Abstract
Precast Autoclaved Aerated Concrete (AAC) is a proven construction material used in Europe for over 70 years. Introduced to the United States in 1990, construction thus far is limited to commercial and custom home applications. Premium benefits include energy efficiency and resistance to natural disaster and pests. Despite being the leading residential construction material in Europe and Japan, lumber is the leading material of choice in the United States. AAC is clearly a superior residential construction product in its current form, but the economic position of lumber and industry change hesitation demand a different marketing approach than is used elsewhere in the world. Using an internet-based survey, home buyers provide data surrounding three core issues: the important characteristics of a house, how much are they willing to pay for superior benefits, and the expected payback period. Adapting current product form and installation methods can make AAC cost competitive with traditional residential framing systems. Consumer education is essential in this evolution to understand the connection between building products and their benefits. As an option to lumber construction, consumers will benefit from its low utility and life cycle costs. The environment will benefit from its energy efficiency and natural resource conservation.Introduction
In 1990, Hebel of Germany introduced North America to Precast Autoclaved Aerated Concrete (AAC) as an alternative structural construction system. The Hebel Construction System is a complete structural building system designed for low rise commercial and residential applications. Although innovative to the United States construction industry, AAC is a proven material in use for over 70 years in Europe. Since its commercial production beginning in 1923, AAC has been used to build millions of residences worldwide. As an alternative to traditional residential construction methods, AAC not only provides consumers and builders with competitively priced options, but provides additional selling points of low life cycle costs, energy efficiency, superior fire resistance, acoustic efficiency, and natural resource conservation. Hebel is the world leader in manufacturing and distribution of AAC products and products and produces more than 31 million cubic yards annually (Hebel, 1998.) The 400000 cubic yard annual production rate of its recently opened manufacturing facility in Adel, Georgia is just a beginning in the evolution of residential construction in the United States.
AAC industry intent is to integrate its material into the full spectrum of U.S. design and construction applications, making it a conventional system alongside steel, concrete, and wood. The use of AAC structural systems in U.S. commercial applications is already gaining momentum, with increasing sales every year. The nature of precast systems is somewhat better adapted to commercial structures due to the general use of repetitive bay designs. U.S. homeowners on the other hand demand uniqueness. The maximum cost benefit of AAC is attained through mass production of products requiring no tooling changes on the production line. Although blocks for residential construction are efficient in production, there is some productivity loss on the construction site as blocks are custom fitted and shaped.
Precast autoclaved aerated concrete is the leading residential construction material in Europe and Japan. The leading material of choice in the United States is lumber. Unlike the rest of the world, lumber is prevalent is the U.S. and historically relatively inexpensive. Despite the emergence of several new residential framing technologies such as steel and a variety of portland cement applications, no innovative method has been able to penetrate the mainstream stronghold of lumber in the housing market. It is highly unlikely AAC technology will replace lumber in the residential market, but it is AAC's intention to compete head to head with lumber, and attain market share as an equal or better residential construction material.
AAC structural systems are already proven to work all over the world. They simply must be promoted and priced such that they are competitive in the U.S. market against lumber. With a specific program in place, the AAC industry will gradually change the way design and construction professionals view residential construction. With full knowledge of AAC applications, environmental benefits, technical capabilities, and unique requirements, consumers and builders will reap the benefits of this sustainable construction product while preserving environmental resources.
Still, the U.S. residential market presents a challenging goal to the AAC industry. Why are innovative construction methods necessary? What exactly is AAC? How can this proven system compete against current U.S. methods? This research answers these questions through identification and summary of appropriate technical and marketing issues. With programs in place to address these issues, the industry will guide AAC to its rightful place as standard in U.S. residential construction.
Residential Construction Background
The dominant material in residential construction within the United States is wood. Construction industry statistics show 94% of new homes are constructed using exterior and interior wood framing (Dodge, 1990). In mid-1992, increasing concerns of environmental preservation and endangered species forced federal restrictions on logging (Lemonick, 1991), and in a dramatic turn of events, by mid-1993 lumber prices nearly doubled to a peak of around $ 500 per 1000 board feet. Not only are the resultant price increases significant, but the sharp fluctuations created a volatile market for timber sales. The average weekly change in the framing lumber composite price varied in 1993 between $10 and $15 per 1000 board feet, or about three times the rate of change experienced in the 1980's (HUD, 1994). Although lumber prices receded to a current value of about $430 per 1000 board feet (Random Lengths, May 1997), the subsequent instability of the lumber market since 1993 has led to such drastic measures as stock market hedging in lumber futures (Lurz, 1994). Also, despite forestry management methods, some critics of the lumber industry state the long term outlook on quality lumber is poor due to harvesting high-quality forests at a rate greater than they are replenished.
Despite the growing cost, tremendous price fluctuations, and an unsure future, builders continue to use lumber. When investinating concrete as an alternative to lumber, builders can not seem to get a comparable house at a comparable price. After factoring in new labor skills, building code differences, increased costs from subcontractors unsure of their role, and making it all work to satisfy customers, any savings from less expensive materials is lost. It makes more sense for them to ride out the trouble, and continue using wood (Vander Werf, 1995).
In 1993, The U.S. Department of Housing and URban Development (HUD), Office of Policy Development and Research published the first report of ongoing research studying alternative structural materials for residential construction. In the interest of consumers and the residential construction. In the interest of consumers and the residential construction industry, the National Association of Home Builders (NAHB) bwas commissioned by HUD to conduct this study to review and identify viable innovative construction materials. Although a variety of sponsors participated in the study, including the portland Cemnet Association with several concrete allpications, AAC was not dientified in any of these reports.
A preliminary literature review of state of the art residential construction technology reveals little about application of precast autoclaved aerated concrete in the U.S. There are, however, several international publications on the subject of AAC structural properties. Although the Portland Cement Association (PCA) has recognized it and included it in its 1995 publication, The Portland Cement Association's Guide to Concrete Homebuilding Systems, little has been done to integrate it in the mainstream residential construction industry. The portland Cement Association readily admits that very little documentation exists concerning AAC. The U.S. Department of Housing and Urban development has yet to recognize AAC in any of its publications on research of alternative residential construction materials.
In response to tremendous lumber price hikes, and in the interest of consumers and the residential construction industry, the U.S. Department and Research, commissioned the National Association of Home Builders (NAHB) to review and identify viable alternative structural materials for housing construction. The initial result, Alternatives to Lumber and Plywood in Home Construction, published in 1993, identifies several innovative technologies. Further study results released in 1994 (Alternative Framing Materials in Residential Construction: Three Case Studies) provide insight into the installed cost of three systems; Foam - Core Panels, Light - Gauge Steel Framing, and Welded - Wire Sandwich Panels.
Continuing its research into new materials, HUD released a 1995 report, Innovative Structural Systems for Home Construction, presenting Wood Structural Insulated Panels and Insulating Concrete Forms for conventional residential construction, and a detailed floow-up report, Insulating Concrete Forms for Residential Construction: Demonstration Homes, published in 1997. Despite Hebel's presence in the U.S. since 1990, AAC was not identified in any of these reports.
In an effort to continue HUD's research into new materials, this research presents precast autoclaved aerated concrete as an alternative technology for conventional residential construction. HUD's research addresses the technical aspects of alternative construction materials, but does not address the more difficult aspect of acceptance and adoption of that technology. This research identifies the needs of home buyers / owners, and their willingness to purchase the technology to support those needs. These technical and marketing positions will be used ultimately to develop a marketing plan to modify product form and stimulate adoption and sustained use of AAC.
AAC industry's initial intent was to promote AAC technology in both commercial and residential markets. Applications are rapidly growing in the commercial construction market. Steady growth is attributed to architects and engineers becoming more familiar with AAC. But at a slightly higher cost than lumber, AAC is considered a "premium' prodcust for residential applications, and as such has been limited to custom homes. With revenue from and proven performance in the stronger, more immediately profitable commercial market, AAC companies are better prepared to take on the lumber dominate housing industry.
AAC Product Overview
AAC is a lightweight, structural, precast building material of uniform cellular structure. It is formed by combining sand, lime, cement, gypsum, water, and an expanding agent, which forms a porous, microstructure in the concrete. At one-fifth the weight of concrete, the solid units are easily placed and secured with a thin-bed mortar. With wood-like behavior, blocks shape easily and fasten using common woodworking tools and fasteners. The masonry-like units and reinforced panels are a part of a complete range of products that enable a structure to be built entirely of AAC (Hebel, 1998). The entire structural shell including, basements, walls, stairs, floors, and roofs are all made from precast autoclaved aerated concrete products. AAC was used to build a seven story hotel in Atlanta in preparation for the 1996 Olympic Games.
History of Autoclaved Aerated Concrete
Although new to the United States, precast autoclaved aerated concrete is a proven construction material used successfully in Europe for over 70 years. As an alternative to lumber, AAC provides additional selling points of low life cycle costs, energy efficiency, superior fire resistance, acoustic efficiency, and natural resource conservation. The world leading manufacturer and distributor of AAC products is Germany's Hebel. Hebel established its first U.S. operation in Atlanta, Georgia to introduce AAC to the U.S. in 1990. Another European (Swedish) company, Ytong, soon followed and set up operations in Haines City, Florida (Near Orlando).
Materials Used in Manufacture
AAC is manufactured from sand, cement, lime, gypsum, water, and an expanding agent. Unlike lumber, all of these materials are readily available and are abundant natural resources. Since the finished product is nearly five time the volume of the raw materials used in manufacturing, this product uses resources very efficiently/ The mixture is poured into a large mold and steam-baked in an autoclave. Following the autoclave process, the large block is cut into precise blocks. Reinforced products follow the same process, but reinforcement is also placed in the mold. The block is shaped to interlock with mating pieces following the autoclave process.
Energy Conservation Benefits
AAC is an easy to use environmentally friendly construction material. Only a fraction of the energy used in production of other building materials is used in the production of AAC. Additionally, no pollutants or toxic by-products are produced during the manufacturing process. AAC is also completely recyclable (Hebel, 1998).
The R-value of 8inch AAC walls is better than that of a wood stud wall with R-30 insulation (Hebel, 1998). The combination of R-value, thermal mass, and air tightness work together to eatablish energy efficiency that far surpasses any comparable wood stud wall.
In addition to greatly moderating the interior temperature, there is a lag time of about eight hours from the exterior peak temperature to the interior peak temperature (Hebel, 1998). This lag time allows energy comsumption to be shifted to off-peak hours. This is a cost benefit to homeowners and a load management benefit to power companies.
Airtightness is another characteristic of AAC construction that saves costs and energy. Research (Yuill, et.al., 1997) shows that reduced air exchange due to leakage not necessary for ventilation saves energy costs. This was proven for both warm and cold climates. Reduced air exchange due to leakage also offers the opportunity to use a smaller HVAC unit, and for subsequent lower initial costs for the builder and buyer. The research highly recommends building "substantially airtight" structures, and relying solely on the mechanical system for ventilation.
Environmental Benefits
As an integrated structural and insulation system, no other single construction material can match its design flexibility, rapid construction, energy efficiency, and low life cycle costs. Design flexibility and rapid construction allow builders to construct a quality structure in a short time, and move on to the next project. The energy efficiency translates to lower utility costs for homeowners, and lower initial costs for smaller HVAC units. Also by using less energy, natural resource are conserved. Low life cycle cost is the result of lower utility cost, little to no maintenance of the structure, and an overall "healthy" home through high resistance to air flow through the structure.
AAC is an inorganic solid wall that is insect resistant. It is not possible for insects to inhabit or breed in them as is possible in other systems. Without concern of termites and other insects damaging or inhabiting the structure, chemical treatments are reduced or eliminated. Associated damaging or inhabiting the structure, chemical treatments are reduced or eliminated. Associated environmental and health threats are avoided by not putting chemicals in the ground or in the air.
A commonly overlooked environmental problem in residential construction is that of noise. The soid wall construction of a building made of AAC provides excellent sound abatement. This greatly reduces the effect of outside environmental noise, providing a quieter more comfortable interior for residents.
Durability is an important factor when considering use of a building material. A structure that does not need major repairs or renovation every twenty years or so, as many wood products require, can save money, inconvenience, energy, and other resources. This is of tremendous advantage to the building owner, creating a better investment. AAC has proven to be a very durable material. There are numerous structures worldwide, many over 50 years old, in excellent condition. AAC will not rot, warp, rust, corrode, or otherwise decompose. The very low maintenance of a AAC building saves considerable maintenance time and money over the life of the building (Hebel, 1998).
As a construction syste,. AAC provides significant environmental and other benefits for the builder and the home owner. The short and long term benefits of AAC are lower energy consumption, reduced insurance and operating costs, greater safety and comfort, and a healthier, trouble-free house. These features provide a better investment for the home owner, and for the environment.
Autoclaved Aerated Concrete as an Alternative to Lumber
From an engineering perspective, AAC is an ideal residential construction material for a sustainable environment. It is easy to use on the construction site due its light weight and is placed using tepical mason skills. Its unique characteristics allow it to be cut and shaped like wood and typical fasteners (i.e. nails, anchors) can be used to attach furring strips, picture frames, curtain rods, etc. The combination of thermal mass, air tightness, and inherent insulation create and energy efficient structure that saves resources and homeowner costs. Fire resistance of AAC far exceeds the capabilities of lumber homes, containing the fire, saving the structure and far exceeds the capabilities of lumber homes, containing the fire, saving the structure and household affects, ultimately reducing insurance premiums. AAC structures have a higher resistance to high winds and hurricanes, and are impervious to insect attack (such as from termites). AAC is also much more affective is reducing noise transmission. ALL these benefits are achieved with much less maintenance as wood structures. A complete cost benefit conparison is in Appendix A. All of these benefits are clearly desired by every homeowner, so why would homeowners not want AAC in their home?
The primary reason AAC is not a common building material is cost. Presently, AAC is marketed as a premium product costing 5% to 75 more than the entire cost of a house just to construct the exterior framing system and upper level ceiling using AAC. As such, its use in residential construction has been limited to custom home applications. Consumers aware of AAC's capabilities that can afford a custom home appliactions. Consumers aware of AAC's capabilities that can afford a custom home are able to specify AAC for construction. For the average home buyer this is not an option. The average home buyer relies on the builder's selection of materials. The competitive nature of residential construction leads builders to use the least expensive material available. If life cycle costs of an AAC home home are lower than a lumber home, the AAC home is less expensive over the expected use period of the home. For an average home buyer looking at a new mortgage, it is difficult to perceive how a higher fixed monthly payment for a "premium product" is less expensive over the life (or use) of the home. Unfortunately, builders simply will not take the risk and build homes using the more costly AAC without a guaranteed buyer. The subsequent "up front" cost of the homes will send uninformed buyers to the neighboring builders' development.
In present form, AAC products are not a true replacement for lumber construction. The 5% to 7% coast premium is only to build the exterior walls and upper level ceiling using AAC. The interior walls, second story floors (if applicable), and roof are still constructed using traditional materials (wood or light gage steel). This is again a cost issue. The primary cost benefits of AAC are attained in the exterior wall an ceiling syste,. Building interior walls and floors with AAC will increase costs, but not provide significant additional savings. The cost of using AAC for a roof is costly due to the many angles, dormers, and penetrations. To ensure the energy efficient integrity of an AAC system, the upper level ceiling is constructed using AAC. Homes in Europe are made entirely of AAC due to the lack, and subsequent cost premium, of lumber. Another significant factor in European applications is the stringent building codes requiring high energy efficiency. The high cost of European utilities also encourages home buyers to seek homes with high energy efficiency and low life cycle costs.
Another reason AAC is not a true replacement for lumber construction is the lack of cavity between wall panels and in the floor or ceiling panels. Traditional construction methods rely on the cavity between wall panels to run electric and plumbing utilities as well as cable, intercom, and alarm systems. If the builder chooses to finish the interior with furring strips and drywall, the 3/4 space is used for most utilities. Otherwise, channels are routed into AAC to run utilities. Following utility placement, the channel is filled with plaster, or just covered with drywall. The lack of "normal" cavities is an important issue easily resolved if planned (or designed) in advance.
The general consensus is that consumers want the benefits provided by AAC, and are willing to pay extra for improved disaster resistance, pest resistance, energy efficiency. An interactive internet survey was established to determine exactly how much buyers are willing to pay for AAC and at what rate of payback is acceptable.
Research Methodology
Developing residential construction products and a marketing plan requires knowledge of consumer needs and perceptions related to the housing market. This information is even more important to overcome the difficulty of acceptance and adoption of this technology. The primary research mechanism through which this report is developed is through an interactive internet-based customer survey. The results of this survey are compared to the three year old Homeowner Report by the Portland Cement Association (Portland Cement Association, 1995) developed to determine attitudes and perceptions concerning the use of concrete in new single-family homes. A secondary mechanism of this research is interviews of professionals within the residential research and construction industry.
Survey
Initial intent of the survey was to conduct approximately 500 personal interviews each in the Atlanta and Dallas metropolitan areas. These metropolitan areas were selected primarily due to Hebel having corporate operations in these cities, but also due to their standing in the mainstream residential construction market, and their representation of major metropilitan standards. Starting in the Atlanta area, it was soon discovered that malls, home centers, builder showcases, and other assorted businesses would not allow customer interviews for one or both of two reason: (1) policies in affect that prohibit soliciting their customers, or (2) existing contracts with survey companies asuring sole access to customers.
Proprietary survey companies charge $20 per contact incident (Quicktest, 1998). With no financial backing, and the advent of electronic media, the next obvious avenue was an interactive internet-based survey. Additional responses were gathered through distribution of a hard copy paper survey based on the electronic survey version.
In addressing the advantages and disadvantages, the internet survey actually benefits in many aspects that traditional surveys have problems. Anonymity in the internet version allows the consumer to be totally honest. Since the internet survey must stand on its own with the customer, there is no interviewer bias that can plague personal or telephone interviews (Rea, 1992). The premium benefit is cost. Access to most electronic email lists are free, and internet sites are free, depending on thelocation of the server. The only disadvantage is the survey precludes anybody who does not have access to ba computer and the internet.
Development of Survey
In order to eliminate bias in the survey results, the questions are worded in a way that do not invoke a particular response (Fowler, 1993). All question are general in nature and do not mention AAC or any other building material (See the actual survey in Appendix B). Although the initial intent was to minimize the survey to 5 questions, further efforts to clarify questions and separate issues resulted in expansion to 9 questions. Minimizing the survey length is a key initiative to encourage consumers to participate, and to keep them interested long enough to complete the survey.
The actual focus of the survey is to answer three questions:
1. What characteristics of a house are important to the consumer.
2. How much are consumers willing to pay for improved characteristics.
3. At what rate of payback for premium benefits are acceptable.
The characteristics are focused on the superior benefits provided through use of AAC products. The consumer is asked to rank 6 characteristics (Appearance, Maintenance Cost, Disaster Resistance, Durability, Energy Efficiency, and Initial Cost) in the order of most importance. The characteristics are listed randomly to preclude order bias by the researcher's perferences. Intended region of purchase is of particular interest since their concern for certain characteristics may be attributed to the conditions of each locality. Additionally, the house cost and size are reported to compare characteristic ranking and spending patterns. Those that intend to stay in a house for longer periods are expected to be more concerned with life cycle costs versus immediate costs.
Questions #6 through #8 ask how much more the consumer is willing to pay for premium benefits. The Portland Cement Association's survry asks a similarly formatted question, but uses responses in the form of percentages. It is felt that even educated consumers may perceive 45 or 5% to be a low cost for a premium benefit without actually calculating the cost. It is easy for a customer to state they would pay 45 for something, but when it comes down to the actual purchase, they may not be willing to obligate an additional $6000 (for a $150000 house). The survry intends to determine exactly what the customer will actually purchase.
Internet. The electronic version of the survey is posted on an internet website, with the actual files stored on the America Online server (http://members.aol.com./gt7768). The web-based hypertext markup language (HTML) form sends the respondent's information to the researcher via e-mail. To get the form to send the information in a legible format, the information must first be processed in a CGI program. To maintain a legitimate research appearance it was intended to place the survey on the Georgia Tech server. Limited access to that server and the ability of it to properly process the form responses prompted the survey to be placed on the America Online server under a screen name established solely for this research.
Hard Copy. Seventy-five hard copy surveys were produced by printing the internet survey. Despite being distributed solely in the Atlanta metropolitan area, they did not necessarily produce responses for the South Atlantic area. Several respondents intend to purchase homes outside the South Atlantic region. Hard copy surveys were distributed to military and civilian employees at Naval Air Station Atlanta, and the Marietta business office of Leaseplan, U.S.A.
Distribution of Internet Survey
The survey sampling is developed around the simple random method. This would be the method chosen for a traditional mail or telephone survey based on the expected population intended for data collection. The expected intercept population is anybody in the market to purchase a new home. The market research analysts at Elrick ＆ vLavidge, in Atlanta, provided insight to the principles of survey sampling to ensure the results would be accurate. To attain a confidence factor of 95% and an accuracy of +/- 55 using traditional survey methods, the survey would have to be sent to 741 recipients.
Despite the efforts of marketing companies to keep up with addresses and phone numbers, there is a chance the survey may not get delivered to the intended recipients. Additionally, once the recipients receive the survey, there is a less than 50% chance they will even respond. Even if they do respond, it mat not be complete or accurate 9incidence). The rates of working addresses (or phone numbers), cooperation, and incidence vary greatly depending on the database used and the type of target recipients. For this survey's intended targets, Bill Salokar of Elrick ＆ Lavidge recommends the following rates:
With a base of 741 recipients, these rates translate to 200 accurate responses with a confidence factor of 95% and a result accuracy of +/- 5%. Unfortunately, the use of e=mail forwarding, the internet, and advertising through search engines precludes knowledge of exactly how many contacts are made.
Assuming AAC industry companies may make business decisions based on this research, Hebel's Vice President of Marketing (U.S. Operations), Bill Sutton, requested a response base of 1000 customers. With a goal of 1000 accurate responses, an estimated 3100 consumers were reached through various methods.
The most difficult aspect of web-based sampling is getting visitors to be web site. Several methods were employed to invite participants to do the survey, but the advent of "junk e-mail" results in a relatively low response rates from direct e-mail invitations. Despite the web site being listed on the top 20 web search engines, there is low confidence that any significant volume of survey participants visited via this route.
Interviews
The interview phase of this research reveals the status and perception of AAC by major market home builders that specialize in specification homes (homes built prior to owner purchase) and by researchers at the National Association of Home Builders. Although Hebel's competitors were not interviewed, a brief summary of their activities are presented to provide an understanding of the state of the AAC industry, and the importance of prompt action to secure relationships with major market builders.
Major Market Builders
Initial interviews were conducted with personnel from three builders (Centex, Ryland, and Pulte in the Atlanta area that construct specification homes nationwide. The summary of these interviews reflect of these interviews are quite interesting. Calls were placed to different offices within each company to make interview appointments. Marketing and purchasing managers, as well as architects and engineers were contacted. In the competitive nature of nearly every business, one would expect national home builders to be actively searching for innovative materials and construction technologies to enhance their market share. In every case, not one person was interested in setting up an appointment to discuss this research. In fact, several other builders coutacted were not even interested enough to discuss it on the telephone.
Those builder representatives willing to discuss this research on the telephone generally are categorized in one of the following three catgories:
1. Never heard of Autoclaved Aerated Concrete (or by an other name).
2. Heard of it, but no knowledge of benefits, applications, cost, or installation skills.
3. Aware of it, but not willing to do anything different for fear of losing market share.
The most surprising aspect of these interviews is that thry were not even interested in the research findings. Many people contacted in the course of events of this research have requested a copy of the final results. These representatives have not. Gaining no cost support to the research effort such as access to their customers or exit poll summaries was just as fruitless. Suprisingly, the Centex office in Dallas is working with the Hebel SouthCentral operation to develop a cost effective AAC specication home for that area. The similar climatic Atlanta Centex office is not aware of this relationship or the impact it could have for future construction.
Competition
Competition on the horizon means quick action is imperative. When Hebel started its U.S. operations in 1990, they were the only company in the U.S. promoting AAC. In just the past 5 years, several competitors have appeared, including Sweden's Ytong. Some of the ther new U.S. corporate faces are backed by names familiar to the European AAC marketplace.
The second largest producer of AAC products in the U.S. is Ytong. U.S. operations were established in 1997 in central Florida. As with Hebel, primary foucs is on production and commercial sales, but are also using AAC in custom home applications. Ytong also has a strong presence in the European AAC market, but not near the level Hebel has attained. Due to their worldwide experience, Ytong is a serious competitor.
Babb Cellular Concrete LLA, of Ringgold, Georgia has just started construction of a pilot plant to manufacture AAC from fly ash (Engineering News Record, 1998). They also are negotiating to build additional plants at several of the Tennessee Valley Authority's fossil fuel plants. This production venture is beneficial to the chronic problem of ash disposal. However, this research did not reveal sales or application concepts for their product. Other power companies in Pennsylvania and some midwest states are also working to develop contracts with manufacturers that will use fly ash in the production of AAC.
A company in Arizona, Truestone America, is building homes with their version of AAC. This division of a Swedish company, Svanhome, may have a significant proximity advantage in the race to capture the West Conast market.
Survey Analysis
The purpose of this survey analysis is to determine the validity of consumers' willingness to pay for premium construction products and associated benefits. Research survey results are presented and compared to appropriate similar data in two other surveys conducted in 1995. The comparison is made to validate results, and determine if trends have changed over the 3 year period between survey samplings.
Professional Builder magazine funded a 1995 survey to find out how much home buyers are willing to pay up front in premiums for energy efficiency and maintenance (or life-cycle) costs. The survey includes responses from more than 700 consumers that recently purchased a home, or intend to buy a newly built home (McLeister, 1995). The Portland Cement Association conducted a homeowner survey in 1995 to determine the attitudes and perceptions concerning the use of concrete products in single family homes. The homeowner survey was mialed to 1600 households that had previously agreed to complete questionnaires. 970 consumers responded. The Portland Cement Association is in the porcess of compiling homeowner data from a 1998 survey that is expected to be released in August 1998.
Statistical Validation
Approximately 3100 consumers were contacted through e-mail and invited to visit the internet web site to answer the 9 question survey. Upon completion of the survey, the form automatically sends the results to the researcher via e-mail. 761 responses were received. 131 responses were incomplete or not completed corectly, and subsequently disregarded. The remaining 630 are considered valid. Of the 3100 requests, 75 were actually hard copy survey. Of those, 63 were returned. This small volume is relatively insignificant in the scope of the entire response base. A total of 693 valid responses are included in the survey data.
The use of internet based survey sampling is so new, statistical standards have not yet been established. With guidance from the marketing research company of Elrick ＆Lavidge, Atlanta, Georgia, and the statistical validation of the Portland Cement Association's 1995 Homeowners Report, this survey is validated at the 95% confidence level with a margin of error of plus or minus 5%. Although the 22% response rate of this survey is significantly lower than the 60% rate of the PCA survey, it is only slightly lower than typical mailed wurvey responses, and actually quite strong considering the use of e-mail. E-mail messages are readily discarded. The Homeowners Report had 970 responses from a known sampling base that had previously agreed to answer questionnaires on a variety of subjects.
The strong response volume of 693 is what keeps the margin of error to less than 105. Market research specialists recommended at least 200 responses to validate the survey at the 95% confidence level with a margin of error of plus or minus 10%. The large response base keeps the margin of error low (less than 5%), but the use of electronic access degrades the certainty of the sampling. Since there is a possibility some of the surveys were completed by people not within the parameters of a home buyer (age, for example), the margin of error is increased to approximately 5%.
Critical Analysis
Initial cost and appearance were reported as the most important features to the majority of customers. However, appearance, durability, and energy efficiency are very closely ranked. Although home buyers in the low end and high end price market have slightly different interests and priorities, specific marketing programs may need to be prepared for these customers to capitalize on those trends. Buyers in the low and moderate price markets report initial cost as the most important characteristic, while customers in the high end price market report appearance as the most important characteristic.
Energy saving, maintenance costs, and disaster resistance are all very important issues to home buyers. Several comments reported hesitancy to rank them. Regardless, over 90% of buyers reported they would pay more for a home that incorporated even one of these features. Over 855 of buyers would spend more than $ 1500 each for energy savings and disaster resistance features.
Desired Home Value
Forty-eight percent of the customers reported their next home purchase would cost $125000 - $199000. Only 3% and 4% respectively intended to purchase homes costing <$75000 and $350000 or greater. Homes costing $75000 - $124000 and $200000 - $349000 are the next purchase of almost one-quarter of the customers for each range (See Figure 2).
In contrast, Figure 3 shows the market value of homes the 1995 survey respondents live in. Twenty-six percent of those respondents live in homes valued less than $75000. Another 365 live in homes valued between $75000 and $125000. By looking at the chart similarities in Figure 2 and 3, it is clear most respondents of this research survey intend to make their next purchase in the next higher cost category.
Resistance to Natural Disaster
Eighty-two percent of the customers reported they would spend at least $1500 more for a house that had greater resistance to the effects of natural disasters such as fire and hurricanes. Larger, more costly homes, accounted for the 8% reporting they would spend more than $6000 for this benefit. These percentages are consistent with findings in the 1995 PCA survey. Figures 5and 6 show the distribution of willingness to pay extra for improved disaster resistance.
The 1995 PCA survey showed a high percentage of resondents willing to pay more than $6000 and a high percentage not willing to pay anything. The current research survey shows considerably lower percentages in both these categories, with the majority (61.4%) of consumers willing to pay between $1500 and $4500 for this benefit.
Additional data in Appendix C compares disaster resistance spending to the number and cost of the next home purchase, as well as regions. For purchases between $75000 and $350000, spending is consistent with the overall percentage (61.4%) of those willing to spend between $1500 and $4500. For purchases under $75000 the percentage drops to 47.8% due to a significant percentage of customers (30%) not willing to spend any extra for this benefit. For purchases over 4350000 the percentage drops to 39.3%, but is countered by 42.8% willing to spend more than $4500. Of that 42.8, 35.7% is willing to spend more than $6000.
Comparing the number of home to disaster resistance spending shows more customers are willing to spend $1500 to $4500 in progressive ownership. In this spending range, 57.4% first home buyers are willing. This percentage rises consistently to 63.9%, 65%, and 70.4% in second, third, and fourth home purchases. The percentage drops to 32% for fifth home buyers, but a significant number of buyers (30%) are willing to spend more than $6000.
Although the PCA survey revealed a higher interest in disaster resistance spending in certain regions, this research survey did not show any such trends. All regions showed the majority of consumers (53% - 73%) are willing to spend $ 1500-$4500 except the Middle Atlantic region which only had 37% interest in this spending range. The Middle Atlantic had 28.2% willing to spend at least something for this benefit, but less than $1500.
The "Ranking vs. Spending Comparisons" in Appendix C shows only a slight trend in spending patterns regarding the rankings assigned to disaster resistance. Above $ 1500 the participation varies from 94.6 in the top ranking to 76.9% in the lowest ranking. Regardless of how disaster resistance is ranked, it is still important enough for 82.5% to spend more than $1500.
Improved Energy Efficiency
The research survey asked customers how much more they would spend for a house that would save 15-20% on energy costs. Ninety-two percent reported they would spend more for a house that had greater energy efficiency. These percentages are consistent with findings in the 1995 PCA survey. Figures 7 and 8 show two separate survey results' distribution of willingness to pay extra for improved energy efficiency.
The 1998 survey showed only 7% willing to pay more than $6000, but the 1995 PCA survey showed over 50% of respondents willing to pay more than $6000. This high percentage could be attributed to the use of percentage-based instead of dollar figure-based questions. The majority of customers in the research survey (64.6%) would spend extra for this benefit in the range of $1500 to $4500. The Professional Builder survey found 81 percent of consumers willing to spend $2000 up front to save $250 a year in heating and cooling expenses. Figure 9 shows that almost 20 percent of those consumers would spend an additional $1000 to save the same $250 per year. Despite the differences in each survey approach, all three validate the fact that 80%-90% of all customers are willing to pay at least $2000 to save approximately $250 (or about 20%) per year in heating and cooling costs.
Additional data in Appendix C compares energy efficiency spending to the number and cost of the next home purchase, as well as regions. For purchases between $75000 and $350000, spending is consistent with the overall percentage (61.6%) of those willing to spend between $1500 and $4500. For purchases under $75000 no customer reported a willingness to spend >$4500. For purchases over $350000 the average spending range percentage drops to 39.2%. The reduction is attributed to two extreme positions. Fourteen percent of those purchasing a home costing over willing to spend only less than $1500. On the other extreme, 25% of $350000 customers reported a willingness to spend more than $6000.
Comparing the number of home to energy efficiency spending shows this relationship has little to do with what the customer is willing to spend on this benefit. Across the board, customers are willing to spend $1500 to $4500 regardless of the bnumber of home purchase. The only notable increase occurs in the fifth home when fewer customers report spending in the lower 2 ranges, and more report spending in the ranges >$4500. Comparing energy efficiency spending to region reveals a slight increased interest in the East North Central and Northeast regions. This was also previously indicated in the weighted rankings. These two regions average about 80% of its customers willing to spend $1500 - $4500 for this benefit, while the remaining regions reported 55% - 65%.
The "Ranking vs. Spending Comparisons" in Appendix C shows a notable trend in spending patterns regarding the rankings assigned to energy efficiency. In the spending range above $1500 the participation varies from 94.4% in the top ranking to 58% in the lowest ranking. Regardless of how energy efficiency is ranked, it is still important enough for 85% to spend more than $1500.
Reduced Maintenance
The primary expense of maintenance in the context of this survey is framing material replacement due to pest infestation, and termite treatments. Water intrusion may slao contribute to the need to replace certain framing materials. Figure 10 shows the distribution of customers' willingness to spend extra for fratures that offer superior resistance to termite and pest damage. Ninety-four percent of customers are willing to pay extra for these features.
Thirty-eight percent (38.4) of customers are willing to spend in the range of $1500 - $2999 for this benefit. Another 28.7% will spend up to $1500 and 26.7% will spend more than $3000.
According to the 1995 Professional Builder survey up 72 percent of consumers would spend $4000 to save $500 per year in maintenance costs (Figure 11). Almost one quarter of those willing to pay would spend $5000 to save the same $500 per year in maintenance costs.
Although the Professional Builder survey quetion is worded slightly different than the research survey, an approximate comparison between the two is possible. The 67.1% research customers willing to spend up to 43000 is correlated to the 55.7% Builder respondents willing to spend $4000. The differences in percentage are likely attributed to the $1000 difference in spending limits. The Builder respondents showed 16.3% not willing to spend $4000 for this benefit. This high non-participation may be due to the "yes" or "no" format of the question and a single spending threshold of $4000. The research survey showed only 65 unwilling to participate. At the upper slending limits, the research survey showed significantly more interest with 22.5% willing to spend up to $6000, while only 16.3% of Builder respondents willing to spend up to 3000.
Trends seen in Appendix C data show comparisons of maintenance-saving spending with cost of home, number home, and regions have spending patterns similar to other premium benefits, but the spending range is one category lower. In homes costing $75000 - $350000, spending follows the average 67.1% in the $0 - $3000 range. In homes costing $75000 - $350000, spending follows the average 67.1% in the $0 - $3000 range. In homes costing <$75000, less consumers are in the average spending range, and tend to pay less. In homes costing >$350000, less consumers are in the average spending range, and tend to pay less. In homes costing >$350000, less consumers are in the average spending range, and tend to pay more. The same pattern and spending range applies to number of home, with first home buyers paying less, and fifth home buyers paying more. Regional comparisons show a slightly higher interest in East South Central, Middle Atlantic, Pacific, and South Atlantic. These regions are more likely to have termite problems.
Payback Period
Sixty-five percent of customers expect a oayback period of 3-9 years. Another 24% expect to break even in 10-12 years. Figure 12 shows the distribution of payback periods. Payback patterns based on cost of house reveal no particular trens. Comsumers expect a 3-5 year payback in most price ranges except in homes costing <$75000. More than 47.8% of consumers in this category expect a 6-9 year payback. Payback expectations continue to be 3-5 years for the first, second, and third homes, but rises to 6-9 years for the fourth and fifth houses. Regional comparisons produced scattered results.
Alternative Product Development
Autoclaved aerated concrete is clearly a superior residential construction product in its current form. However, the competitive nature of home construction in the U.S., the economic position of lumber and industry change hesitation demand a different marketing approach than is used in AAC construction elsewhere in the world. Every consumer and builder would like to have all the benefits AAC provides, but are not necessarily willing to pay more or change the way construction trades build home. Two options to make AAC more appealing to U.S. residential construction are product modification and cost improvements.
Product Modification
Current residential AAC construction uses small blocks similar to concrete masonry units (CMU's). Block construction is generally labor intensive. Commercial AAC construction uses a combination of small block, ju,bo block, and reinforced panels. The benefit of using small block is the handling ease. As with CMU and lumber, no lifting equipment is necessary on site other than for delivery. Using jumbo block or large panels would require lifting equipment on site. However, the benefit of jumbo block and panels is the reduced labor time by reduces the number of joints. A combination products can offset the product and equipment costs through labor savings. A product developed specifically to compete with traditional U.S. residential construction methods would be ideal.
The concept of product modification is already in motion at Hebel. They have already changed the lintel method by producing a precast unit. Also, they are developing a thin AAC panel that will attach to a light gage steel stud frame. This approach also addresses the wall cavity of which the U.S. construction industry has become so familiar and dependent. Wood and steel framed walls have a cavity that provide a means for simple utility installation. Even CMU's have voids that follow the labor intensive process of being hand cut or routed.
A product concept developed by the author of this research is to produce full and half height AAC panels (with and without window and door openings) with pre-installed conduit for electrical and other wiring. The various panels could be assembled in a variety of combinations to construct unlimited house design combinations. Only very unique design features would need on site custom block placement. This concept is already used in other types of premanufactured framing systems.
Another way to modify the product is to couple it with an energy conservation program offered by utility companies, and local, state, and federal programs promoting energy efficient construction. Financial incentive programs are available to offset the costs of energy efficient innovative technology. Direct incentives are used to reduce the initial cost of these technologies, while rate incentives are used to encourage offset peak utility use (Vine, 19890. Regardless of the financial incentive used, it is a significant factor in further reducing the long term costs of an energy efficient AAC home.
Conclusion
This research effort into the evolution of residential construction in the U.S. using Autoclaved Aerated Concrete summarizes the state of the AAC industry. AAC offers a premium construction product with added superior benefits of energy efficiency, disaster resistance, pest resistance, natural disaster resistance, noise attenuation, and low life cycle costs while reducing the environmental impact.
Through adaptation of current product design, application, and construction methods; inclduing integrated design with other materials such as light gage steel, AAC will soon be cost competitive with traditional residential construction methods. The key to this transition is the unique relationship of AAC products' ability to meet the needs of consumers and builders. The supporting research survey shows the majority of consumers are initially willing to spend more for superior benefits, and subsequently for construction products featuring those benefits. Their willingness to pay extra is contingent on understanding the connection between building products and their benefits, how much they are paying for them, and the life cycle cost savings they will receive in return.
Current residential designs are generally engineered around the traditional building method of lumber framing. Applying AAC to those designs requires engineers to convert existing designs and oversee permitting and code approval. Needless to say, this is an inefficient way to design and build a house. Also of important notice is current residential AAC construction still relies on lumber or light gage steel for interior walls and roofing systems.
Beyond the scape of this research is future potential research and development of educational curriculums and computer design software. The educational need might extend even beyond institutions of higher learning to a whole new consulting industry. Software development or AAC could mean new businesses or be new divisions in computer software firms already in business.
This research is a comprehensive tool as an introductory device to educate consumers and builders, and to provide consumer marketing data for the AAC industry. As an educational and informative tool, it will be instrumental in changing the way U.S. residential design professionals and homewoners view AAC construction systems, and make AAC systems as familiar as wood stud systems. Changing this view will encourage builders to adopt this emerging innovative building material and promote it in the residential construction market.
As AAC construction becomes more commonplace, it will be considered by builders and consumers as a conventional material and construction method. Moreover, this technology will provide consumers a long overdue option to lumber construction. Not only will consumers benefit from low utility and life cycle costs, but the environment will benefit from its energy efficiency and natural resource conservation.
Recommendations
The Autoclaved Aerated Concrete industry has many engineering and marketing decisions to shape their products into a viable alternative to traditional residential wood cavity construction. It is of the utmost importance that decisions are based on consumer and builder perceptions and opinions that reflect the buying public as a whole. The survey associated with this research provides the most up to date consumer preferences, and is in line with previous similar surveys conducted in 1995. It would be wise to also consult the Portland Cement Association's 1998 Homeowner Report, which is expected to be published about the same time as this report.
Continue modifying existing products to better acommodate the needs of the U.S. residential construction industry. Modifications should consider modular manufacturing in a controlled setting to improve manufacturing productivity, cost, and quality control, while reducing on site installation lavor cost. Improved products and installation methods can be applied in other world settings to increase AAC use and further profit in those markets.
Hebel's strategic alliance with Centex Homes is exemplary in developing products, construction methods, and consumer education programs that will benefit both organizetions as well as the residential construction industry as w whole. With several competitors on the horizon, it is essential to establish proprietary relationships with as many regional and national homebuilders while they are still available. Not only will this provide solid working relationships for future product orders, but the AAC industry benefits from the builder's extensive marketing experience and educational promotion capabilities.
Establish relationships with utility companies to offer financial incentives (direct or rate) based on the energy saving features of AAC homes.
Education is needed to increase awareness of AAC construction and to teach consumers why they should not be astisfied with lumber construction. Education programs should emphasize the superior benefits of energy efficiency, durability, disaster resistance, and pest resistance as primary reasons to prefer AAC construction over lumber. A sensitive balance is necessary to foster relationships with builders that currently rely heavily on lumber construction until they are fully integrated with AAC construction.
A significant tool in educating consumers and builders is a clear and concise comparison addressing initial and long term costs, with interest and life cycle considerations. This cost comparison should be the focus of a national education program. This comparison needs to be compiled in a manner comprehensible to consumers, similar to the sample cost comparison in Appendix A.
Solicit support of the Portland Cement Association to author and support implementation of energy codes that recognize the energy efficiency benefits associated with AAC structures.
Provide architects and engineers with tools to facilitate use of AAC in designs. Success of the strategic plan may rely on development of "tools" to assist design and construction professionals and home buyers in adopting AAC as a conventional residential construction method. Such tools may include:
1. design kits with mini scale blocks, panels, lintels, etc. that can easily be put together to determine constructability and feasibility
2. AAC computer design software
3. classroom curriculum for educational institutions
4. curriculum for practicing architects and engineers
