In part one, I suggested that the solar industry, with such vast upside, has a problem with demand. There is not enough demand at today’s sustainable price points to consume the rapidly increasing supply. Price subsidies will help, but to maximize profitable growth, more people need to understand and desire solar power.
The following is an oft-used way of looking at how potential customers move from awareness through purchase — the funnel. Each portion of the funnel can be measured. For example, Consideration is the percentage of the market population which is seriously considering purchasing. People cannot consider unless they are aware (the top of the funnel), and people will not purchase (bottom of the funnel) without considering. These stages are mathematically related, and can therefore be used to diagnose problems or prescribe remedies in markets.
The notes to the right are my assessment of the current situation in the solar market. I haven’t made the measurements, but these are directional projections based on other data. My summary view of solar demand health:
a. top-of-mind awareness (this is highly correlated to sales) is low; general awareness is good;
b. consideration rate (percentage of those aware who also consider buying) is low;
c. there is little understanding of product offerings, prices, and financial mechanisms;
d. knowledge of suppliers and buying process is poor;
e. rationale for purchase is vague;
f. social or emotional motivators are not powerful.
Marketing can be employed to improve these factors of market health. Imagine if: solar occupied a place in the forefront of potential customers’ minds; those people had a specific idea of why it is good, how much it costs, and how to buy; a higher portion looked into purchasing; and a higher percentage of those shoppers bought. The result, in economic terms, would be a reshaped demand curve and a move to the right.
This moves the intersection with the supply curve to a point where both quantity and price are higher. The industry sells more at higher prices.
Unfortunately, there is currently very little end-user marketing investment. Low margins and technology focus have led solar manufacturers to keep marketing budgets small. Also, the installer channel is nascent, lacking marketing expertise and resources.
So am I suggesting that already stretched players add a few (marketing) expense to drive long term profitability? The purist in me really wants to, but no. I’ll outline a more viable idea in Part 3.