According to GTM Research, it costs 49 cents per watt to acquire a solar customer in the U.S., which equates to about $3,000 for the typical 6-kilowatt residential rooftop. Meanwhile, a report by Lawrence Berkeley Lab estimated a cost of less than 7 cents per watt in Germany. Marketing, advertising and sales made up the majority of the cost (41 cents), while system design accounted for 8 cents per watt.
FIGURE: Vivint Solar's Cost per Watt in 2014
Although GTM research predicts that acquisition costs will decline as installers embrace lower-cost lead generation strategies and more efficient technology platforms, near-term competition may be causing costs to increase. For Q4 2014, Vivint Solar reported sales and marketing costs of 45 cents per watt, while SolarCity reported costs of 57 cents. One can get a better feel for the amount being spent on customer acquisition by comparing sales and marketing budgets to revenue. For Q4 2014, SolarCity spent $79 million on sales and marketing compared to about $72 million in total revenue or 110 percent of revenue. Vivint spent about 82 percent of revenue.
FIGURE: SolarCity Cost per Watt, 2012-2017
Source: SolarCity's Q4 2014 earnings presentation
There has been lots of discussion on GTM and in other forums about why it costs so much to acquire new residential solar customers in the U.S. -- especially compared to other countries. Some frequently cited explanations include:
- Varying net metering policies and utility rate structures
- More stringent regulations and permitting requirements and more burdensome utility approval processes
- Confusion over the real cost of solar given an array of incentives, rebates and tax policies
- A shorter average length of home ownership, which reduces the likelihood that the homeowner will realize a positive payback
But marketers have little control over regulatory, structural and other exogenous issues. What they can control are the types of programs and technologies they use to find and convert ideal solar prospects. They also have control over how they optimize conversion at each stage of their sales funnels.
Solar providers are using a variety of strategies to acquire new customers. Some of these are focused on building brand awareness, like Sunrun’s witty TV ads. Others are geared toward acquiring new qualified leads. For example, referrals represent one of the best-performing lead sources, with providers paying as much as $1,000 for a lead that decides to purchase. Some approaches, like door-to-door sales, in-store sales teams and telemarketing, attempt to pull a prospective buyer directly into a live conversation with a highly skilled sales representative to create the type of engagement that is essential to close a complex, high-cost solar sale.
Solar marketers, like marketers of other high-ticket items, have to manage and optimize performance throughout the marketing funnel -- and the more effective they are at each stage, the lower the acquisition costs. For example, SunEdison is able to estimate that 10 percent of leads and 40 percent of qualified leads will ultimately convert to sales.
FIGURE: Lead Conversion Efficiency
Source: SunEdison's Q4 2014 earnings presentation
Irrespective of whether a lead came from a list purchase, retail partnership, website conversion or other source, phone sales continue to serve as a cornerstone for residential sales. Companies have found it to be one of the most cost-effective ways to lead a prospect through the complexities of solar adoption. It also gives them the ability to reach more prospects and easily scale operations to meet lead flow.
Solar providers are also becoming increasingly sophisticated about how they use call center technologies and methodologies to optimize conversion at each stage of the funnel, driving down customer acquisition costs. Here are a few examples.
Increasing talk time: Agent occupancy is a key performance indicator (KPI) used by call centers to measure the percentage of time an agent (or sales rep) is actively engaged with a prospect. By using automated dialing solutions, solar providers are able to reduce the amount of time a lead development rep spends dialing, listening to busy signals and reaching answering machines. Studies have shown that advanced dialers can dramatically increase talk time, often as much as 300 percent, helping to improve occupancy rates.
Monitoring and coaching: Solar businesses are increasing the conversion rates of lead development and sales teams by actively monitoring performance and coaching staff. Leveraging supervisory applications, sales managers can view sales rep status to easily see if they are ready to place (or receive) call, are on a call, are doing wrap-up work and more. This helps to improve another important KPI called “adherence.” The more time sales staff is available for calls and adhering to staffing schedules, the better sales performance will be.
Following up on web leads: Most solar providers use web properties as a primary source of leads. Consumers often fill out forms or use online calculators to estimate how much they can save with solar. These leads are extremely valuable, but their value decreases rapidly if not followed up on immediately. Providers have found that by automatically inserting and prioritizing web leads into outbound dialing lists, lead development representatives are able to reach the prospect while they are actively considering their offering -- often before they’ve left the company’s website.
Active blending: To further improve occupancy rates, many providers use a technique called “active blending.” With active blending, inbound phone calls are prioritized. If a prospect is calling the solar provider (or calling them back), they want to ensure that those high-value calls are answered first. However, for times when there is low incoming call volume, sales reps can be automatically switched to placing outbound sales calls, reducing idle time and improving occupancy.
Improving sales conversions: Probably the most important way to improve lead-to-opportunity and opportunity-to-close rates is through the use of highly skilled sales consultants. For many solar providers, the entire sales process, including answering questions, reviewing utility bills, designing panel placement, scheduling site visits and ultimately signing contracts, is orchestrated by the sales team over the phone. To improve the effectiveness of sales consultants, providers are placing the most advanced tools possible at their disposal. Integrated agent desktops typically include soft phones, sales scripts, automatic screen pops that include caller information, CRM integration and access to provider knowledge bases.
Channel engagement: Although much of the residential solar sales process is handled over the phone, not everything is done by phone. Sales consultants use email to send proposals and received signed documentation. Lead development reps may also use online chat to engage with new web prospects and even mine social networks for new leads. This is why many solar providers are also embracing solutions that enable them to engage effectively across multiple channels as a way to shorten the sales cycle and improve close rates.
Richard Dumas is the director of product and solution marketing at Five9, a provider of cloud contact center software, used by solar companies to manage sales, service and support.
If you’d like to continue the discussion and learn more about how solar installers, manufacturers and marketers are optimizing call conversions and lowering customer acquisition costs please join Nicole Litvak, GTM Solar Analyst, and Richard Dumas on March 26th for a GTM-hosted webinar, "7 Proven Strategies to Acquire More Residential & Commercial Solar Customers.”