Milton Friedman on Energy

Born on this day 105 years ago, free-market economist Milton Friedman (1912–2006) was one of a kind.

Even the dyspeptic Paul Krugman called his rival “the economist’s economist … a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time and possibly the most brilliant communicator of economic ideas to the general public that ever lived.” The Economist (issue of November 23, 2006) called him “the most influential economist of the second half of the twentieth century…and possibly all of it.”

Milton Friedman’s major professional mark was in monetary economics. But as a public intellectual, writing popular books and a biweekly Newsweek column, he became conversant in different fields, including energy.

Friedman understood how, for much of US history, major energy regulation was sponsored by some segment of the industry. “Few U.S. industries sing the praises of free enterprise more loudly than the oil industry,” he stated in 1967. “Yet few industries rely so heavily on special government favors.”[1]

The same can certainly be said today for the nuclear, wind, solar, ethanol, electric vehicle, and carbon-capture industries. From time to time, an interventionist proposal might also emanate from an oil, coal, or natural gas company.

Friedman’s harsh reaction to President Nixon’s wage and price control order of August 1971 is particularly important for the energy debate, for this action, not the Arab Embargo, created the oil shortages and a decade of spiraling regulation. The negative effects of the wage and price controls were so great that federal price controls on energy have not been part of the debate since.

Friedman explained how a surplus of regulation caused a shortage of oil and gas. He did not buy the “running out of resources” argument, elegantly dressed as Harold Hotelling’s fixity/depletion model, as did so many economists–even those at Resources for the Future.

Near the end of his long career, Friedman weighed in on the global warming debate with a blurb for Thomas Gale Moore’s book for the Cato Institute, Climate of Fear: Why We Shouldn’t Worry About Global Warming (1999). Friedman opined:

This encyclopedic and even-handed survey of the evidence of global warming is a welcome corrective to the raging hysteria about the alleged dangers of global warming. Moore demonstrates conclusively that global warming is more likely to benefit than to harm the general public.

Some salient Friedman quotations follow with commentary.

Energy Economics

“I do not believe there is a natural resource economics. I believe there is good economics and bad economics.”

– Milton Friedman to Robert Bradley, e-mail communication, September 8, 2003.

Comment: This is a very profound view. Many economists, viewing minerals as fixed and thus depletable, have tried to separate natural gas, coal, and oil from so-called nondepletable goods. Friedman is saying that there is no special scarcity value for minerals, energy, or other natural resources. This puts him in the camp of Julian Simon and Ludwig von Mises, not Hotelling-inspired economists.

Energy Depletion

“[Oil, gas, and coal are] producible … at more or less constant or indeed declining cost because of the improvements in the technology of drilling and exploring and so on.”

– Milton Friedman, “The Energy Crisis: A Humane Solution” (Cato Institute: 1978).

Comment: This is Friedman’s nod to what Julian Simon memorialized as the “ultimate resource”—human ingenuity. (Friedman, by the way, felt that Simon’s empirical work on human improvement should have qualified him to win the Nobel Prize in economics. Simon died in 1998.)

Protectionism

“The infant industry argument is a smoke screen. The so-called infants never grow up. Once imposed, tariffs are seldom eliminated.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), pp. 5–6.

Comment: Think about wind power and (on-grid) solar power, particularly in reference to the federal Renewable Energy Production Tax Credit (PTC), first established in 1992. Now 25 years old, the PTC has been extended nine times: in 1999, 2002, 2004, 2005, 2007, 2009, 2012, 2014, and 2015.

Nixon’s Price Control Order: August 15, 1971

“I regret exceedingly that he decided to impose a ninety-day freeze on prices and wages. That is one of those ‘very plausible schemes … with very pleasing commencements, [that] have often shameful and lamentable conclusions.’”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“Individual price and wage changes will not be prevented. In the main, price changes will simply be concealed by taking the form of changes in discounts, service, and quality, and wage changes, in overtime, perquisites and so on…. But to whatever extent the freeze is enforced, it will do harm by distorting relative prices.”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“By encouraging men to spy and report on one another, by making it in the private interest of large numbers of citizens to evade the controls, and by making actions illegal that are in the public interest, the controls undermine individual morality.”

– Milton Friedman, “Morality and Controls,” Newsweek, October 28, 1971.

Comment: Friedman’s criticism ranges from economics to civil liberty to human morality. Regarding oil and gas, quality changes could not compensate for such intervention, leading to physical shortages.

1970s Energy Crisis

“It is a mark of how far we have gone on the road to serfdom that government allocation and rationing of oil is the automatic response to the oil crisis.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“The present oil crisis has not been produced by the oil companies. It is a result of government mismanagement exacerbated by the Mideast war.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“Lines are forming at those gas stations that are open. The exasperated motorists are cursing; the service-station attendants are fuming; the politicians are promising. The one thing few people seem to be doing is thinking….

“How can thinking people believe that a government that cannot deliver the mail can deliver gas better than Exxon, Mobil, Texaco, Gulf, and the rest?”

– Milton Friedman, “FEO and the Gas Lines,” Newsweek, Marc 4, 1974.

“The long gasoline lines that suddenly emerged in 1974 after the OPEC oil embargo … and again in the spring and summer of 1979 after the revolution in Iran, [came after] a sharp disturbance in the supply of crude oil from abroad. But that did not lead to gasoline lines in Germany or Japan, which are wholly dependent on imported oil. It led to long gasoline lines in the United States, … for one reason and one reason only: because legislation, administered by a government agency, did not permit the price system to function.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 14.

“There is one simple way to end the energy crisis and gasoline shortages tomorrow—and we mean tomorrow and not six months from now, nor six years from now. Eliminate all controls on the prices of crude oil and other petroleum products.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219.

Comment: Price controls on oil and on natural gas were removed in the 1980s, and markets went from shortage to surplus where they have been—with rare exceptions—ever since.

Milton and Rose Friedman explained prices controls and shortages in their most popular book, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219:

Economists may not know much, but we know one thing very well: how to produce surpluses and shortages. Do you want a surplus? Have the government legislate a minimum price that is above the price that would otherwise prevail…. Do you want a shortage? Have the government legislate a maximum price that is below the price that would otherwise prevail. That is what New York City and, more recently, other cities have done for rental dwellings, and that is why they all suffer or will soon suffer from housing shortages. That is why there were so many shortages during World War II. That is why there is an energy crisis and a gasoline shortage.

Milton Friedman’s timeless energy insights should be appreciated for all time.

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[1]“Oil and the Middle East,” Newsweek, June 26, 1967. Reprinted in Milton Friedman, An Economists Protest (Glen Ridge, NJ: Thomas Horton and Daughters, 1973), p. 21.

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SEI Student Spotlight: Shannon Ware

Shannon Ware is a Senior Commercial PV Designer based in St. Louis, MO. This week she traveled to Solar Energy International (SEI) to take PV351L: Tools and Techniques for Operations and Maintenance Lab Week (Grid-Direct), an intensive, advanced training designed for solar professionals already working in the PV industry who want to take their technical skills to the next level. Shannon certainly has a lot of experience in the industry. She primarily designs commercial systems, recently completing a large 322 kW DC parking structure in San Diego. In 2014, she became a NABCEP Certified PV Installation Professional.

Before getting into the solar industry, she’d had a full career beginning with a Bachelors of Science in Ocean Engineering,followed by a stint in commercial printing and digital publishing, and then successful time in real estate sales of historic homes. After taking an interest in green home building,  she grew into a larger passion for sustainability. Shannon eventually took solar training and through an influx of serendipity immediately landed her first PV installation contact.

For that install, Shannon acted as the project manager and also designed, permitted and ran the installation of that first 25kW  commercial PV system. She was drawn to the design process of PV installations because of the creativity and problem solving skills needed. Shannon said “you need to have an engineering mindset. Every roof is different and you’re dealing with shadows and shading while looking to be efficient for your customer.”

Though Shannon has a diverse range of experience designing PV systems, she came so SEI “looking to expand skill set in commissioning and troubleshooting.”  She said “I’ve always wanted to come out [to SEI]. It’s the best in the world!”

The post SEI Student Spotlight: Shannon Ware appeared first on Solar Training - Solar Installer Training - Solar PV Installation Training - Solar Energy Courses - Renewable Energy Education - NABCEP - Solar Energy International (SEI).

A Crude Primer: Would a Barrel of Oil by Any Other Name Smell as Sweet?

Oil Qualities

When people talk about a barrel of crude oil, there is a tendency to lump all of it into one large category. The reality is that there are different flows of crude oil from all over the world that have various, distinct qualities. There are two main qualities used in the classification process. The first is API gravity and the second is the sulfur content.

API gravity is a measure of the density of oil on a “light to heavy” scale. Generally, “light crude” has an API gravity greater than 38° and “heavy crude” has an API gravity of less than 22°. Water by comparison has an API gravity of 10°. Some heavy crude is dense enough to sink in water.

The sulfur scale ranges from “sweet to sour”. If oil has a sulfur content of less than 0.5 percent it is considered “sweet,” and if it is above 0.5 percent it is considered “sour.” Oil that is heavy or sour requires a more complex, more intensive, and more expensive refining process.

How Does Oil Get to Market?

Oil markets can most simply be understood as composed of three stages: upstream, midstream, and downstream. The upstream phase is the exploration for and production of oil, which occurs when a company drills an oil well. Once the oil is extracted from the ground, the oil is typically sold to a transporting company. Transporting the oil is the midstream stage and can consist of multiple transactions between a number of companies. The third stage is the refining stage, in which oil is turned into useful products.

How is Oil Priced?

Oil is produced in over 90 countries around the world. The price for a barrel of oil in a given location is determined by a number of factors. The characteristics of the oil as described above constitute one factor. In general, refiners are willing to pay a higher price for light sweet crude because it is cheaper to refine light sweet oil into useful products. However, a much more important factor is the geographical location of the oil supply, and access to diverse markets that have demand for the oil.

Consider two barrels of light sweet crude oil produced in different regions: Barrel #1 is produced in a sparsely populated area with no infrastructure in place to transport and process the oil. Barrel #2 is produced close to an oil refinery hub like the Gulf Coast in the US. Which do you think would fetch the higher price?

The answer, of course, is Barrel #2. Though the first barrel may be of identical quality, without the infrastructure—railways, pipelines, etc.—in place to easily transport it, midstream companies would not pay a premium for it because their transportation costs would be so much higher.

The “true” value of oil in a market is ultimately determined by companies/traders who enter into contracts with each other to buy and sell it. These oil traders are constantly negotiating—with buyers trying to get a lower price and sellers trying to get a higher price. As contracts are entered, the prices are reported and the public can see what the market says oil is worth. This price is called a “benchmark.”

Different Markets

There are several unique oil markets in the US alone and hundreds of others around the world. The distinctions in these markets are created by factors like the type of refineries in the region, the type of oil that can be affordably transported to the region, and the types of refined fuels that are in the highest demand in the region.

For example, the US Gulf Coast is a large market for heavy sour crude. This is mostly due to the fact that a high percentage of oil refined in the Gulf Coast has historically been from Mexico and Venezuela—both of which produce mostly heavy sour crude. As a result, a majority of the refinery capacity is designated for medium to heavy sour crude. The US East Coast, on the other hand, is not as good of a market for heavy crude because most of the refineries in that part of the country are not built to refine heavy sour crude. Within each unique market there are benchmark prices that determine what the value of a barrel of oil should be for any given transaction.

Why Are WTI and Brent Predominant?

WTI is the benchmark that refers to a blend of US oil flows that tend to be high quality light sweet oil varieties that are priced in Cushing, Oklahoma. Brent is the benchmark that refers to oil originating in the North Sea. Why have they become so distinguished?

According to the Energy Information Agency, widely used benchmarks have four main qualities:

(S)table and ample production; a transparent, free-flowing market located in a geopolitically and financially stable region to encourage market interactions; adequate storage to encourage market development; and/or delivery points at locations suitable for trade with other market hubs, enabling arbitrage (profit opportunities) so that prices reflect global supply and demand.

WTI and Brent pass each of these four tests.

Let’s take a closer look at WTI, to explain what this means. Cushing is located in a region that is relatively close to very stable and ample production. Oil flows from the Bakken play in North Dakota, the Permian Basin of West Texas and New Mexico, the Scoop and Stack plays in Oklahoma, and several other US oil fields all flow through Cushing. The stable-and-ample requirement is covered easily.

With the US export ban now in the past, WTI has no problem meeting the threshold for EIA’s second requirement. The US market is very transparent, with all production and distribution data collected and reported by multiple state, federal, and private groups. Also, the oil industry in the US is privately run and suffers from relatively little government intervention.[1]

The Oklahoma hub also easily meets the third demand. Cushing is home to the largest crude oil storage facilities in the world with more than 80 million barrels of storage space. The fourth demand goes along with the third. The large storage capacity can be efficiently and affordably distributed to a number of other markets/hubs. Cushing oil supplies can be distributed to refineries in the Gulf Coast, the Midwest, and the East Coast through pipelines and railcars.

WTI vs. Brent

At different times WTI and Brent have each been considered a better indicator of global oil prices. Each has advantages and disadvantages. WTI flows mostly through pipelines into Cushing. This enables a higher volume of contracts for batches of various sizes. Due to the storage facilities and pipeline capacity, oil traders can respond quickly to demand in various markets and can supply to downstream companies in whatever size batch they demand.

Brent, on the other hand, is a waterborne supply and is transported by tankerload. Tanker ships carry enormous quantities of oil, so the contracts involving Brent tend to be bigger contracts. This results in a lower number of contracts. But the global financial markets are ever-shifting, and oil prices can change drastically in a short amount of time due to market sentiment, geopolitical conflicts, or even weather events. Creating a continuous price based on Brent can be difficult due to the lower volume of contracts that cannot react in real time as easily as WTI.

The advantage of Brent is actually the same as its disadvantage. As mentioned, it is a waterborne supply which means that companies can affordably access markets around the world. Transporting large shipments of oil on ship tankers is the cheapest way to transport oil. So unlike WTI, which has to travel through pipelines and railcars in landlocked areas, companies that produce Brent crude oil can cheaply access whatever market is paying the highest price for their oil. This exposure to many major markets, gives an accurate picture of what markets around the world are willing to pay.

Conclusion

The next time you hear a market analyst on Fox Business Channel discussing oil prices, you’ll have a little more insight into the topic if you remember these basics: “light” versus “heavy” refers to API gravity, “sweet” versus “sour” refers to sulfur concentration, and WTI and Brent are geographic benchmarks that give us a glimpse of the prices buyers and sellers are circling around on the open market.

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[1] In 1975 the US passed the Energy Policy Regulation Act, which among other things put a ban on exporting oil from the US. This would seem to limit the ability of companies to use WTI as a reliable benchmark since it was cut off from global markets. The main reason that WTI remained a reliable benchmark is because the US market for oil is so large. So since WTI was the price point for crude oil produced in the largest market in the world, it remained an accurate indicator of the value of oil. This is not to say that the export ban did not negatively affect WTI’s influence, because it certainly did. This was most clearly seen from 2009-2015, the peak years of the ongoing shale boom in the US, during which time WTI traded at a substantial discount to Brent. This differential was due to the excess US light sweet production that was forced to sit in storage because there was simply not enough demand for it in US refineries, and the export ban restricted companies from sending their oil to markets that had space for their oil. In the decades prior to the shale boom, many US refineries updated their facilities to process heavier sour crude. In 2015 the export ban was lifted, which likely means that WTI and Brent will ultimately trade at very similar prices moving forward.

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5 Tactics to Earn Links Without Having to Directly Ask - Whiteboard Friday

Posted by randfish

Typical link outreach is a tired sport, and we've all but alienated most content creators with our constant link requests. In today's Whiteboard Friday, Rand outlines five smart ways to earn links to your site without having to beg.

Click on the whiteboard image above to open a high-resolution version in a new tab!

Video Transcription

Howdy, Moz fans, and welcome to another edition of Whiteboard Friday. This week, I'm going to help you avoid having to directly ask for links.

Some people in the SEO world, some link builders are extremely effective. If you go to the Russ Jones School of Link Outreach, you need to make a big list of people to contact, get in front of those folks, outreach them, and have these little success rates. But for some of us, myself included, I just absolutely hate begging people for links. So even though I often produce content that I want people to link to, it's the outreach process that stops me from having success. But there are ways around this. There are ways to earn links, even from very specific sources, without needing to directly say, "Hey, will you please link to this?" I'll try and illustrate that.

The problem

So the problem is I think that most of the web at this point is sort of burned out on this conversation of, "Hey, I have this great resource." Or, "Hey, you linked to this thing which is currently broken and so maybe you'd like to," or "Hey, I noticed that you frequently mention or link to blah, blah, blah. Well I have a blah, blah, blah like blah, blah, blah."

Folks I think are just like, "Oh, my God, I hate these SEOs, like I'm so done with this." Most of these folks, the journalists, the bloggers, the content creators of all kinds start to detest the link requests even when they're useful, even when they help your success rates. I mean, great success rates.

The world's best link builders, link outreach specialists, when I talked to agencies, they say, "Our absolute best folks ever hover in the 5% to 10% success range." So that means you're basically like, "No. Nope. Nuh-uh. Uh-uh. No way. Sorry. Uh-uh. Yeah, no. Uh, no." Then, maybe you'll get one, "Okay, fine. I'll actually link to you."

This can be a really demoralizing practice, and it also hurts your brand every time you outreach to someone and have no success. They're basically associating you with . . . and in fact, there are many people in the SEO world who my only association with them is, gosh, they have asked me for a lot of links over the years. It kind of sucks the souls from people who hate doing it. Now granted, there are some people who like doing it, but you have two options.

Number one, you can optimize the outreach to try and get a higher success rate, to do less damage to your brand when you do this, to make this less of a soul-sucking process, and we have some Whiteboard Fridays on exactly that topic and some great blog posts on that too. But there are ways to build links without it, and today I'm going to cover four and a half of them, because the fifth one is barely a tactic.

5 Tactics to earn links

1. The "I made this thing you'll probably use"

The first one is the tactic — I'm going to use very conversational naming conventions for these — the "I made this thing you will probably use." So this is, in effect, saying not, "Hey, I made this thing. Will you link to it?" but rather, "I made this thing and I can have some confidence that you and people like you, others like you, will probably want to link to it because it fulfills a specific need."

So there's some existing content that you find on the web, you locate the author of that content or the publisher of that content, and you form a connection, usually through social, through email, or through a direct comment on that content. You have an additional resource of some kind that is likely to be included, either in that particular element or in a future element.

This works very well with bloggers. It works well with journalists. It works well with folks who cover data and studies. It works well with folks who are including visuals or tools in their content. As a result, it tends to work well if you can optimize for one of those types of things, like data or visuals or ego-bait. Or supporting evidence works really well. If you have someone who's trying to make an argument with their content and you have evidence that can help support that argument, it will very often be the case that even just a comment can get you included into the primary post, because that person wants to show off what you've got.

It tends not to work very well with commercial content. So that is a drawback to the tactic.

2. The "You list things like X, I have or I am an X."

So this is rather than saying, "I would like a link," it's a very indirect or a relatively indirect ploy for the same thing. You find resources that list Xs, and there's usually either an author or some process for submission, but you don't have to beg for links. You can instead just say, "I fit your criteria."

So this could be, "Hey, are there websites in the educational world that are ADA-compliant and accessible for folks?" You might say, "Well, guess what? I'm that. Therefore, all of these places that list resources like that, that are ADA-compliant, will fit in here."

Or for example, we're doing design awards for pure CSS design, and it turns out you have a beautifully-designed site or page that is pure CSS, and so maybe you can fit in to that particular criteria. Or websites that load under a second, even on a super slow connection, and they list those, and you have one of those. So there's a process, and you can get inclusion.

3. The "Let me help you with that."

This can be very broad, but, basically, if you can identify sources and start to follow those sources wherever they publish and however they publish, whether that's social or via content or broadcast or other ways, if you find those publications, those authors expressing a need or an interest or that they are in the process of completing something, by offering to assist you will almost always get a link for your credit. So this is a way where you're simply monitoring these folks that you would like to get links from, waiting for them to express some sort of need, fulfilling that need, and then reaping the benefit through that link.

4. The "I'd be happy to provide an endorsement."

This is sort of a modified version of "I made this thing you'll probably like." But instead of saying, "Here's the thing that you will probably like and maybe include," you're saying, "I noticed that you have a product, a piece of content, a tool, a new piece of hardware, some physical product, whatever it is, and I like it and I use it and I happen to fit into the correct demographic that you are trying to reach. Therefore, I am happy to contribute an endorsement or a testimonial." Oftentimes, almost always, whenever there's a testimonial, you will get a link back to your source, because they'll want to say, "Well, Rand Fishkin from Moz says X and Y and Z," and there's the link to either my page or to Moz's page.

5. The "Guest contribution."

The one you're probably most familiar with, and it was probably the first one that came to mind when you thought about the "How do I get links without asking for them?" and that is through guest contributions, so guest blogging and guest editorials and authorship of all kinds. There are a few Whiteboard Fridays on that, so I won't dive deep in here.

But I hope you can leverage some or all of these tactics, because if you hate link building the outreach way, these all have more work that goes into them, but far, far better results than this 5% to 10% as the top. Five to ten percent is probably the bottom range for each of these, and you can get 50%, 75% on some of these tactics. Get a lot of great links from great sources. It just requires some elbow grease.

All right, everyone. Thanks for watching. We'll see you again next week for another edition of Whiteboard Friday. Take care.

Video transcription by Speechpad.com

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Growth in Rooftop Installations Expected to Decline This Year

Rooftop solar installations have seen explosive growth, but that growth explosion is expected to change this year. Bloomberg News Energy Finance projects a 2.4 percent decline in new residential installations.[i] Driving the decline are a number of factors that include saturation in some markets, financial problems at several solar panel makers and a change in state net metering policies.

State net metering policies allow rooftop solar owners to sell their excess power to their utility company, generally at retail rates, allowing them free transmission and distribution services that other homeowners must effectively fund.[ii] The net metering policy also favors more well-to-do homeowners who can afford to purchase rooftop installations; this makes the policy regressive. Several states (Hawaii, Nevada, Arizona, Maine and Indiana) are phasing out retail net metering, although Nevada has reinstituted its net metering policy—adding some changes due to solar companies leaving the state for more lucrative markets.[iii]

Market Saturation

Residential solar capacity additions in the United States declined 11 percent from the fourth quarter of 2016 to the first quarter of 2017. California, which makes up 45 percent of the U.S. residential solar market, experienced the decline most. The drop in residential solar installations in California was twice the decline at the national level and was due to an unusually wet winter, seasonal factors and market fundamentals.[iv]

Major residential solar installers, like SolarCity and Vivint, are changing their strategy and focusing more on profit and less on rapid growth: they are devoting fewer resources to making sales in mature state markets (such as California) and focusing more on emerging markets. They are also focusing less on door-to-door sales.

The cost of customer acquisition is the highest-cost component of an installation and is increasing because the lowest-hanging fruit has already been picked. As a result, SolarCity recently announced it is ending its door-to-door sales practice and plans to sell solar through Tesla’s retail outlets.

Financial Problems for Solar Manufacturers

Some residential solar companies are having financial problems. Residential solar company Sungevity and commercial solar supplier Beamreach have both filed for bankruptcy in 2017 while Verengo Solar and SunEdison went under in 2016. Yingli Green Energy, a former world leader in solar panel volume, lost $267.1 million in the fourth quarter of 2016 on $294.0 million in revenue.[v]

Vivint Solar and Sunrun—the second and third largest residential solar installers in the United States—are on tenuous financial footing. They need a constant flow of project sales and financing to keep their business afloat. The failure of Verengo and Sungevity shows that financing may not be as easy to come by as it once was.

Net Metering Phase-Out

Indiana is one state that plans to phase out its net metering policy. Indiana generates less than 0.5 percent of its electricity from solar power and ranks 22nd in the country in terms of installed capacity, according to the Solar Energy Industries Association.

On May 2, 2017, Indiana Governor Eric Holcomb signed into law Senate Bill 309, which phases out the state’s retail net metering policy in 2022. The new policy grandfathers in solar rooftop systems installed by the end of 2017 at the current retail rate for 30 years. After that, the rate will gradually decrease for new customers until 2022 when retail net metering will end, and the customer will receive the utility’s marginal cost plus 25 percent for any unused power that it wants to sell to the utility company.[vi] The decrease in value that the homeowner would get for any excess solar power would be about 7 cents per kilowatt-hour—from about 11 cents per kilowatt-hour today to about 4 cents per kilowatt-hour.

Utility-Scale Solar Installations Are Expected to Decline Also

GTM Research and the Solar Energy Industries Association (SEIA) predicts that new solar capacity installations (residential, non-residential and utility-scale) will decline 10 percent in 2017 to 13.2 gigawatts from 14.8 gigawatts in 2016. The reason for the decline in utility-scale solar installations is a bit different from the factors that caused the decline in residential solar installations. One reason for the decline is the rush to complete solar projects in 2016 due to the expected expiration of the federal Investment Tax Credit (ITC)—a 30 percent tax credit for solar projects. A build-up in solar projects occurred in 2016 despite the ITC’s extension passed at the end of 2015. Because utility-scale solar projects were rushed to completion in 2016, there will be less solar installations in 2017—particularly in states where utilities have already met renewable portfolio standards requiring utilities to generate a certain amount of their electricity from renewable energy by specified dates.[vii] This phenomena was seen in the wind industry when the production tax credit for wind was set to expire.

Conclusion

It is expected that new solar capacity additions will decline in 2017 for the first time. The reasons for the decline differ by market with residential solar facing market saturation in certain markets, financial problems for solar manufacturers and changes to state net metering policies to more fairly compensate homeowners for excess power that their solar panels generate. Utility-scale projects are expected to be down this year due to the build-up in solar projects in 2016 to capture the investment tax credit that was expected to expire. The solar industry, like the wind industry, needs subsidies and favorable policies to continue its expansion.

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[i] Bloomberg, U.S. Residential Solar Market Slides for the First Time in 16 Years, June 1, 2017, https://www.bloomberg.com/news/articles/2017-06-01/u-s-residential-solar-declining-as-industry-faces-retooling

[ii] New York Times, Rooftop Solar Dims Under Pressure From Utility Lobbyists. July 8, 2017, https://www.nytimes.com/2017/07/08/climate/rooftop-solar-panels-tax-credits-utility-companies-lobbying.html?emc=edit_th_20170709&nl=todaysheadlines&nlid=63692790

[iii] Institute for Energy Research, June 14, 2017, http://instituteforenergyresearch.org/analysis/green-technologies-cannot-survive-marketplace-without-subsidies/

[iv] Green Tech Media, New US Residential Solar Capacity Down 17% Year-Over-Year for Q1, May 17, 2017, https://www.greentechmedia.com/articles/read/residential-solar-capacity-down-17-year-over-year-for-q1

[v] The Motley Fool, Solar Shake-Up: Why More Bankruptcies Are Coming in 2017, April 18, 2017, https://www.fool.com/investing/2017/04/18/solar-shake-up-why-more-bankruptcies-are-coming-in.aspx,

[vi] New York Energy Week, Indiana to Phase Out Retail Net Metering in 2022, May 11, 2017, http://nyenergyweek.com/indiana-phase-retail-net-metering-2022/

[vii] PV Magazine, GTM Research: U.S. solar market to decline 10% in 2017 (with charts), March 9, 2017, https://pv-magazine-usa.com/2017/03/09/gtm-research-u-s-solar-market-to-decline-10-in-2016/

The post Growth in Rooftop Installations Expected to Decline This Year appeared first on IER.

The Lazy Writer’s Guide to 30-Minute Keyword Research

Posted by BritneyMuller

You, a content marketing ninja, are able to wield immense SEO reach with your content in ways most SEOs (*cough* like myself) can only dream of.

BUT, you’re not leveraging keyword research to your advantage!

The fact that you can discover how many people per month are searching for something, what words they're using, and what questions they're asking still blows my mind!

Keyword research doesn’t have to be a marathon bender. A brisk 30-minute walk can provide incredible insights — insights that connect you with a wider audience on a deeper level.

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Why keyword research is essential [Case Study]

My previous company, Pryde Marketing, was not founded on out-of-this-world high-quality content. It was founded on leveraging online data strategically for private medical practices.

When we were hired to do keyword research for an MRI company, we discovered that hundreds of people a month were searching “open vs closed mri” but no one was providing any good answers, content, or photos for these searchers.

We decided to create an "Open Vs. Closed MRI" page for our client that, to our surprise, continues to see over double the traffic of the homepage. Plus, it's brought in over 50k+ unique visitors.

We were not successful because we thought of this content idea.

We were successful because we listened to the keyword data.

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5 keyword research hacks in under 30 minutes

Example client: Hunter & Company (Wedding & Event Planning)

Objective: Write better content for their website and assist with digital marketing efforts.

#1: Blog category keyword research

Having five to ten data-driven blog categories can help you rank for popular topics, allow readers to find more relevant content, and help to organize your blog.

Evaluate top industry websites (10 mins)

Identify the most common navigation items and blog categories on leading industry sites.

Advanced search operators (3 mins)

While exploring top websites, you can use advanced Google operators to dig deeper.

Example: Bride.com has topic pages like /topic/wedding-beauty. To view all of Bride.com’s topics search this: site:brides.com/topic

Google Suggest (10 mins)

Google "wedding" and don’t hit enter!

Instead, make note of the drop-down search suggestions. You can also search "wedding a" [don’t hit enter], "wedding b" [don’t hit enter], all the way through to z to get the most popular and/or trending wedding-related searches.

Now that we have aggregated keywords from the above tactics, we have a solid list:

wedding venues, wedding photographers, wedding dj, wedding beauty, wedding videographers, wedding bands, wedding budget, wedding invitations, wedding registry, wedding colors, wedding decorations, wedding party, wedding ideas, wedding cakes, wedding centerpieces, wedding hairstyles, wedding bouquets, engagement rings, wedding dresses, bridesmaid dresses, mother of the bride dresses, wedding rings, flower girl dresses, wedding accessories, wedding jewelry, wedding tuxedos, wedding registry, wedding ceremony, wedding reception, wedding cake, wedding food, wedding favors, wedding flowers

Keep up the pace — we can’t stop here!

Next, let’s determine which categories are most popular by average monthly Google searches.

There are two primary tools to view average monthly search volume (AKA to know how many times a query like “wedding flowers” are searched per month): Google Keyword Planner and Moz Keyword Explorer. (Check out GKP vs. MKE to learn more.)

Google Keyword Planner (5 mins)

Step 1: Paste your saved keyword list into the box under “Enter one or more of the following” and click “Get Ideas”:

Step 2: Evaluate and save search volume data while being mindful of the large search data ranges and limited data:

Note: Google will occasionally change your keywords to something different; “wedding videographers” was changed to “wedding videos” in this case. It’s important to be mindful of this as you’re deciding on the exact category names.

You should also explore the keywords below your immediate keyword search section. Sort by average monthly searches (highest to lowest) to make sure you aren’t missing any other big category items.

Moz Keyword Explorer (5 mins)

Step 1: Create a new list.

Step 2: Paste your keyword list into the “Enter Keywords” box:

Step 3: Take a quick water break, because KWE will take a minute to gather data. Once the data is in view, sort by and evaluate average monthly search volume:

Woohoo! We reached the finish line with two minutes to spare.

To finalize our blog categories, we need to ask ourselves two things: Which topics are the most popular and the most relevant to a wedding planner site?

With that in mind, you’ve chosen six of the most popular wedding topics and have nested several sub-categories within “Wedding Decorations” — brilliant!

• Wedding Dresses
• Wedding Invitations
• Wedding Photography
• Wedding Cakes
• Wedding Venues
• Wedding Decorations
  • Wedding Flowers
  • Wedding Colors
  • Wedding Centerpieces
  • Wedding Venues

#2: FAQ keyword research

Answering the most commonly searched-for questions about your product/service will provide value to your readers and solidify you as an industry expert.

Here’s how to gather the most commonly asked questions on a topic:

AnswerThePublic.com (10 mins)

Search for your product/service.

How cool is this snazzy question wheel?! While the visuals are fun, it’s easier to gather the questions by clicking the top-right yellow “export to csv” button and deleting non-relevant questions in a .csv or Google Sheet.

Moz Keyword Explorer (10 mins)

Step 1: Search and filter “display keyword suggestions” by “are questions”:

Step 2: Add relevant questions to a new keyword list:

Step 3: Add relevant AnswerThePublic questions to list:

Research done!

I wouldn’t worry about evaluating search volume too closely for FAQs because questions are typically more long-tail (meaning they have lower search volume and are usually easier to rank for). In multitudes, these can be very valuable to your site.

Now you can start adding your newly discovered FAQs to an FAQ page (while trying to avoid duplicate types of questions):

#3: Competitive content research

Evaluate your competitor’s 10 most popular pages on SimilarWeb (5 mins)

This uncovers the specific type of content your audience is interested in. Here are the 10 most popular pages for One Fine Day Events:

Evaluate each of the top pages & gather 3 key takeaways (20 mins)

1. The most popular “Gallery” page confirms that images are extremely popular in the wedding and event space. Maintaining an optimized gallery and incorporating more images into on-page content should be a top digital marketing priority.
2. Interestingly, the “Preferred Vendors” page is a Category page! It's something we should consider implementing on Hunter & Co. It would also be a great link building opportunity (to get vendors to link back to Hunter & Co)... but I digress.
3. Testimonials are also be a top priority and live off the primary navigation.

Pro tip: Use Google Trends to evaluate seasonal searches and prepare competitive content months before it spikes:

#4: Expand your keyword reach

Expanding your page’s topical content will expand your digital SEO reach. This is why you’ll see definitive guides like Moz’s Beginner’s Guide to SEO ranking so well, and for such a wide range of keywords (~1,665!).

Download MozBar (Chrome add-on) (1 minute)

Step 1: Activate MozBar. Enter in your primary keyword and click “optimize.”

Step 2: Click “On-Page Content Suggestions”:

Step 3: View the 23+ content integration ideas for your webpage:

Decide which topics you want to integrate (5 mins)

You never want to force non-relevant content onto a page for SEO reasons. Instead, look through the topics and think about which would provide value to your readers.

Then, devise a plan to naturally integrate those topics into the page’s content.

Topic integrations for the Hunter & Co. homepage:

• Wedding Planning Checklist (create a checklist page that’s linked to from homepage)
• Wedding Vendors (confirms our popular page strategy! Add a page link from the homepage)
• Wedding Venues
• Couples

#5: Keep up with Google

We are seeing a big rise in "no-click" Google searches.

No-click searches occur when individuals search for something and find their answer, without ever having to click on a search result.

Example: If you search “Denver weather,” Google will show you an 8-day weather forecast for Denver. Most searchers are satisfied with that and leave, resulting in a no-click Google search.

Image from State of Searcher Behavior Revealed

No-click searches are rising because Google continues to provide searchers answers within search features such as featured snippets (answer boxes), People Also Ask boxes, knowledge graphs, weather forecasts, etc.

Know which search features show up most often for your keywords (5 mins)

Knowing which search features occur most frequently for your product/service-related searches can help you to steal search features by optimizing for them. Keep in mind that if you're ranking on page one or two of a desired featured snippet search, you're better positioned to steal that featured snippet than if you were on page 3+.

Remember our FAQs about “wedding planning” above? Twenty-four of 28 questions found in Moz Keyword Explorer have featured snippets (answer boxes) in their search results:

RealSimple currently has a large featured snippet for “wedding checklist”:

Looking more closely into that page, you’ll notice RealSimple’s <html> check-box markup and definitive style content.

Brainstorm a better (and more useful) wedding checklist (10 mins)

• Hire a freelance developer to create a beautiful, printable wedding checklist calendar that, once a reader enters their wedding date, populates with scheduled to-dos.
• Create an IFTTT (If This Then That) recipe to schedule Google Calendar To-Do Reminders based on the user’s wedding date.
• Provide a more detailed and more beautiful wedding checklist.

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Now, my content marketing ninjas, go forth and tap gloves with a wider audience! Your content deserves it!

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

Switching to Markets Could Save You 15 Percent or More on Climate Insurance

A recent piece in The Week on the climate change debate is at once refreshing and disappointing. On the one hand, the author Jeff Spross tries to be fair to the opponents of government intervention into the energy sector. He agrees that they aren’t “science deniers” and goes so far as to concede that they know the science as well as the alarmists clamoring for stringent new regulations and taxes.

On the other hand, Spross is still a supporter of vigorous government intervention, and he uses the analogy of insurance to justify his stance. Yet Spross’s case is flawed. He misunderstands the IPCC report: the economic damage from popular climate change policies is projected to be 80 times higher than what Spross tells his readers. Furthermore, even on his own terms, Spross hasn’t really shown that the popular proposals to combat climate change make sense. Nobody—including Jeff Spross—would buy life or car insurance on these terms.

Spross Misstates the Economic Damage of Climate Change Policies

Although it was no doubt an honest mistake, Spross seriously misleads his readers on what the Intergovernmental Panel on Climate Change (IPCC) reported in its most recent publication on the estimated costs and benefits of government policies designed to mitigate climate change. Here’s Spross:

Insurance comes in many forms: You pay premiums so health insurance companies will some day pay for your care. You buy homeowners insurance in case disaster strikes your house. And if you ride a motorcycle, you buy “insurance” by purchasing an expensive leather jacket and helmet that will protect you in case you ever crash.

Insuring against climate change is more like the latter example: We need to spend money on a whole lot of things now — constructing solar panels and windmills, research and development of batteries, smart grids, building weatherization, electric cars, etc. — to avoid losing a whole lot more money to storms and heat waves and water shortages and sea-level rise down the road. Pinning down exactly how much that would cost is horribly tricky, but the models used by the Intergovernmental Panel on Climate Change (IPCC) generally put it at around 0.06 percent of global GDP per year.

But the key thing is that we make climate change less about science and more about risk management. Because once we all agree we’re discussing risk management, we can discuss the potential risks more concretely.

The IPCC’s models also project climate change could reduce global GDP by as much as 5 percent by 2100, assuming the world’s current-but-inadequate efforts to reduce carbon emissions stay on course. That’s obviously a lot more than 0.06 percent. But maybe, given all the uncertainties, 5 percent itself doesn’t seem like much to panic over. [Bold added.]

So at this point, Spross’s readers would think that the IPCC was projecting that if the governments of the world continue to twiddle their thumbs, then by the year 2100 climate change damages will have reduced global GDP by 5 percent compared to what it otherwise would have been. In contrast—so Spross’s readers would think—humanity could avert that hit to the globe by adopting policies to limit greenhouse gas emissions, which in turn would only reduce global GDP by 0.06 percent.

If those were indeed the numbers, what kind of a fool wouldn’t jump at that bargain? Why wouldn’t we want to make global GDP 0.06 percent lower in 2100, rather than 5 percent lower?

There are two huge problems here, one blatant and one more subtle. The first problem is that Spross (relying on this Grist article) misunderstood the “0.06 percent” figure. Below is a table taken from an early draft of the IPCC’s latest report:

IPCC’S TABLE SPM.2. Global Mitigation Costs From Emissions-Reductions Policies

Source: Early draft of IPCC Working Group III AR5 Summary for Policymakers, p. 16

I gave more context in a previous IER post, but for our purposes here, I’ve marked up the relevant elements of the table.

In order to “likely” limit total global warming to 2 degrees Celsius—which is considered the maximum acceptable ceiling by many activists, and which was adopted as the formal ceiling in the Paris Climate Agreement—the IPCC document specified that in the year 2100 atmospheric concentration of greenhouse gases had to be limited to 450 parts per million of CO₂-equivalent, meaning that we are looking at the top row of the table above.

In red, I’ve circled the 0.06 percent per year figure that Spross cited. However, that figure means that if governments adopt policies to limit atmospheric concentrations to 450ppm, then global economic growth will be 0.06 percent points slower every year during the period 2010 – 2100. For example, if normally the global economy would have grown on average 2.5 percent every year during this 90-year period, then with the emission reduction policies in place, instead, global consumption will only grow 2.50 – 0.06 = 2.44 percent every year in this period.

That doesn’t sound like a big deal, but it has has a huge cumulative effect. The middle columns, for example, show (in blue) that global consumption will be 3.4 percent lower in the year 2050 relative to the baseline and will be 4.8 percent lower in the year 2100.

Remember that Spross had suggested that, in the year 2100, unrestricted climate change damages would mean a hit to global GDP of about 5 percent, while the economic cost of avoiding it would only be 0.06 percent. We see the true cost (as projected by the IPCC) is actually 4.8 percent i.e. 80 times higher than what Spross thought. Now, instead of looking like a great bargain, using the IPCC’s own numbers,[1] we see that the “bare minimum” target contained in the Paris Agreement is closer to a wash.

Oh, wait—it gets worse. The net benefit of climate mitigation policies is the difference in climate change damage from “business as usual” versus “limit warming to 2 degrees Celsius.” In other words, it’s not correct to compare the economic impact of 4.8 percent with the climate damage of 5 percent, because even if the Paris Agreement target is achieved, most models predict some climate change damages even with 2 degrees of warming.[2] So the net benefits of the government policies are less than 5 percent, even though (as we’ve seen) their cost is still 4.8 percent, making the whole proposition even more dubious.

Would You Buy Insurance Like This?

However, even after correcting for the (enormous) mathematical misunderstanding, Spross might try to resurrect his basic point: “Sure,” he could argue, “humanity will probably ‘spend more’ in terms of forfeited economic output on government mitigation policies than we will ‘save’ in the sense of avoided climate change damage, but isn’t that true of insurance in general? After all, doesn’t the typical home owner ‘lose money’ on fire insurance, and doesn’t the typical motorist ‘lose money’ on car insurance?”

It is certainly true that people buy insurance in the private market because of “risk aversion” and not because it’s an actuarially profitable investment. For example, if there is a one-in-a-thousand chance that your $200,000 house will burn down each year, then the fire insurance company will charge you more than $200 in annual premiums, because they have overhead expenses and so need to charge more than the “breakeven” amount.

Even so, you as a homeowner would gladly pay (say) $300 to eliminate the actuarially expected loss of $200 on your home, because you’ve translated the uncertain outcome into a known (and small) loss. Because most homeowners are risk averse, it is possible to have win-win fire insurance contracts where large companies pool thousands of customers and issue blocks of policies, where they “make” $100 per policy per year on average in order to cover their expenses and earn a return on their invested capital.

So now we have to ask: Is this a good analogy for the climate change debate? And the answer is: absolutely not. As I wrote in a previous IER post that analyzed this topic more thoroughly, after running through some of the numbers from the IPCC reports:

Suppose someone from an insurance company came to you in the year 2050 and said, “We’ve run computer models many thousands of times using all kinds of different assumptions. In the worst-case scenario, a very small fraction of the computer runs—about 1 in 500—has you losing 20% of your income in the year 2100. In order to insure you against this extremely unlikely outcome that will occur in half a century, we want to charge you 3.4% of your income this year.”

Would you want to take that deal? Of course not. The premium is way too high in light of the very low probability and the relative modesty of the “catastrophe.” When someone’s house burns down, that’s a much bigger hit than 20% of annual income. And yet, the premiums for fire insurance are quite reasonable; they’re nowhere near 3.4% of income for most households. Moreover, the threat of your house burning down is immediate: It could happen tomorrow, not just fifty years from now. That’s why people have no problem buying fire insurance for their homes. Yet the situation and numbers aren’t anywhere close to analogous when it comes to climate change policies.

Other Problems With the Insurance Analogy

There are other ways of seeing the problems with this analogy. For example, Spross likens climate policies to wearing a helmet when you ride a motorcycle, or to “insuring” against colon cancer, but he doesn’t actually do the work to translate from the IPCC’s numbers to show that these analogies work.

Ask yourself: Why do people wear a helmet when they ride a motorcycle? It’s because, for the type of accident that is admittedly unlikely but nonetheless catastrophic, it would do a lot of good on the margin to be wearing a helmet.

In contrast, we don’t wear helmets when we fly in commercial airplanes. It’s not because we are certain there won’t be a crash, but because (in that unlikely but catastrophic scenario) having a helmet on is going to make a big difference. In contrast, it would be silly to bear the “cost” of wearing a helmet all the time when you fly.

Turning to cancer: Spross doesn’t say what “insurance” he has in mind, but presumably he means regular screening for people of a certain age. Again, we have to compare marginal costs and marginal benefits. Nobody recommends that eight-year-olds in Ghana get screened every month for colon cancer; that would be ridiculous. If the UN passed a measure insisting on such procedures, it would make everybody worse off.

Future Generations Will Be Much Richer Than We Are

It is not enough for Spross and others to merely invoke insurance as if that solves the matter. No, they need to show that the numbers actually make sense. As I argued above, you probably wouldn’t pay a big chunk of your income to only partially insure against a very unlikely (but much bigger) loss that wouldn’t occur for decades.

What people often overlook in the climate change policy debates is that the severe outcomes that occur in the computer simulations typically don’t kick in until many decades down the road. Even if governments “do nothing,” so long as they get out of the way and allow conventional economic development, the future generations dealing with climate change (and AI, and biological warfare, and killer asteroids, and all sorts of other problems we can’t even imagine) will be much richer than we are today.

For example, just throwing together some ballpark calculations (from here, here, and here), it’s a decent guess to say that in the year 2100, real global economic output will be more than seven times as high as it is today, while the world population might be a bit higher than 11 billion. So, if current estimates put real GDP per capita at around $17,000 per year, by the year 2100 each Earthling on average will enjoy a standard of living of more than $70,000 per year.

So let’s say disaster strikes and the global economy is cut in half by the year 2100 compared to what otherwise would have been the case without climate change. Even so, with our ballpark figures that still means per capita income will have more than doubled rather than quadrupling.

Conclusion

Although he tries to be fair to the opponents of government intervention in the name of fighting climate change, Jeff Spross still makes a very weak case for activism. In addition to seriously botching an important number, he doesn’t really provide the right type of argument to make the insurance analogy work.

Beyond that, Spross and others need to remember that we’re talking about future generations who will be much richer than we are. We’re talking about hobbling energy development today in order to make the Earth a few degrees cooler for people who will probably have robots fly them to work.

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[1] Strictly speaking, the economic cost measures are often expressed (as here) in terms of “consumption,” not “GDP.”

[2] For example, in Table A-1 of this paper from William Nordhaus, we see that in his “optimal” run, by the year 2050 the globe still experiences 2.11 degrees of warming, and has suffered a 1.1% hit to global output by that point.

The post Switching to Markets Could Save You 15 Percent or More on Climate Insurance appeared first on IER.

A Beginner’s Guide to Marketing Automation

Posted by Angela_Petteys

To say marketing automation is a complex subject is putting it mildly. On the surface it seems simple enough, but once you get just a little bit deeper into it, it’s overwhelming. Even if you work with marketing automation on a daily basis, it can be hard to describe.

When used correctly, marketing automation can be useful in helping sales and marketing teams do their jobs more effectively so they can reach their goals. But there are also a lot of misunderstandings about what marketing automation is and isn’t. Let’s try to get a better understanding of what marketing automation is and how it can potentially help a business.

What is marketing automation?

Marketing automation is the use of software to deliver personalized messages to customers and leads. The software allows you to create a dynamic series of messages to send to your contacts. The message a person receives is decided by factors you specify, like what their spending habits are, where they are in the buying process, and past interactions they’ve had with your site.

Delivering content that’s tailored to a person’s needs and interests helps build stronger relationships which, in turn, can help increase conversions and revenue. Marketing automation can help you accomplish all these things while streamlining your operations at the same time.

In the broad scope of things, marketing automation incorporates several different aspects of marketing and business development, including email marketing, content development, conversion rate optimization, and lead generation.

The benefits of using marketing automation

By far, one of the biggest benefits of marketing automation is that it helps sales and marketing teams work more efficiently. People love personalized content; sending out personalized emails generates six times more revenue than sending non-personalized emails. But manually sending out customized messages to contacts simply isn’t practical. Marketing automation platforms handle the mundane and repetitive work that goes into delivering personalized content, giving sales and marketing professionals more time to focus on things that are more interesting and challenging.

Not only does marketing automation make it easier to deliver messages, it makes it easier to figure out where people are in the conversion process. Marketing automation programs typically have a lead scoring feature which helps users quickly identify which leads are the most sales-ready.

One of the most common reasons why businesses consider using marketing automation in the first place is because they want to improve their conversion rates and revenues. Marketing automation is a way to encourage customers to stay engaged longer, making it more likely they’ll stick around long enough to convert. On average, companies that use marketing automation have 53% higher conversion rates and an annual revenue growth rate 3.1% higher compared to companies that don’t.

For products and services with longer conversion cycles, marketing automation can also help speed up the process. In one example cited by VentureHarbour, Thomson Reuters was able to reduce their conversion time by 72% by using marketing automation software.

What applications are there for marketing automation?

While marketing automation has several different applications, email messaging and lead generation/nurturing are among the most common.

Yes, email is still relevant as a marketing tool. While it’s easy to say things like “Everybody’s on Facebook/Twitter/Instagram,” it’s simply not true. However, most Internet users do have at least one email address. Email inboxes also tend to move at a slower pace than social media feeds, giving you the best chance at making a direct connection with your contacts. There's a multitude of ways marketing automation can be used with email:

• Welcome messages
• Product retargeting
• Abandoned cart reminders
• Personalized product recommendations

And that's just to name a few.

Many companies use marketing automation to solicit feedback from their contacts, regardless if they’ve converted or not. Whether it’s by sending out surveys or asking people to send comments directly to them, the information they garner can be extremely valuable in guiding changes that will help improve their revenues in the long run.

Given that personalized emails generate so much more revenue than non-personalized emails, marketing automation can be an effective way to nurture your leads. According to Marketo, about 50% of leads in any system are not ready to buy and nearly 80% of all new leads will never become sales. With marketing automation, the goal is to give people something of value when they need it most so that they’re more likely to convert. Effective lead nurturing generates 50% more sales-ready leads at a 33% lower cost. Nurtured leads also tend to make larger purchases than non-nurtured leads.

Marketing automation platforms are also often commonly used to manage social media campaigns, create landing pages, and conduct ongoing A/B testing.

B2B vs. B2C marketing automation

Businesses of all sizes can potentially benefit from marketing automation, but whether a business has a B2B or B2C model is going to have an impact on the type of messaging used in their campaigns. While both types of businesses would have the main goals of improving conversions and revenue, there are differences in how they’ll reach that goal.

B2B sales

B2B sales tend to have longer conversion cycles than B2C sales and often involve products or services that require a more long-term commitment. (Of course, there are some exceptions.) Because of this, B2B messaging has a greater emphasis on long-form content like whitepapers, case studies, and e-books. When major purchases are being considered for a business, multiple people are often involved in the decision-making process, so it’s not always a matter of winning over one person like it is with B2C sales. It’s important for the business with something to sell to establish themselves as an authority in their industry — offering in-depth informational content is a great way to do that.

B2C sales

Since B2C sales move at a faster pace, the content used in their messaging is typically much simpler. For example, Sephora customers aren’t going to be interested in long case studies about a product, but they might appreciate a 30-second video demonstrating how to use a product instead. For B2C companies, the focus tends to be more on brand building and giving customers reasons to come back, so their messaging typically includes things like abandoned shopping cart reminders, personalized product recommendations, and offers tailored to specific types of customers.

Key concepts

Although many different aspects of marketing and business development come together in marketing automation, the whole process is ultimately driven by a few core concepts.

Conversion funnels

A conversion funnel is the process a person takes toward becoming a customer. Now that it’s so easy to find product reviews and shop around, a lot of people don’t just buy things from the first place they see it for sale. Marketing automation is a way to keep people engaged so they’re more likely to convert.

The conversion funnel can be broken down into a few basic stages:

• Awareness: The customer initially becomes aware of a company, product, or service. It’s too soon for a person to want to make any decisions, but a business has made its way onto their radar.

• Interest: Not everyone who is aware of a business/product/service is going to have a need for it. At this point, those who are interested will start becoming more engaged by doing things like requesting a quote, signing up for a free trial, following a business on social media, looking for reviews, or reading blog posts and other content on a company’s site.

• Consideration: By now, a person is familiar enough with a business to know they like what’s being offered. They’re not quite ready to make a decision, but a business is in the running.

• Action: This is the point where a person decides to convert. You’ve won them over and they’re ready to do business with you.

Ideally, after a person converts once, they’ll be so happy with their decision that they become a repeat customer. But as people move through the conversion funnel, whether they do it once or several times, some of them will always drop out at each level. On average, only 1–5 % of people who enter a conversion funnel actually convert. When people drop out, it’s known as churn, and while some churn is inevitable, marketing automation can help reduce it. By understanding the needs and interests of people at each stage of the conversion funnel, you’re better able to keep them engaged by providing them with the type of content they’re most interested in.

For example, let’s say a company installs vinyl windows and they advertise heavily in the local media. At any given time, a large percentage of the thousands of people who see their ads won’t take any action after seeing one because they either don’t need new windows or because they live in a rental property. No amount of additional messaging will win those people over. But since replacing windows can be very expensive, the people who actually do need them typically spend time doing research to make sure they choose the right type of window and get the best price. If this company were to send additional information about vinyl windows to the people who contact them to get an estimate, they may be able to convince more people to convert.

Feedback loops and metrics

One of the basic laws of physics is that for every action, there’s an equal and opposite reaction. A very similar concept also applies in the world of marketing automation, and it’s known as a feedback loop. When you send a message to a person, the recipient will have some kind of reaction to it, even if that reaction is to do nothing at all. That reaction is part of your feedback loop and you’ll need to pay attention to your metrics to get an idea of what those reactions are.

Feedback loops and metrics are a reflection of how effective your marketing automation strategy is. Whether a person converts, clicks through to your site, ignores the message, flags it as spam, or unsubscribes from your list, that tells you something about how the recipient felt about your message.

When you look at your metrics, you’ll ideally want to see high open rates, clickthrough rates, and maybe even some forwards, since those are signs your content is engaging, valuable, and not annoying to your contacts. Some unsubscribes and abuse reports are inevitable, especially since a lot of people get confused about the difference between the two. But don’t ignore those metrics just because they’re not what you want to see. An increasing number of either could be a sign your strategy is too aggressive and needs to be reworked.

User flow

While conversion funnels refer to the process taken toward converting, user flow refers to the series of pages a person visits before taking an action.

When you have traffic coming to your site from different sources like PPC ads, social media, and email messages, you want to direct users to pages that will make it easy for them to take the action you want them to take, whether it’s buying something, signing up for a free trial, or joining an email list.

You also have to keep in mind that people often have different needs depending on how they arrive at a page, so you’ll want to do your best to make sure people are being taken to a page that would appeal to them. For example, if a person is directly taken to a product page after doing a search for a long-tail keyword, that’s fine since they’re clearly looking for something specific and are more likely to be ready to convert. But someone who clicks on a PPC ad and fills out a form on a landing page is probably going to want more information before they make any decisions, so it’s not time to give them a hard sell.

Workflows

Workflows are where the automation part of marketing automation comes into play. Your workflow is the series of triggers you create to deliver messages. Creating a workflow involves taking yourself through the entire process and asking yourself, “If this happens, what should happen next?”

Workflows can consist of many different triggers, such as how long it’s been since a person has taken an action, interactions you’ve had with a person, or actions they’ve previously taken on your site. Some types of workflows commonly used by retailers include sending discount codes to customers who haven’t made any purchases in a while, reminding people to review products after they’ve had some time to enjoy their purchase, and sending reminders to people who have recently added items to their cart without actually making a purchase.

Important steps in creating a marketing automation strategy

1. Define your goals

This might seem like an obvious point to make, but before you do anything else, you need to decide exactly what you want marketing automation to help you achieve so you can plan your strategy accordingly. Are you trying to generate more leads? Working to build up business from return customers? Trying to boost sales during an off season? Each of those goals is going to require a different strategy, so it’s important to understand exactly what your main objectives are.

2. Identify who to target

Of course it’s important to understand the needs of your customers at all points of the conversion process. But depending on what your main goals are, your time and energy may be best spent focusing on people who are at a specific point of the process. For instance, if you’re not really having a problem with lead generation but you want more people to convert, your time and energy would be better spent focusing on the middle and lower parts of the conversion funnel.

3. Map user flows

By using marketing automation, you’re trying to get people to take some kind of action. Mapping user flow is a way to visualize the steps people need to go through to be able to take that action.

Depending on the way a person arrives at your site, some people might need more information than others before they’re willing to take that action. You don’t want to make people go through more steps than are necessary to do something, but you don’t want to hit people with a hard sell too soon, either. By using state diagrams to map user flows, as recommended by Peep Laja of ConversionXL, you’ll see exactly how people are arriving at a page and how many steps it takes for them to take the desired action.

4. Segment and rate your leads

It’s important to remember that not all leads are necessarily equal in terms of quality. Your database of contacts is inevitably going to be a mix of people who are on the verge of buying, people who are still researching their options, and people who probably won’t convert, so it’s not possible to create broad messages that will somehow appeal to all of those types of people. Rating your leads helps you figure out exactly who needs further nurturing and who is ready to be handed over to a sales team.

The interactions a person has had with your content and the actions they’ve taken on your site can be a reflection of how ready they are to convert. A person who has viewed a pricing page is most likely going to be closer to buying than someone who has simply read a blog post on a site. A person who has visited a site multiple times over the course of a few weeks is clearly more interested than someone who has only visited once or twice in the past year. Marketing automation software lets you assign values to certain actions and interactions so that it can calculate a score for that lead.

Marketing automation also lets you segment your database of contacts to a very high degree so you can deliver messages to very specific types of people. For example, when working with a B2B business, a marketer might want to target messages to people with certain job titles who work at businesses of a certain size. With B2C sales, a retailer might want to segment their lists to give special offers to people who have spent a certain amount of money with the company or send product recommendations to people who live in certain locations.

Building and maintaining a contact database

There’s no easy way around it: Building a high-quality database of contacts takes time. Marketing automation should come into play once you already have a fairly sizeable database of contacts to work with, but you will need to keep adding new names to that database on a regular basis.

One of the most effective ways to build a database of highly qualified contacts is by creating informative content. Blog content is great for providing high-level information, and it helps businesses build trust and establish themselves as an authority in their field. On the other hand, things like whitepapers and e-books are best for attracting people who want more in-depth information on a subject and are more inclined to be interested in what a business is offering, which is why those types of content are usually gated. With gated content, a person’s contact information is essentially the price of accessing the content.

For businesses that offer a service, free trials are an excellent way to get contact information since the people who sign up for them are obviously interested in what’s being offered.

Just say "no" to purchased lists

Whatever you do, don’t be tempted to buy a list of contacts. Purchased lists may give you a quick boost up front, but they’ll work against you in the long run.

First of all, high-quality lists of contacts aren’t for sale. The kinds of lists you can buy or rent are typically full of invalid and abandoned email addresses. Even if a person actually does see your message, they likely either won’t be interested or will be skeptical about doing business with a company they’re not familiar with.

If you were to start sending messages to a list full of contacts of questionable quality, you’ll most likely end up with high bounce rates, lots of unsubscriptions, low open rates, and a whole lot of abuse reports. Email service providers pay attention to those sorts of metrics and if they start seeing them on a regular basis, they’ll view you as a spammer, which will only make it harder for you to get your message to more qualified leads once you have them.

Best practices for marketing automation messaging

Get to the point

Make your point quickly and make it clear. We all have a limited amount of time each day and one thing people have little patience for is long messages. People just want to know what’s in it for them. How would your product or service solve their problem? What’s unique about what you’re offering?

Keep it active

By implementing marketing automation strategies, you’re trying to keep people engaged. Therefore, your messages should be written in an active tone and encourage recipients to take some kind of action, whether it’s downloading a whitepaper, reading a blog post, watching a video, or making a purchase.

Remember where people are in the process

Don’t forget that some types of content will be more appealing than others depending on where a person is in the conversion funnel. People who are just starting to learn more about a company or product are not going to be happy if they get hit with a hard sell, but highly promotional content could potentially be effective on someone further down in the conversion funnel.

Avoid looking spammy

When used correctly, marketing automation is not spam — we’ll talk more about why that is in just a little bit. But don’t give your contacts the wrong impression. Certain things will always look spammy, such as typing in all capital letters, overusing the color red, and using too many links in the body of the message. If you’re going to use symbols in your subject lines or messages, don’t use too many of them. Avoid using words known to trigger spam filters.

If you’re unfamiliar with the CAN-SPAM Act, take some time to learn about what it means for your campaign. Subject lines need to be accurate and not misleading. Companies that send marketing messages through email need to provide a physical mailing address. (PO box addresses are allowed.) You also need to provide an unsubscribe option in all messages and make sure all opt-out requests are honored as soon as possible.

Hone your list

Bigger isn’t always better when it comes to contact lists. One of the key goals for marketing automation is to get your message to precisely the right people. Pay close attention to your metrics so you know who your most qualified leads are and get rid of the ones who aren’t responding anymore. You’re better off with a smaller list of highly qualified leads than with a large list of contacts who don’t care. If it’s been months since a person last opened a message from you, just remove them from your list and focus more on the leads who are more interested.

Misconceptions about marketing automation

It’s impersonal

When done correctly, marketing automation can and should feel personal. In all fairness, it’s easy to understand how people get the wrong impression here — after all, the word “automation” is usually associated with things like computerization and robots. But for a marketing automation strategy to be successful, there needs to be a human touch behind it. Marketing automation simply makes it easier for you to get your message out there. It’s up to you to come up with content that will appeal to people and to create the strategy for getting it out there.

It’s spam

We all know how obnoxious spam is — marketers included. Marketers also understand how ineffective it is. While spam is an unsolicited message promoting something irrelevant to the vast majority of its recipients, the goal of marketing automation is to deliver highly relevant messages to users who clearly express an interest in it.

Unlike spam, marketing automation also frequently involves non-promotional content. Marketing automation messages absolutely can be promotional in nature, but ultimately, the goal is to foster positive relationships by offering something of value — and that doesn’t always involve a hard sell.

You can set it and forget it

This is another case where the word “automation” can give the wrong impression. When you think of something being automated, it’s easy to think you can just set it up, sit back, and let it run on its own. In reality, marketing automation is anything but a hands-off process. Marketing automation needs constant attention and refinement to make sure it’s as successful as possible. Many people use the A/B testing functionality of marketing automation software to run ongoing tests to see which sorts of content, subject lines, design variations, and CTAs people best respond to.

It’s just email marketing

Email is a significant part of marketing automation, but marketing automation isn’t just a new name for email marketing.

First of all, the types of messages involved in basic email marketing and marketing automation are distinctly different. When most people think of email marketing, they’re thinking of broad email blasts that go out to an entire list of contacts, but that’s just what you’re trying to avoid doing with marketing automation. Marketing automation messages are much more fine-tuned to a user’s interests and needs. Although basic email marketing programs do allow for some list segmentation, marketing automation programs allow you to get much more hyper-segmented.

Basic email marketing and marketing automation programs also offer different functionality and insights. While regular email marketing platforms give some basic information about how people interact with your message, marketing automation programs offer more measurable, in-depth insights.

While marketing automation offers a lot of benefits, it’s not going to be an ideal solution for all businesses. For some types of businesses, basic email marketing is all they really need. Studies have shown that marketers often feel like marketing automation software isn’t worth the investment, but many marketers also fail to use it to its full potential or businesses try using it before they have a large enough database of contacts to truly make it worthwhile. Before using marketing automation, the key things to consider are whether or not you have the time and resources to dedicate to training on the software so they can use it to its full potential.

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