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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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!!!!

Related Article(s)
Solar Product Perception

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Is Solar in the Dead Zone?

A simple graph of customer gain (x-axis) vs. customer pain (y-axis) highlights a dangerous place for technology-based products like solar/PV.

This simple four-by-four grid compares value derived from a product, to the pain of acquisition and ownership. The Dead Zone is defined as the area where a product provides value that is good but not great, which can be adopted with discomfort but not excruciating pain. This combination usually convinces the customer to delay purchase because the gain isn't really high enough to justify the amount of pain required.

Technology-based products generally thrive in areas of medium to very high "customer gain" and low-to-medium "customer pain." (see areas shaded in green) And a product or technology is said to be "in the mainstream" when it provides high or very high gain while imposing only modest discomfort.

Sustainable markets exist around the edges of this graph. Very high gains can overcome almost any amount of pain, and in the absence of pain, even modest gains look good. But what happens to an offer (such as solar) that falls in the middle?

A company or an entire industry can escape the dead zone by moving down and/or to the right, away from the center of the graph. And it's interesting that almost universally, the solar industry has decided that increasing gain via lowering cost per watt is the best way to move solar out of the dead zone.

However reducing pain would actually be a faster, long-term solution. In nearly all cases, customer pain is minimized by intangible factors supplied by the vendor rather than tangible or technical attributes of the product itself.

Examples of reducing solar-customer pain might include: selling preconfigured systems/packages through major retailers, eliminating the interconnection application process for small systems, introducing standards for equipment ratings, or making solar-product warrantees transferable.

Focusing on product intangibles would be a much more effective way of lowering pain, reducing the perception of risk and leading solar out of the dead zone.


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Solar Market Leadership

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Determining Intangibles in Emerging Businesses

Determining intangibles in an emerging business is a special case within the disciplines of marketing and communication.

For an emerging business, the base of customers is small, and many customers represent innovators and early adopters, buyers whose characteristics are not typical of the majority of the future market. Indeed, attempting to build a business based on innovators is often a course that leads to bankruptcy. Even if the company does not fail, relying on innovators leaves the majority of the market open to new competitors who focus more effectively on the intangibles important to other adoption segments. It is this phenomenon that results in pioneering firms doing all the early eduction and market development, only to find the lion's share of the market falling to a later entrant.

Building intangibles for emerging businesses remains a special art, particularly in markets where the majority of customers are still classified as innovators. In this situation, traditional research techniques usually do not provide adequate insight into potential intangibles. Instead, management is often wiser to embark on a course of creating intangibles rather than searching for them in the customer base.

Related Articles:
Solar Product Perception

 

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Product Adoption Fundamentals

The Technology Adoption Lifecycle is a model that describes a market’s acceptance of a new technology in terms of the types of consumers it attracts throughout its useful life. It is probably the most well established model in “new product marketing” because it provides useful insight at all stages of market development.

The underlying thesis of the Technology Adoption Lifecycle is that innovations are absorbed into any given user base in stages corresponding to psychological and social profiles of segments within that user community. The process can be represented by a bell curve with definable stages; each associated with a definable group, and each group making up a predictable portion of the whole community.



The prescription for success in introducing a new product or technology into any community is to work the curve from left to right, focusing first on the innovators, growing that market, then moving on to the early adopters, growing that market, and so on. To do this effectively, it is necessary to know and understand the psychological characteristics of each group of buyers.

The psychographics of each group in the adoption process influences the development and dynamics of the market. For example, each group places a different value on product intangibles, and on endorsements or references from other groups. As products move through the adoption process, intangibles and user references assume more importance. Often, pioneering new products lose their initial prominence because a new entrant is more successful in product positioning based on a more effective mix of intangibles. This can be the case even if the second product is not technically superior.

The concept of dynamic change in the perceptions of products is reinforced by the concept of the adoption process. In 1957, researchers at Iowa State College were able to track the diffusion of information and purchase patterns of a new product: hybrid seed corn. They found that purchase and use (or adoption) behavior fell into understandable patterns. They found that five "segments" of an adoption population could be described. They noted the different characteristics of persons in these five groups, and hypothesized about the way word-of-mouth influences purchase behavior.

Five groups were identified as follows:

• Innovators--2.5% of the population

• Early Adopters--13.5%

• Early Majority--34%

• Late Adopters--34%, and

• Laggards--16%

The research demonstrated a number of elements of purchase behavior, including the dynamic nature of how products are purchased. Innovators, for example, are motivated by being first, while late adopters are primarily interested in a bullet-proof product.

The primary value of the research was the development of the idea of an "adoption process." New product acceptance could finally be understood and even diagramed.

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Intangibles Develop New Markets

One of the most famous examples of the power of product intangibles is xerography. In the late 1950's, the Haloid Corporation (the predecessor of Xerox Corporation) developed the first dry copier, but ran short of funds for marketing. Haloid approached IBM with the notion that IBM handle distribution. The idea seemed to be a good one, in that IBM had the sales force and service organization that Haloid would otherwise have to establish.

IBM hired Arthur D. Little, Inc. (ADL) to do a study of the market for dry copiers. ADL reported that the entire U.S. potential market was 5,000 machines. The study was used as one of the factors in IBM's decision to reject the Haloid offer.

So, with limited resources, Haloid brought the 914 Xerox copier to market. In the first two years, even though production was constrained, over 10,000 units were placed in use. Twice as many copiers than the predicted potential of the total market were sold. This story, and others like it, demonstrate the power and value of the tangible / intangible product concept.

ADL and IBM looked primarily at the tangible product. Haloid, on the other hand, concentrated more on intangibles. The 914 was sold in a unique way: based on a flexible utilization plan (in other words, on an intangible).  A customer could acquire a Xerox 914 for as little as $95 per month, which covered the machine and the first 2,000 copies per month. Additional use was billed on a cost per copy scale.

Customers bought double the projected total market forecast in the first two years primarily on the intangible aspects of the product. This is but one of many examples of short-sided research that focused more on tangibles than intangibles.

It has become a premise of the industry that research cannot uncover a market for a product that does not yet exist. But this premise is wrong. The problem is not with research, per se, but with research that focuses exclusively on the tangible product factors.

Good qualitative research, conducted by well-experienced professionals, often can elicit glimpses of markets based on intangible factors that might otherwise be ignored.

Are your market research efforts focused on the tangible or intangible side of solar/photovoltaics?

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Solar Product Perception

Understanding changes in the solar marketplace and translating those changes into organizational change is the key to long term survival for most solar suppliers. And the best starting point to understand why this is necessary is the concept of "product perception."

Typically, when an organization brings a product (or service) to market, the initial consumers and users are intrigued with the tangible features of the product itself: its performance, its specifications, its size, color, shape, weight, etc. On top of that, the entrepreneurial team that conceived, developed and first sold the product is, by definition, often consumed by these tangible product attributes. Tangible aspects of the product, often become the only focus of the development team.

But as the product moves from technology enthusiasts and early adopters to users who are more conservative and pragmatic, a subtle yet powerful change occurs. Tangible aspects of the product decline in importance and intangible aspects surrounding the product begin to emerge. In the early days, the overwhelming emphasis on product tangibles can be diagrammed like this:


Typically, the product development team focuses on the inner portions of the circle: the tangibles.

But as the product begins to move into the market, and as the markets develop, a change occurs in perceptions of the product: intangibles assume an increasingly larger proportion of the perceived product. The comparison can be illustrated like this:

Customers begin with an appreciation of the tangible product, but they soon appreciate more the aspects of intangibles surrounding the product -- service and support, the image of the company, the nature of the underlying technology, industry standards, or the reputation of the supplier.

So whereas early users of solar power have been most interested in: conversion efficiency, crystalline vs thin film, panel size, inverter specs, maximum power and voltage, etc; mainstream users of solar will be most interested in: supplier recognition/reputation, industry standards, quality, service and support.

Are you building intangibles into your solar product offering?

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