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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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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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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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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Branding Only Works on Cattle

I'm all in favor of promoting solar and raising awareness for renewable energy.  It doesn't matter if it's with buttons, bumper stickers, social media (twitter, facebook etc.), web sites or search engine marketing (seo).  The more the better.

But never forget that solar power is seen as a riskier than the alternative -- power supplied by the local utility.  This perception of risk comes from the fact that solar is more complex, installation is not as simple, solar costs more, and most solar dealers/installers are smaller, unknown companies (at least compared to the local utility).

So don't expect people to seriously consider buying solar based on a promotional button, twitter or bumper stickers.

Think of it this way:  If you had a serious heart condition and needed surgery, would you select a surgeon based on something you saw on a bumper sticker or read on Twitter?  I know I wouldn't.

I would look at a surgeon's reputation, ask for recommendations from other doctors, determine which hospital the surgeon is affiliated with, investigate the surgeon's credentials and formal training, and definitely talk with patients who have had a similar prognosis.

Solar isn't a life or death proposition like heart surgery, but the trusted sources of information needed by buyers to reduce risk when making a high-risk decision do not include promotional materials developed by the vendor.

Promotional content does NOT help the customer lower their perception of risk in buying solar. And branding only works on cattle.

Marketing solar (which is higher risk) the same way that Coke markets soft drinks (little or no risk) is one of the reasons the solar industry has such a hard time breaking into mainstream markets.


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Solar Market Development

The strategies historically employed to spur expansion of the solar (PV) market are almost always product oriented. They are typically based on the progressive lowering of prices through economies of mass production, combined with subsidized “buy-down” programs or "feed-in tariffs" for residential and commercial users. Lowering “cost per watt” is seen as the key to unlocking a vast potential market for photovoltaics.

Numerous past studies and development efforts have promoted this “product path” to solar (PV) market expansion. PV products are subsidized or supported with the primary goal of achieving economies of mass production and eliminating barriers to use. Examples include:

• federal and state buy-down programs
• coordinated government procurement of PV
• elimination of barriers to capital formation
• legislative packages supporting distributed energy
• legislative and regulatory assistance to states
• prohibition of restrictive covenants and ordinances

At the same time, steps are taken to make the product (PV) more “attractive” to the consumer. These include: legislation that encourages deployment of PV systems, sales tax exemptions, interconnection standards, net metering laws, and other programs designed to ease or eliminate barriers to adoption.

Here's a classic example as stated in a research report by the Renewable Energy Policy Project (REPP):

The product path requires government involvement to increase the diffusion rate of consumer [PV] products through setting market rules, making strategic purchases, and other innovative support.

This product-centric approach emphasizes pushing photovoltaics into various applications or markets under the assumption that lower prices, attractive financing options, and the absence of barriers to implementation, will automatically lead to consumer demand.

In contrast, the underlying belief in free-market enterprise is that people do things for their own reasons. So low price and ease of implementation do not exclusively drive market expansion. People must want to buy what is being offered. And motivating people to want something -- especially if it’s technical in nature -- requires the influence or involvement of preceding groups of people in the marketplace.

Most “for profit” organizations working to accelerate market adoption focus on winning over groups of buyers in sequence according to their psychographic profiles. This involves identifying a group of early buyers who initially value a product offering, and then communicating or promoting a combination of tangible and intangible benefits in ways that lead to the sale of product. After capturing the first group, the organization refocuses its collective attention on the unique needs of the next group, and so on. In this way, a succession of customers act to pull the market forward as the product is adapted or “positioned” to address their varying needs.

From the standpoint of pure capitalism, it is important to realize that there is no guarantee solar power will automatically become widely adopted when it costs approximately the same, or even somewhat less than conventional sources of electricity. Many other factors influence market adoption.

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Marketing High-Risk Products

Marketing a high-risk product is *vastly* different than marketing a consumer product that carries little or no risk. As everyone knows from personal experience we choose a professional advisor, a doctor, an attorney, or a stockbroker with much more care than we buy soft drinks or even automobiles. With high-risk products (or services) the customer has more at stake and looks for objective sources of evidence about the provider's methods and abilities.

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. Have you ever had someone call and ask you what kind of computer he or she should buy? This is a common method of lowering risk by gathering objective evidence.

Although solar power may not be considered high risk from a technical point-of-view, it is certainly much riskier than the alternative of obtaining electric power from the local utility. Consumers perceive solar to be high risk "relative" to Ready Killowatt.

With low risk products, there is little or no penalty for making the wrong decision. Marketing low-risk products relies on name recognition, image and branding because most products in a given category are interchangeable, plus customers accept the claims of the provider at face value. When was the last time you called a trusted friend to ask what type of cereal or milk to buy? Or called the Coca Cola Company to ask if they offer 24-hour support? We just automatically believe that Kellogg's knows how to make Corn Flakes.

Marketing solar power as if it were a low-risk consumer product is a fatal mistake.

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Solar's Main Competition

Who are solar suppliers really competing against?

The answer is "Reddy Kilowatt."

It's true that solar companies compete not only against their solar peers but also against other sources of electricity. But when customers make decisions about energy providers, the "concept" of Reddy Kilowatt (i.e non-stop power from the local utility) still holds the advantage.

For almost 70 years, Reddy Kilowatt served as the official mascot of the electric utility industry, licensed for use by as many as 300 electric utilities in the US and abroad. Created in 1925 by Alabama Power Company executive Ashton Collins, Sr., the familiar “bolt and bulb” figure symbolized the power industry during a time of tremendous growth and goodwill.

Reddy represents specific characteristics and attributes that are the competitive strengths of all electric utilities -- attributes such as reliability, plenty of capacity, plug-in ready, and always available.

Even though we don't see Reddy Kilowatt mentioned today, he is an enduring symbol of our culture and a competitive advantage for electric utilities.

It's vital that solar companies of all sizes recognize and compensate for this enduring "consumer perception" in their marketing programs and activities.


Reddy Kilowatt Commercial:

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Assessing Intangibles in Turn-Arounds

Determining how customers view product intangibles is easy in turn-around situations. The usual problem is that many of the intangibles no longer relate primarily to the product. Instead, they concern the company's performance. Typically in turn-arounds, most of the intangible aspects surrounding the company turn negative.

For public companies, with highly publicized financial difficulties, the sales force/channel will often spend most of its time trying to answer intangible objections about the company's performance and longevity. In addition, most product advertising is wasted because tangible product claims are overwhelmed by intangible concerns. Here, the challenge is to find ways to reverse the perceived decline in non-product intangibles. Often, a refocus on product intangibles is the most effective way to accomplish this.

The most difficult task facing management of a turn-around is objectively determining the company's current perceptual strengths and weaknesses. Turn-arounds are characterized by attempting to effectively deal with past failures. Failure is an emotional issue. Consequently, determining current perceptions and the areas requiring improvement is something most difficult for existing employees and managers to accomplish. Experience, objective external support is almost always required.

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Determining Product Intangibles

In an existing solar business, with established products, customers and competitors, the process of determining the intangible factors that influence purchasing decisions is relatively simple. It means asking customers (and others who influence the purchase decision) two basic questions:

1. What factors in the purchase and use of solar power are important to you? and,

2. How does our solar offering compare on these factors to other alternatives (including related but not directly competitive products)?

This type of research is easy to describe but difficult to do. In my experience, many research efforts fail to achieve adequate answers to the two questions.

When it does, however, the results can be dramatic. In one recent case, interviews with 200 solar/PV customers and potential customers found that users valued the reputation of the supplier, the service and support provided, prior interaction with the supplier, and industry standards or certifications as the most important intangible attributes of the product. In fact, the tangible characteristics (i.e. PV system specs) ranked no higher than sixth in the customer's ranking.

However, this company had based the majority of its marketing and sales messages on tangible product attributes: conversion efficiency, crystalline vs thin film, panel specs, inverter specs, and maximum power.

The research was commissioned only after a period of frustration and declining sales, and after two new competitors had made substantial early inroads into the company's customer base.

After the product perception research was completed and after the company's sales and marketing messages changed to reflect the results, revenues reversed their decline and climbed twenty-four percent the first year, gross margins tripled, and the market value of the company doubled. All of this occurred with only a slight increase in marketing expenditures, and with no change in the tangible product.

Not all cases are this positive, of course. But enough of them are to demonstrate the power of marketing product intangibles.

Simple in concept as this type of customer focused research is, it rarely appears in discussions about the solar industry. Determining product intangibles and converting the knowledge into messages and programs is easiest in an existing market where competition is strong, such as the example cited above.

The process also works in emerging businesses and in turn-arounds, but the situations are different.

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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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