How 1BOG Helps Make Solar More Appealing to Mainstream Customers

We hear this topic discussed almost everyday in the solar industry. How do we reduce or eliminate barriers to adoption, and what programs or activities are needed to make solar/PV a mainstream technology?  Within this endless debate, it's interesting to see the different strategies being applied toward reaching the common goal of increased market adoption.

Two examples of recent initiatives -- specifically aimed at taking solar into the mainstream -- include groSolar's national advertising campaign and Akeena Solar's partnership with Westinghouse. In terms of strategy, groSolar is relying on building awareness whereas Akeena is focusing on brand recognition and using "home improvement" channels of distribution.  Yet in my mind the most interesting strategy is the one employed by an organization called 1BOG.

Buying solar involves a complex, information intensive and high risk purchase decision. (Note I said the purchase decision is complex and high risk, not the technology)  This is exactly the reason why the solar industry has not yet reached a tipping point.  Solar/PV is a high cost product, supplied by unknown vendors, in an industry without uniform standards or government regulation.

When faced with a purchase decision that involves high cost and/or high risk, pragmatic customers (starting with the early majority) will not buy until they see proven/leading suppliers, references from people they trust, and reliability of service.  1BOG helps mainstream customers meet these buying requirements by offering a unique combination of group purchasing/installation and objective advice.

1BOG's service organizes homeowners in a given area and allows them to purchase and install solar as a group.  In addition to negotiating a volume discount of about 15%, 1BOG acts as an independent provider of quality assurance and objective information.  To qualify as a 1BOG vendor, local solar companies must go through a rigorous evaluation of their products, installation practices, and longterm stability as a company. Customers are also provided with assistance and support in the areas of rebates/incentives, financing and permits.

While most people would point to the 15% reduction in cost or the assistance provided with bureaucracy and paperwork as the primary benefits of 1BOG's program, I believe the true power of their approach is in helping reduce the perceived risk of solar.

In the world of high risk the customer will not rely on the word of a vendor. The customer’s decision process is based on finding objective information from reliable sources, something the vendor cannot provide.  1BOG reduces the perception of risk by acting as that provider of objective information.  1BOG facilitates references from trusted sources (by organizing buyers into self-referencing groups), and then provides evidence of expertise and product quality (by vetting local solar providers).

The 1BOG strategy is by no means complete but it does a good job of addressing some of the needs of mainstream customers. Only time will tell if this, or other methods, will deliver the anticipated prize -- solar's mainstream market.

Warren Schirtzinger advises solar companies on how to: differentiate their products, grow during an industry shakeout or consolidation, and thrive without government subsidies. He has authored articles as a "Renewable Energy Insider" on RenewableEnergyWorld.com and writes about marketing strategies on the solar strategies blog.  Contact him via e-mail (warren["at"]solar-strategies.com) or follow him on Twitter @SolarStrategies.

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Meet the Gatekeeper of Solar's Mainstream Market

The solar industry has been selling to an early market of innovators and early adopters for many years now. And there are still plenty of customers in the early market to sell to.

But most solar companies have their eye on a bigger prize -- solar's mainstream market -- a category that contains a whopping 84% of all customers. Because there are so many people in the mainstream market, winning their business is key to sustained profits and growth.

Customers exhibit purchase behavior over time that is different at each stage of a market's development. Innovators (about 2.5 percent of a market) are often fascinated with new technology. Early adopters (about 13.5 percent of the market) are less fascinated with technology but are often quick to see the potential benefits of something new. But the great majority of the potential market -- the remaining 84 percent -- is not fascinated with technology at all. In fact, the most substantial portion of a market are those who fundamentally dislike technology.

What are the characteristics of the customers who make up 84% of the solar market? Meet the gatekeeper of solar's mainstream market -- the early majority.

All mainstream markets begin with the early majority.  They are the gatekeepers of the business rewards that lie ahead.  These people do not want to be pioneers and will never be the first on their block to try a new technology like solar.  They like to keep a low profile and their goal in life is to make incremental, predictable progress. (quantum leaps are for Evel Knievel)

The early majority shares some of the early adopter's ability to relate to technology, but ultimately they are driven by a strong sense of practicality.  The word "risk" is a negative word in their vocabulary because it implies the chance to waste time and money.

When they buy they care about the company they are buying from, the quality of the product they are buying, and the reliability of the service they are going to get.  They like to see competition and prefer to buy from the proven market leader.  Members of the early majority tend to be vertically oriented, meaning they communicate more with others like themselves. References and relationships are very important to these people which presents a "catch-22" for solar vendors: the early majority won't buy from you until you are established, yet you can't get established until they buy from you.

In order to break into the mainstream market, solar vendors will need to re-orient their business practices to match the pragmatic and conservative characteristics of mainstream buyers. This means: facilitating referrals and references from someone the customer trusts, establishing then adhering to industry standards, emphasizing financial stability and product "intangibles" rather than technical specs, selling through channels that mainstream buyers are comfortable buying from, and offering turnkey systems that are designed for vertical markets.

Meeting the needs of the early majority is a strategic way of intervening in the solar market to create lasting change. There are many ways to affect markets on a short term basis -- advertising campaigns, government policy, subsidies, etc. -- but these techniques have no long-term positive impact on the market. Understanding mainstream buyer behavior and adapting your business practices accordingly will permanently change solar markets in ways that are sustained by natural market dynamics.


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Smart Grid Standards Must Come First

Technology adoption is all about standards. To succeed with consumers, one firm's gadget often has to work with other gadgets from other firms.

Technology moves so quickly that standards set by committees usually come too late. Instead, the industry organizes itself around de-facto standards championed by single firms with the clout to make them stick. For example, as Intel has done with microprocessors.

Early adopters who are using Smart Grid Investment Grants (SGIG) are currently choosing hardware, software and communications technology well before most of the relevant standards have been settled. This creates enormous *risk* in the minds of the public.  The possibility of selecting the wrong vendors or technologies is keeping a lot of people from participating, thereby delaying mainstream adoption of smart grid products and applications.

Smart grid standards would help remove this barrier to adoption and open the door to mainstream markets.  The only question is, who has the clout to establish a de-facto standard that the rest of the industry can follow and benefit from?

I was disappointed to read a recent article written by General Electric -- clearly one of the candidates capable of establishing a smart grid standard -- that said the key to smart grid adoption is education and awareness.  This claim was based on a report commissioned by GE Energy that surveyed consumers in the U.S. and Australia.  It found that 10% of the people surveyed know "something" about smart grid technology, and those people are overwhelmingly in favor of pursuing and adopting it as soon as possible.

GE's logic goes like this: we found that people who know about the smart grid concept support it…so if everyone knew about it, everyone would support it.

Innovators and early adopters (who make up about 16% of the smart grid market) are willing to accept high risk.  And the GE survey did a nice job of confirming the fact that innovators and early adopters are technology advocates and enthusiasts.  But the bulk of the smart grid market (known as the early and late majority) is risk averse and not willing to participate until standards and other risk-lowering factors have emerged.

I wouldn't recommend spending a lot of money promoting the smart grid concept until a minimal amount of standardization is in place.  You can't advertise or "educate" your way into a mainstream market.  Without the right mix of vendors, channels, products, services and standards, pragmatic and conservative customers simply won't buy in.

With emerging technologies and markets, sometimes raising awareness is the last thing you want to do.


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Reducing the Risk of Solar

Solar energy is considered a long decision-cycle purchase. Due to the complexity of the sale and its financial components, consumers educate themselves thoroughly before buying. As such, vendors cannot move a customer through decision stages to close the sale.

With products that are more costly, complicated or high-risk, the customer has more at stake.  If a solar installation goes bad, the customer is looking at losing thousands of dollars, the potential of roof damage/repair, time without basic necessities (electric heating, cooling, refrigeration, etc.), and a significant disruption to his or her life.

Adding to this perception of high risk is the nearly risk-free alternative of buying electric power from the local utility, a proven supplier with an unmatched record of safety and reliability.  Relative to a utility, solar appears extremely risky.

In the world of high risk the customer will not rely on the word of the provider. The customer’s decision process is based on finding objective information from reliable sources, something the vendor cannot provide.

Think about the last time you had to select a surgeon, a family doctor, a lawyer, or an investment broker/advisor -- all high-risk purchase decisions.  Would you entrust your life savings to a financial advisor or broker because of an ad or brochure?  Would you select a surgeon based on his "messaging?"

The only way to increase adoption of a high risk offering is with methods that reduce risk in the mind of the customer -- references from someone the customer trusts, professional credentials/affiliations, a supporting infrastructure, industry standards, evidence of expertise, product quality, and ongoing service.

The solar industry needs to wake up and realize that the McDonald's-happy-meal approach to promotion is useless when the product is high cost and/or the purchase decision is high risk.


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Solar Forces a Change in Behavior

I think it was Nathan Lewis of the California Institute of Technology who first said that solar energy-generated electricity does nothing "new." People already have electricity.  And that is true.  Solar doesn't offer an improvement in capability.  But that's not the real barrier to the public's adoption of solar power.

Most emerging technologies are introduced when their performance is not as well developed as established products.  And in order to become competitive over time, technologies like solar must be refined and improved by a sequence of users (starting with innovators and early adopters).

The key issue here is not that solar is an under-developed technology or that solar provides something people already have.  The key issue is that solar, like many technologies, forces a change in behavior.  With solar you must have panels (or PV material) installed, rather than use a built-in connection to the grid.

A recent survey by the Solar Energy Industries Association (SEIA) as reported on Renewable Energy World indicates people are in favor of solar power but would prefer that it is supplied by their utility.  Why would 75% of people surveyed want their utility to install solar?  Because that way they can realize the environmental and renewable benefits of solar, without changing their behavior.

As long as everyone agrees that centralized solar electric power delivered through a grid is the best path to a sustainable future, then our objectives are clear.  We need to focus on utility-scale solar and improve our centralized system of delivery.

However, if distributed generation and residential solar are a better way to go, we need to find a way to get people to change their behavior.  And getting people to change their behavior requires more than just cost reduction and government subsidies.  Encouraging people to change their behavior requires the influence or involvement of preceding groups of people in the marketplace


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The Easy Solar Segments Are Gone

Today's solar markets have exhausted the "easy" segments. Typically, customers exhibit purchase behavior over time that is different at each stage of a market's development. Innovators (typically about 2.5 percent of a market) are often fascinated with new technology. Early adopters (about 13.5 percent of a market) are less fascinated with technology but are often quick to see the potential benefits of something new.

But the great majority of a potential market -- the remaining 85 percent -- is usually not fascinated with solar technology at all. In fact, the most substantial portion of any market may be those who fundamentally dislike technology.

Solar organizations that understand the shift in potential customer focus will recalibrate their marketing. They will concentrate more on the complete (intangible) product and less on the technical specs or "tangible" features.

Developing a complete product means helping the customer focus on how the product will improve his/her future. It requires detailed knowledge of the customer's life and direction, not merely an understanding of the efficiency of a solar cell.

Companies that do not understand this fundamental change will experience an abyss in their growth curves. Once the easy segments of their markets are exhausted, additional sales will come only at the expenditure of substantial resources, and the returns on sales and marketing will decline rapidly.


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The Relative Advantage of Solar

Most business schools still refer to Everett Rogers and his theory of how and why new ideas and technologies are adopted by a population.  In his book called Diffusion of Innovations, Rogers introduces five main dimensions that influence the adoption of an innovation: complexity, compatibility, observability, trial-ability, and relative advantage.

An examination of the last factor, "relative advantage," reveals why there are so many challenges associated with making solar more widespread.

"Relative advantage" is the extent to which solar is viewed as better than the method in current practice.  Fundamentally, a new product or service will be successful if it does a better job than existing products at satisfying the needs of a targeted customer group.  But "doing a better job" actually has four components. If a new product or service can exceed existing offerings across all four of these components at once, then we can guarantee that the targeted customer group will purchase it.

The four components expressed in terms of solar electric power are:

• solar must be less expensive than power from a utility (lower price).
• solar must provide better features or functionality than power from a utility (greater benefits).
• solar must not have any switching or adoption costs (easy to use).
• solar must be readily available (easy to buy).

Customers for whom all four conditions apply will purchase solar because there are only benefits and no barriers. And the closer a solar product comes to succeeding in all four dimensions, the greater the chance that the product will be a success.  And, of course, the new solar product will be a financial success if these conditions can be met at a profit.

The convenience and reliability of utility-delivered electric power makes it very difficult for solar to meet all four criteria. Grid parity alone is clearly not enough.


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How to Differentiate a Commodity

There's a lot of disagreement about whether or not solar is a commodity.  Even if it's not, at some point everyone will need to know how to differentiate a solar product when it becomes a commodity.  I've selected the example of a well-differentiated automobile dealership, to provide insight into how the same concepts can be applied in the solar industry.

Sewell Village Cadillac is the perfect example of a business that has taken a fairly mundane "product" (selling cars) and redefined it into a non-commodity powerhouse.

Sewell goes far beyond the average car dealership: The dealership looks spectacular, starting with lovely chandeliers on the showroom floor and a marvelous floral arrangement that is changed daily.  Stanley Marcus, chairman emeritus of the Neiman-Marcus stores, provides Sewell with merchandising advice and consultation.

As attractive as the Sewell Village showroom floor is, the service bays are even more spectacular.  They truly sparkle, the result of several daily washings and a nightly waxing.  The would-be customer is escorted through both the showroom and the sparkling service bays and then taken to a "preview room."  It is a twelve-by-twelve room off the showroom floor, decorated with lavish antiques.  One sits on a beautifully appointed couch and is treated to a brilliant audio/video presentation.  Only a small part deals with the tangible product (the Cadillac); most describes what it is like to become a member of the "Sewell Village Cadillac Family."  This involves such extras as being given the home phone number of the senior people in the service department.  If your car breaks down, one of them, night or day, will come out with a loaner car which you then keep until yours is repaired.

An organizational development consultant teaches interpersonal dynamics to Carl Sewell's mechanics!

This brief snapshot of the Sewell Village story may provide a bit of a feel for the non-ordinariness of the operation.  The tangible product is, of course, the Cadillac (even though it's no longer a best seller).  The expected product intangibles include such things as Sewell's keeping standard hours and having mechanics available, and perhaps the "loaner car."  The unexpected product intangibles would be: the fresh flowers changed daily, the use of Stanley Marcus as a consultant, the interpersonal dynamics training for the mechanics, the sparkling service bays and so on.  Taken together the "product" has literally been redefined.  Carl Sewel is not selling cars, nor is he selling Cadillacs. He is selling a combination of product, service, ease of doing business with, pleasantness of doing business with, that quite literally redefines the personal transportation/car purchase/service/ownership phenomenon.

The results speak for themselves. Sewell's sales are approximately $100 million; twice the average of most Cadillac dealerships. Plus they have won the Cadillac Master Dealer and Mark of Excellence Award (the award given to the top Cadillac dealer for retail sales and customer satisfaction)...for 35 consecutive years!!!!

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Public Confusion About Solar

There are many things that confuse the public when it comes to solar.  Included on the lengthy list of confusing factors are items such as: incentives, regulations, restrictions, warranties, technology differences and financing options.

But in my mind, the bigger issue comes from the fact that "confusion" translates into "high risk" in the minds of consumers.

Whenever something appears to be more complex or confusing than the status quo (a.k.a. power from the electric utility) most consumers label that item as a source of risk. This perception of risk comes from the potential consequences of making the wrong decision, based on confusing or complex information.

With most consumer products there is little penalty for making a wrong choice. If you buy a pair of blue jeans and they don't look good, the most you've lost is a couple of hours of time and somewhere around $100.

But if a solar installation goes bad, the consumer is looking at losing thousands of dollars, the potential of roof damage/repair, time without electric power, inconvenience, etc., etc.  In other words a massive and costly disruption in their lives.

The perceived risk of solar in the mind of the consumer presents the biggest barrier to mainstream adoption of solar power.


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Is groSolar's new ad campaign the right approach?

groSolar recently announced the launch of a new national advertising campaign that will feature images of real people in real life situations, rather than pictures of solar panels.  According to the company's press release, groSolar's objective is to "communicate the real value of clean energy choices."

This technique is especially common in the healthcare industry.  Doctors, hospitals, clinics, and other providers often show people living a happy, healthy life rather than say, open heart surgery in progress.

The questions is: would you select a surgeon based on pictures of happy people?  Does a value-oriented advertising campaign convince a skeptical audience to buy services from the advertiser?  My answer to these questions would be: not if the product or service is high risk…and solar is perceived as high risk.

Here's the reason why.

Solar requires a complex, information intensive and high risk purchase decision. (Note I said the purchase decision is complex and high risk, not the technology) A solar installation requires a good deal of work on the part of both the consumer and the provider. It is a product/service with a standard base of know-how, but totally customized and personalized. Buyers of solar power want a dealer/installer with a good reputation and would prefer to find one by means of a reference or referral. Information and dialogue are part of the purchase process.  There is the possibility of interaction after the system has been installed and the customer wants to be reassured that he or she can always ask for and receive additional help or information. If the solar installation goes bad, the customer is looking at losing thousands of dollars, the potential of roof damage/repair, time without electric power, and a significant disruption to their life.

With products that are more costly, complicated or high-risk, the customer has more at stake.  So all of the typical methods used in low-risk consumer marketing -- cosmetic factors, product/company name, package color and design, messaging, image, "feel good advertising," celebrity endorsements, logos or symbols to reinforce associations -- are totally ineffective.

The only way to market a high risk offering is with methods that reduce risk in the mind of the customer -- references from someone the customer trusts, professional affiliations, compliance with industry standards, a supporting infrastructure, evidence of expertise, product quality, and ongoing service.

groSolar's ad campaign may raise awareness for the solar industry in general, and that's a good thing. But if the company's goal is to convince customers to buy groSolar's products and services, then advertising is the wrong way to do it.


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The Long Term Effects of Government Subsidies

There's never been a technology that was perfected before it was released.  Technology products like solar are introduced when their performance is not as well developed as established products along some dimension that mainstream customers have historically valued.

In order to become competitive over time technology-based products must be refined and improved by a sequence of users (starting with innovators and early adopters).  This dynamic, called the technology adoption lifecycle, is critical to the success of any new product or technology.  Without the adaptation and improvement that's demanded by early users, mainstream customers (the bulk of any market) will not adopt the product.

This is important because government subsidies often completely disrupt the technology adoption process.  When mainstream buyers of solar begin to enter the market because of a subsidy rather than product attributes, then forward progress on product adaptation tends to stop.

When I surveyed residential solar owners in the Sacramento area I found that the majority of them were late adopters.  That's because the local utility (SMUD) was offering 4 kW systems for only $7 per month. (after 10 years the customer could buy the system for $2400)  SMUD's offering, which included a lot of product intangibles, caused technology laggards to enter the market prematurely.

This subsidy by a utility in Sacramento completely disrupted the normal cycle of adoption that is needed for a market to be sustainable.  And when the subsidy is removed, the market adoption pattern must start over from the very beginning.  This is why government subsidies are so damaging over the long term.  It's more than just a loss of money when the subsidy goes away.  It's also a loss of a key component of sustainable market development: product and buyer evolution.

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In Pursuit of Solar's Tipping Point

A recent call to action in the solar industry reveals a common misunderstanding of the term "tipping point."

An initiative, called National Solar Quote Month, is an effort to encourage lots of people to request quotes from solar suppliers in order to bring solar power to a tipping point in 2010.  Unfortunately, the presence of a large number of people does not translate into a tipping point.

A "Tipping Point," as described by Malcom Gladwell in his book by the same name, is when an idea, product, message or behavior spreads like a virus.  It is the name given to a dramatic moment in an epidemic when everything changes all at once.

On page 33 of the book, Gladwell describes the need for more than just large numbers of people to create a Tipping Point.  It requires the participation of so-called connectors -- people with unique social gifts who have an uncanny genius for being at the center of events.  In other words, connectors are "influencers."

To illustrate the need for connectors, Gladwell tells the story of how Paul Revere's midnight ride started a word-of-mouth epidemic, while a virtually identical ride by fellow revolutionary William Dawes did not.  Paul Revere was a connector and William Dawes wasn't.

So fundamentally it doesn't matter HOW MANY people are spreading the message…it matters WHO is spreading the message.

Parts of the tipping point concept have been used successfully in the electric power industry in the past.  Thomas Edison used the power of influencers to accelerate adoption of electric light when he selected financial institutions in lower Manhattan as his first customers.  Seeing the windows of the financial district aglow by night demonstrated electric lighting technology to the metro population living across the Hudson River in New Jersey.  And because the financial community was considered to be an influential source of new techniques and ideas, Edison jumpstarted a word-of-mouth epidemic that had a tremendous impact on the rest of the country.

Interestingly, a group of researchers just reconfirmed the tipping point concept by studying the social networking site, Twitter.  They found that "follower count" is a meaningless metric when it comes to determining influence.  It doesn't matter how many followers you have.  It only matters who is following you.

Concepts like the Tipping Point, the Principle of Disruptive Innovation, and the Technology Adoption Lifecycle are extremely valuable in our efforts to expand the use of renewable energy around the world.  But it's important to first understand what these concepts really entail, and how they can be applied correctly.

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Utilities Speed Solar Adoption

A recent article in the New York Times takes an interesting look at a partnership between TXU (a utility in Texas) and SolarCity (a Silicon Valley solar supplier) designed to help homeowners go solar. The article says "TXU Energy, with two million customers, is making it possible for homeowners in the Dallas area to lease or buy rooftop solar-power systems in one of the first programs of its kind."

Although this type of program is not one of the first, the author correctly states that utilities are the key to widespread adoption of solar power.

When solar suppliers partner with energy providers (especially utilities), adoption happens much faster. This is because most buyers in a market wait for the availability of a standard product that is made by a leading supplier who sells the product through someone familiar. These attributes are known as product intangibles. And together TXU and SolarCity can deliver most of these requirements.

This type of solar program however is certainly not new. In 1993 Sacramento Municipal Utility District (SMUD) began offering a standardized 4 kW solar electric system valued at $24,000 for only $7 per month. SMUD retained ownership of the system. After 10 years the customer could purchase the system for 10% of its original value ($2,400). Then in 1999 SMUD began selling the same system (worth $24,000) for only $4,800.

When SMUD offered PV to their customers through these two programs (called PV Pioneer) my research revealed that late adopters started signing up in droves. SMUD's program effectively delivered all of the product intangibles required by laggards and late adopters before making a purchase.

This latest initiative by TXU Energy is another version of a concept that is at least 17 years old. But it works!

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Solar in the Mainstream

There is an unfortunate fact about emerging technologies and markets that can cause great frustration for anyone offering something "new." The solar industry is a perfect example.

Most people do not view something new as "in the mainstream" until they see someone exactly like themselves using it.  So a homeowner in Iowa with a 2000 sq. ft. house located on a hill, wants to see another homeowner in Iowa with a 2000 sq. ft. house located on a hill using solar before he describes solar as available here and now. You can have millions of people using solar in other parts of the world, on many types of different buildings, and it means NOTHING to the guy on a hill in Iowa.

This peculiar market-behavior pattern applies to anything new or innovative that is introduced into a marketplace. In every case, the secret to achieving mainstream market acceptance is: focused vertical marketing. In other words, focus on one vertical market segment at a time because mainstream buyers/users will only accept information from people who are identical to themselves.  And it's impossible for solar suppliers to serve the vertical needs of all segments at once.

Any technology that is considered mainstream today, had to go through a phase of focused vertical marketing to get there. And with maybe one or two exceptions, I'm not seeing many suppliers do this yet in the solar industry.


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Edison was a Marketing Strategist

Most history books say 1882 was the year the light bulb was invented. This is incorrect. The basic technology had existed for almost 100 years. The reason 1882 is important is because that's when Edison extended the adoption of electric power and light to the early majority. And the methods he used are strategically very important to the solar industry.

Edison’s strategy for accelerating the adoption of electric light was based on minimizing disruption to people's lives. Since gas lamps were the dominant method of indoor lighting, Edison designed his electric lights to look and operate almost identically. His initial electric lights provided 13 watts of light, almost the same as the 12-watt gas lamps he wanted to replace. The new electric lamps looked almost exactly like those same gas lamps.

Recognizing that many commercial and residential landowners in New York had invested considerable capital in gas infrastructure to light their buildings, Edison chose to run his first electrical wires through existing gas lines, fitting directly into the system people already understood for the delivery of light.

Edison’s technology was new, but the form and function were decades old.

But Edison's most ingenious strategy was in selecting the location of his first customers -- financial institutions in lower Manhattan. Seeing the windows of the financial district aglow by night demonstrated electric lighting technology to the metro population living across the Hudson River in New Jersey.

Because the financial community was seen as a credible source of innovative building technology, Edison helped meet the reference requirements of early adopters, who then shared the idea with their local communities. This endorsement of electric power and light, by demonstrating its use in a visible location, had tremendous influence on the rest of the country.

Who should the solar industry be using as a credible reference?


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Does Grid Parity Matter?

One of the primary assumptions in the solar industry is: "if the cost of something gets low enough, everyone will automatically buy it." In my mind there is no guarantee that solar power will become mainstream when it costs approximately the same, or even less than conventional sources.

Here's why. Even with lower and lower cost per watt, solar power is missing two key elements of market expansion: product intangibles and a compelling reason to buy.

Consider what happened with the personal computer (PC). Not only did prices go down (and performance went up) but MANY other things helped make the PC a mainstream appliance. One of the biggest factors was the addition of IBM's backing and reputation to the desktop computing industry (does anyone remember the so-called "IBM compatible PC" standard?) IBM's blessing along with other "standards" such as the DOS operating system and the ISA/EISA bus (i.e. product intangibles) all combined to reduce the perceived risk of buying a PC.

But the most powerful factor in PC market development was a compelling application called the spreadsheet. Early spreadsheet software (Lotus 1-2-3 and Context MBA) running on the PC provided a quantum leap in capability over the existing ways of manipulating numbers…with adding machines, calculators, pens, pencils and sheets of paper.

It's true there are future benefits associated with solar such as greater environmental health and sustainability, but that's like selling green bananas. The promise that someday a green banana will turn yellow is not compelling enough.

In the solar industry, there are few if any risk-lowering product intangibles (who's the IBM of solar?) and the compelling "mainstream" reason to buy hasn't been sufficiently articulated yet. So when solar reaches grid parity, it will provide something that people already get from a utility…electric power for the same price. There's no quantum leap in capability or extraordinary advantage above what a utility already offers. Plus, there's no need to install a bunch of complex equipment when power comes from the grid.

Without risk-lowering standards or intangibles, and a compelling reason to buy, the solar industry needs to use reference-based techniques to overcome these missing elements of market expansion. (more about this in future posts)

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Credibility and Market Leadership

The most important quality a growing solar company needs for rapid market access and positive competitive positioning is credibility. Credibility can be gained by inference, reference or evidence.

• Inference is often used by startups to gain recognition. Who invests in a company is often more important than how much is invested.  Much of the initial interest in Genentech was stimulated by the involvement of Kleiner, Perkins Caufield & Byers. Similarly, the interests of Venrock Associates and Sequoia Capital in Apple Computer provided "larger than reality" credibility. The quality of investors and directors, along with the backgrounds of initial employees say a lot about the company to the marketplace.
• Reference, or word-of-mouth, is the most important credibility-building tool an emerging company can use. Almost all computers, from personal to mainframes, are still bought because of word-of-mouth. All service-based businesses are word-of-mouth. And, in all segments of the high-technology industry, there are networks of analysts, industry experts, BOS and supporting product producers, and bloggers/journalists who spread the word.  Moreover, potential customers understand and rely on word-of-mouth to determine a new company's credibility.
• Evidence is the third factor that builds credibility. Satisfied customers are essential. But the most visible reinforcing evidence is growth and profits from the business. This falls under the category of "If you're so good, why aren't you making money?" Many solar companies suffer from lack of evidence of financial success because they believe only public companies disclose results.

Other kinds of evidence exist, of course. These include clearly differentiated product performance, market share growth, significant products, the quality of initial customers, and the company's alliance partners, along with the quality of investors. All of these can be tangible evidence of credibility.

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Solar Customers are Changing

The Technology Adoption Lifecycle and the Principle of Disruptive Innovation share at least two fundamental attributes.  First, both models describe market development in terms of the changing nature of the user rather than the product.  Using similar terminology, both suggest that products are initially used by early customers who base their purchase decisions primarily on the product’s functionality.  Then, once the demand for functionality has been met, vendors must begin to address the need for reliability that is demanded by an initial wave of mainstream buyers.  A third phase of growth occurs when market followers and conservatives require that vendors meet their needs for convenience.  The final group is mostly concerned with price.

Another shared attribute is, despite a track record of proven success, both models are counterintuitive to most business managers.  When struggling for survival, a solar organization will find it incongruous to focus on the peculiar or specialized needs of a small group of potential buyers, before addressing the more common needs of larger groups.  Too often managers attempt to serve an entire market all at once, and unintentionally delay the market transformation process.

The inescapable task of winning over a sequence of buyer types, combined with the necessity of promoting intangible benefits tailored to the user’s point-of-view, form the cornerstones of market transformation.  These principles have repeatedly guided new products and companies to the achievement of mainstream market acceptance and commercial success.  Much of the history and experience behind these models can be translated into helpful guidance for the solar industry.


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Solar Marketing Lessons, Learned in the First Grade

Most of us learned at a very early age that it's not a good idea to kick sand in the face of the biggest kid in school.  Unless you enjoyed getting pounded into the ground like a tomato stake, the best strategy on the playground was to avoid direct, physical confrontation.

This simple lesson in life also applies to the practice of marketing.

The number one rule of marketing is never attack an entrenched competitor in his or her area of greatest strength with an emerging technology. (especially not with an emerging technology like solar)

Yet that is exactly what many people in the solar industry actually do!

Hardly a week goes by without a solar vendor, clean energy lobbyist, solar advocate, industry analyst, PR agency or marketing organization proclaiming that the solar industry needs to emphasize "reliability."  Well like it or not, reliability is a key strength of solar's biggest competitor…the electric utility industry.  Using a less traumatic metaphor this time, claiming reliability as an advantage of solar is like challenging Lance Armstrong to a race immediately after learning to ride a bicycle.

Not only does solar provide something that people already have (electricity), but their current supplier (the electric utility industry) has created an enduring public perception of being the most reliable source of electric power.  For more than 70 years, Reddy Kilowatt served as the official mascot of the electric power industry, and in the process became a permanent symbol of our culture.  Reddy represents specific characteristics and attributes that are the competitive strengths of all electric utilities -- reliability, unlimited capacity, plug-in ready, and constant availability.

Utilities are the 900 pound gorilla of the electric supply "playground" and power from the grid is perceived by the public as the safest, most reliable choice.

Those of us in the solar industry know that PV is in fact very reliable.  But utilities have already captured the reliability square on the game board.  They own that part of the playground. And it's a waste of time and money trying to compete against a public perception, built over 70+ years, that utility power is the most reliable.  There are many other areas in which to successfully compete against electric utilities.

One more thing.  Next time you are playing basketball at the local gymnasium, don't challenge Shaquille O'Neill to a game of one-on-one.  The results won't be pretty.


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The Illusion of Cost Per Watt

We have seen many times that a reduction in price often accompanies the acceptance of a product in the marketplace. But it is incorrect to assume that lower price will lead to mainstream market acceptance, or that any technology-based product would be widely used and adopted if its cost was low enough?

Price reduction alone does not guarantee mainstream acceptance.

Take for example global positioning systems or "GPS." Most observers would say a dramatic reduction in average selling price during the late 1980's was responsible for the increased acceptance of GPS in the marketplace.

However, several other factors were equally important in leading to the transformation of the GPS market. For GPS, the intangible drivers of market acceptance were:

• the U.S. government's decision to make GPS available to the public
• Magellan and several other manufacturers started shipping commercially available GPS products (1989)
• the U.S. government announcement that GPS will be "free" for 15 years (1991)
• addition of a 24th satellite to complete the GPS support infrastructure (1995)
• the announcement that GPS will be free for the foreseeable future (1996)

Every one one of these events lowered the risk of purchase/adoption for prospective customers.

Pragmatic and conservative buyers in a market wait for: the availability of a standard product designed to specifically meets their needs, that is made by a leading supplier who sells the product through someone familiar. Despite evidence to the contrary, low price does not exclusively drive market transformation.

This misunderstanding is especially common in solar power and renewable energy. There is no guarantee solar power will become mainstream when it costs approximately the same as conventional sources.

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