- Special Projects
Imagine walking down the cereal aisle in the grocery store. You’re looking to buy a box and don’t have a clear idea of your deciding criteria. Price? Nutritional value? Sugar content? Fun toy inside? Ability to stay crunchy in milk, dairy or soy?
Now imagine a similar plight for a solar electric design and installation firm. You’re wanting to offer your customers choices in module brands. Twenty years ago, the choices could be counted on one hand, maybe two. And now? It’s that overwhelming cereal aisle again.
What will you take into account in order to make the best choices to carry in your inventory? Pricing? Performance? Monocrystalline or polycrystalline or maybe even thin film? Manufacturing origin? Financial strength of the company? Smooth schmoozing from the PV module co. rep and an expenses-paid trip to the factory complete with stylish t-shirt, cap and a fancy pen?
As the owner of a modest PV contracting company here with more than 30 years experience in the U.S. and Asia, I’ve struggled recently over the question of what to offer my customers during these turbulent times of rock-bottom prices, industry consolidation, fierce competition and shrinking margins.
Until last year, I had been offering two choices: the top-performing, highest efficiency mono product on the planet and a solid, more economical American-made poly, what I called my Best and Better module options. I have been providing the Best option since 2005 with the majority of my overall revenue coming from selling that product to top-quality-desiring and performance-oriented home and business owners. A premium choice at a premium price is how I’ve pitched it. The Better option has appealed to those more price-conscious purchasers or those for whom a Made in the U.S.A. label was important. But I was losing sales to hungry competitors who were peddling a lesser known or no-name module brand at seemingly unsustainable pricing.
When presented with an unmanageable number of choices, whether that means not having much of a clue about your cereal preference walking down that grocery aisle or having a PV salesperson offering you a dozen module options, the mind scrambles and the anxiety of the buying experience goes up. So, contrary to many PV integrators who will offer a homeowner module types A through Z expecting them to make an educated choice between too many brands that they know little to nothing about, I decided to make that range of choices smaller and more manageable by offering three module brand options.
For that third choice, I chose a U.L.-listed Chinese brand with a -0/+3 percent power tolerance, standard industry warranty and accompanying flash test data showing that each and every module produces its nameplate rating or higher. With what comes out of my pocket for this brand a whopping 60 percent cheaper than what it costs me for my Best brand and 20 percent cheaper than my Better brand, I would cover the widest price range for those wanting the best and willing to pay for it to those not really caring what was on their roof as long as it was at the lowest cost and brought down their electric bills. I could now offer three options: Best, Better and Good. Let the increased sales come rolling in! Or so I thought.
I have yet to make a sale using my Good modules despite the total installed cost being dramatically lower than the Best option and 10-15 percent less than the Better option. Fortunately I don’t have millions of dollars’ worth of Good module pallets sitting in my warehouse. But I’m left wondering if I made a miscalculation in the evaluation of the residential marketplace in Hawaii and what might be induced from this experience on a more macro level. Why are homeowners choosing to so willingly dismiss a significantly lower cost option and spend thousands, or even tens of thousands, more on the higher priced products? After all, it’s not really about which brand of modules is on one’s roof; it’s the monetary value that those modules produce as far as kilowatt-hours pumped out over time. And putting aside all the sales and marketing hype, Generic Brand Chinese is likely to produce 90-95+ percent compared to what Premium Brand Mono will produce over their respective lifetimes.
At least a couple of identifiable factors may be at play: an anti-Chinese products bias, at least when it comes to big-ticket item purchases, and, independent of the product’s manufacturing origin, a reluctance to go for the lowest cost option available.
With the degree of China-bashing going on across the political spectrum in Washington, as well as opinion polls showing a substantial degree of concern and distrust of the those seemingly cunning Chinese who supposedly manipulate their currency to their advantage, hold so much American debt and allegedly take away American jobs, maybe those homeowners who are so attached to their Chinese-made laptops, smartphones, iPods/Pads, digital cameras and widescreen TVs feel compelled to draw the line at buying a PV system using Chinese-made modules. No matter that 60 or more percent of total global PV production comes from China with Chinese PV manufacturers cranking out quality products on par with American, Japanese and European PV hardware. No matter that the company that has dominated the micro inverter market these past several years has their manufacturing done in China. This form of economic nationalism may make little rational sense as far as maximizing the utility of this kind of major investment since kWhs produced is really, like the Hokie Pokie, what it’s all about. But, by golly, one has to draw that line somewhere to support American workers and the U.S. economy.
The second factor goes more to the heart of basic buying psychology. Unless your most important decision-making criteria is price, price and price, having three choices before you of highest cost, medium cost and lowest cost, there can be an inherent bias against the lowest cost option regardless of where it’s made. “If it’s that cheap compared to the other two options, then the quality can’t be that good and it probably won’t work well or last as long,” or so the homeowner rationalizes. Perhaps similar to the auto industry, which has seen low, low priced cars come and go over the years—remember the Yugo?—the typical consumer has a very hard time believing that something that’s priced that much cheaper can be a wise investment that will provide durable value over time. Interestingly and somewhat surprisingly I have been seeing what I’ll call the Goldilocks Syndrome. Offering these three module options has been prompting homeowners to gravitate to the middle, just right option in increasing numbers.
We in the PV business are going through a period of serious turbulence on all levels, local, national and global. In our little state, the perfect storm of lower installed costs, government incentives, screaming high electric rates and a greater awareness and sense of urgency among the buying public has led to a feeding frenzy never seen before. Across the islands the installed PV capacity more than doubled from 2009 to 2010 and more than doubled again from 2010 to last year. Sure, let’s pat ourselves on the back all we want. But delude ourselves not that this kind of growth is sustainable. It’s not. As the unsustainable number of players try ever harder to maintain their market share and revenue stream, critical questions about product offerings, pricing, value added and financing will come into play. I’ve been at this game longer than most and yet am still surprised how a seemingly obvious move to offer a very solid product at substantially lower delivered cost would lead, at least so far, to no takers. Maybe it’s back to PV Sales Strategy 101 for this grizzled veteran.
About the author: Marco Mangelsdorf has been in the renewable energy field for 33 years and is president of ProVision Solar Inc., a Hilo- and Maui-based solar electric integrator that’s been designing and installing PV projects across the islands since 2000. He also teaches energy politics at UH Hilo.