Market Potential for Residential Biomass Heating Equipment: Stochastic and Econometric Assessments

Market Potential for Residential Biomass Heating Equipment: Stochastic and Econometric Assessments

Adee Athiyaman (Western Illinois University, Macomb, IL, USA)
Copyright: © 2015 |Pages: 15
DOI: 10.4018/IJSEM.2015070101
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Abstract

This paper provides estimates of market potential for biomass-residential-heating equipment in the US: that is, the greatest amount of biomass-residential-heating equipment that can be sold by the industry. The author's analysis is limited to biomass equipment used most to heat the housing unit. Assuming that households equipped with 10+ year old primary heating devices will replace rather than repair the devices he predicts that approximately 1.4 million units of residential home heating equipment will be replaced in 2015. The author's research also shows that customers do not ascribe much value to biomass home heating. The marketing implication for such a “negative” state is to find buyers who greatly value the benefits of biomass heating equipment.
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Background

The extant literature on marketing planning defines total market potential as the maximum amount of sales available to firms in an industry during a given period under a given environmental conditions (Bennet & Robson, 2001; De Steur, Liqun, Van Der Straeten, Lambert, & Gellynck, 2015). In the biomass sector, market potentials are often constructed using techniques such as substitution analysis and expert judgments (Makridakis, Wheelwright, & Hyndman, 2008).

To illustrate, Dornburg, Hermann, and Patel (2008) estimated market potential of biobased chemicals for the European region using the rate at which biobased chemicals substituted for petrochemicals. If the substitution rate is 100% for biochemical x, then the future market demand of reference petrochemical is taken as the market potential for x. These findings generalize as follows:

  • Premise 1: The rate at which one material substitute for another is related to its relative utility; often utility is equated to market demand (Stein, Ayers, & Shapeneso, 1975);

  • Premise 2:z per cent of biobased chemicals are substitutes of petrochemicals;

  • Conclusion:z per cent of market demand for petrochemicals constitute market potential for biobased chemicals.

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