By Pamela Cargill, principal at Chaolysti
Customer acquisition is a vexing topic for many solar contractors. By looking at what strategies have worked over time, we can determine best practices to build a profitable solar contracting business.
Non-referral strategies and the growth of residential solar
Non-referral customer acquisition strategies (content marketing, telemarketing, providing a proposal before an in-home consultation and canvassing, for example), have resulted in tremendous growth for residential rooftop solar installers—about 53% in the residential sector since 2005, according to SPV Market Research.
But what is the cost of that growth? High growth rates of 50, 60 or 70% are great, but they also require putting a lot of money into generating non-referral leads. It’s important for contractors to strike the right balance between growing and staying profitable.
High acquisition costs when not every home is right for solar
In 2013, NREL and the DOE published a soft cost study and found that non-hardware costs contributed to nearly 65% of a project’s total. At least 9% of that cost was associated with customer acquisition (exact percentages differed based on geography, business models, etc.).
Since 2013, solar hardware costs have continued to decline, but soft costs have remained stubborn for many. In some regions, especially more competitive areas like Southern California, they have even increased. Customer acquisition remains a perennial challenge for the residential rooftop sector because solar isn’t right for everyone, and certain forms of advertising may provide little to no return.
While some factors have affected the solar customer market size since 2015, such as changes to NEM, it’s critical to keep in mind that the total addressable market for rooftop solar is not every person and not even every homeowner.
So how do we reach the addressable market while lowering our acquisition costs?
Steps to lowering customer acquisition costs
Step 1: Know your target customer
How well do you know your customer and, specifically, the customer that results in a profitable install? The first step to knowing is measuring. Synchronizing your accounting, estimation and customer information can help you analyze your projects and customers to better understand what types are most profitable and why.
Many marketers look at customer demographics—ownership of the home, age, income, creditworthiness, level of education attained, etc.—to help identify and target their ideal population. For solar, we also have to consider site characteristics, such as home orientation, shade and potential signs of high energy use like pools, AC units or particularly large homes.
During this analysis, it’s also important to understand the maturity of your market. For example, pinning down ideal demographics in emerging markets (such as those in the South and Southeast United States) can seem nearly impossible. Early market buyers bring a different mentality about purchasing a new type of product than those in more mature markets like California or Massachusetts.
Step 2: Focus on referrals first
Focusing only on growing quickly may cost you the satisfaction of your customers. When the customer experience suffers, they are less likely to provide a referral.
Referrals are important because, although you may only see a 10 to 25% growth rate, you are likely to be more profitable given you have the right process controls in place.
Don’t be afraid to ask for referrals. Based on my experience, I recommend asking after the installation is totally complete and the customer receives the first utility bill showing solar savings. You’re likely to catch them on a high note.
Step 3: Deliver an excellent customer experience
To generate referrals, you must meet or exceed the customer’s expectations. This may sound simple, but making customers feel comfortable involves spending a lot of time educating and communicating with them because they are likely purchasing solar for the first time. They may not have any preconceived notions or experience with the solar buying process or know what to expect when the project is underway. Help them understand what to expect. This means ensuring the expectations you set during the sales process are true, realistic and carried through during project delivery.
Find out how, when and with what method the customer wishes to communicate with your company to learn about project updates. Help them understand the reality of potential delays in construction planning, the approvals necessary and who they can contact when they have questions.
Inappropriate sales compensation, high-pressure sales tactics, one-call closes and dubious promises of savings lead to long-term customer dissatisfaction. Noted solar market researcher Paula Mints conducted a consumer satisfaction study in 2015 wherein even respondents who claimed satisfaction provided long-form comments indicating confusion and dissatisfaction with understanding what would change after they adopted solar.
Instead, provide outlets for consumer education, such as through videos, blogs, seminars and open house events. The consumer can decide how and when they engage with these resources.
Continue to track, nurture and educate any prospective customers you touch through email marketing and a CRM. It may take months or years for some to decide they are ready. When they decide, you want your brand to be top of mind for them.
Don’t forget to keep in touch with customers even after project completion. Reach out on a semi-regular basis through timely customer newsletters with tips and tricks on how to read their bill, how to understand their savings and maybe some invitations to fun customer-only events or opportunities. Ask for the referral. Keep your customers happy and engaged. Respond to their concerns and service requests promptly.
Set up your processes and software project management systems to help support the delivery of great customer experiences. You’ll be well on your way to a strong and profitable referral-based business.