In the business of distributed solar energy, net-energy metering (NEM) and rate cases are eroding the old value proposition of simply cutting electric bills. Don’t fret! The techniques we have used to sell solar have already changed more than once in the last 10 years. This is another iteration and not the end of the world. So before looking into the future of where solar customer acquisition is going, let’s step back in time and learn from where it has been.
The History of the Recent Rooftop Solar Value Proposition
In the early 2000s, we sold solar in California based on resilience against rolling blackouts caused during the 2001 Enron scandals. Pioneering customers bravely installed off grid equipment on their homes until the first grid-tied inverters came on the scene.
Between 2000-2005, emerging markets like California, Massachusetts, Arizona, and Connecticut sold the environmental and green benefits to an innovator class of consumers. By 2005, that buyer class was running out and entrepreneurs like Andy Black of OnGrid were pioneering selling solar like a financial proposition. It worked, and we entered the beginning of the early adopter market.
When the housing market crashed in 2008, many prospective solar buyers lost a lot of value in their homes. Loans, cash deals, and HELOCs were no longer widely available. Many solar companies went out of business. This change lead to the rise of the lease model (via SolarCity) and very shortly after the residential power purchase agreement (PPA) (via SunRun) — although solar historians (and both companies named) will argue who brought which innovation to market first.
Third-party ownership completely changed the story of solar. A complex discussion of rebates, tax credits, and paybacks was very quickly supplanted by “no money down” and “save immediately!” and “save 20 percent off your electric bill,” which was the predominant model up until about 2014.
Around 2014, the capital markets had started to loosen up and the cost of solar had dropped nearly 80 percent since the late ’90s. In addition, some negative press had started to circulate about individuals having trouble selling their homes with leased or long-term PPA solar contracts attached to it.
System ownership has started to make inroads again since that time.
But here’s the big news; in later stage markets, the target solar consumer is changing. We are reaching the end of the early adopter market. The same messages and tactics that we have used since 2008 are not working as well anymore. This transformation is especially so in maturing markets like California and Hawaii with quickly declining (or shuttered) incentive programs and increasingly complex regulatory environments. Customer acquisition cost is going up. The publicly traded solar companies are showing us that.
It’s time to revisit Crossing the Chasm, Geoffrey Moore’s seminal book on technology adoption, for some guidance.
Figure 1 Credit: Geoffrey Moore, Crossing the Chasm
In Crossing the Chasm, Moore introduces us to the theory of innovations spread from Everett Rogers and argues there is a chasm between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). Moore believes visionaries and pragmatists have very different expectations, and attempts to explore those differences. He suggests techniques to successfully cross the “chasm,” including choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, and choosing the most appropriate distribution channel and pricing.
The solar industry has been so focused on “The Offer” that it has for the most part lost sight of the consumer in this process. Too many solar companies are more worried about structuring efficient sales funnels than creating useful customer experiences. This is where solar companies are losing their way.
We have nearly tapped out the early market buyers. The tech enthusiasts and the visionaries have purchased rooftop solar if it was right for them. But very few pragmatists are jumping on board. Why?
Many prospective solar consumers don’t even know how much time they should expect to spend researching whether or not solar is right for them. Never mind understanding the mechanisms of NEM compensation, changes happening to NEM, or changes happening to utility rates that could erode the value of solar.
Solar is also not offering the consumer experience desired by this new demographic. What is it? We need to stop shoving our sales funnels in the faces of these consumers and actually listen to how they want to engage.
What’s Next in Customer Acquisition?
The “prosumer” stamp of engagement currently popularized in many other more mature industries marks the next innovations in customer acquisition. Prosumer models are marked by the design of customer experiences that are geared toward meeting the consumer where and how they want to meet with data-rich, highly personalized experiences that apply directly to their personal experience, and creating brand advocates. The underpinning of many successful prosumer experiences is strong reliance on the use of data sciences to better aggregate and understand a particular consumer and speak to them at the depth they want to engage, in the medium they prefer, and with them as the driver.
Here’s a roundup of a few styles marking the “new” customer acquisition.
Online shopping, education, and bid comparison services provided by groups like EnergySage and PickMySolar are growing massively in popularity. These services, at their core, both offer some kind of “arm’s length” shopping experience for consumers. With EnergySage, users can easily compare bids in an apples-to-apples way and get educated about how solar works through a massive content library. With PickMySolar, they streamline the entire interaction on behalf of the user, who never has to interact with solar sales staff from the installers attempting to win the business.
Deregulated Retail Energy
Retail energy providers are independent power producers who can sell generating services to customers in deregulated energy markets. A hallmark of many retail energy providers is an easy, web-based system that can help people shop for rates and plans, much like the solar online marketplaces. In fact, in 2013 retail energy provider Choose Energy purchased Power2Switch, the leading marketplace for comparing offerings from retail energy providers, and now operates that marketplace.
Players like Ambit Energy, Direct Energy, Constellation Energy and many, others populate this space. The companies named all have strategic partnerships with solar installation companies that offer third-party ownership. For a retail energy company, it’s naturally a good fit as they are selling kWhs. Why not partner with the side of solar that is also selling kWhs and provide a more comprehensive offering?
Social selling rounds up a wider variety of experiences. Imagine “Tupperware parties” or Avon for solar. That’s exactly what Clarus Power is cooking up as they start to roll out to early stage solar markets across the country. Clarus was founded by two ex-Sunruners and focused on engaging networks of women in the discussion about solar.
On the “Amway for solar” side, CREW (Clean Renewable Energy Worldwide) aims to build the nation’s largest cohort of independent, fully trained solar sales entrepreneurs backed by incentives for sales reps to build out networks of sales reps below them. Look no further than the partnership between Sungevity and Viridian, a network marketing providers of retail energy solutions, for signposts on how this fits in to the customer acquisition future of the national solar business model.
The distributed energy future is coming. This future is more than pushing solar widgets. It is the New Energy Industry, where distributed solar, energy storage, energy efficiency, electric vehicless, analytics, energy literacy, and comfort/lifestyle are coming together and transforming the lives of everyday people. We need mechanisms to make sure everyone in every socio-economic status can receive the benefits of this amazing transition — from innovations in finance to business models to technology.
Many new business models, like those mentioned here, will have their time in the sun. But to meet new customer experience demands and changing regulatory frameworks, we need to start thinking on our feet and refuse to put our head in the sand, otherwise some of us may find the next figurative rolling blackout sweeping over our businesses.
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