In the introverted world of solar, differentiation amounts to little more incremental increases in panel efficiency and then shouting louder to be heard above crowd. “We don’t need branding” is the familiar cry, “we need awareness and PR”.

It’s an industry ripe for consolidation, and the winners will be those companies that dominate categories with strong brands. The category that is the most susceptible to consolidation is the installer market. It is highly fragmented and the ripest for roll-up and brand domination. There are 750 installers in California alone, a market that comprises 80 percent of the  US solar market. The top 10 installers in California have 40 percent of the market. The rest are small  “mom and pops”. Most are former electricians with little marketing or business savvy.

The consolidation straws are in the wind. The larger solar integrators are buying small installation businesses in a trend that’s bound to continue. Companies such as groSolar, SolarCity, Real Goods Solar and Acro Energy are said to be the most active. They have the brand potential, they have the resources and they have seen the opportunity.

There’s an interesting look at these companies on the Sustainable Business website (www.sustainablebusiness.com/index.cfm/go/news.feature/id/1736)

How will the consolidation happen, and what will it look like?

It’s will not be just about size and market share. It will be about brand and the relationship with the customer. At the residential/commercial end of the solar spectrum it’s a fundamentally different kind of business model than at the industrial end. The residential market requires much more of a retail mindset and approach to the market in which the buying experience is paramount.  Currently, installers think about what they do – install panels. The physical “installation” of the product, the solar panel, is in fact a small piece of the equation for customers.

This is a typical hardware/manufacturing mindset that is all about the product. Manufacturers are typically terrible marketers and retailers. The retail mindset is all about the buyer relationship and experience. The manufacturing mindset is all about product and technology. The buyer relationship and experience was at the heart of the Saturn proposition and success. Disconnected from the low-grade experience of the  GM dealerships, Saturn saw a chance to reinvent the industry and build a brand around a complete buying and owning relationship. And it worked until GM decided it could not resist the urge to interfere.

If the solar industry continues to remain infatuated with product and technology, it is destined for commodization. It will be up to the retailers to add value and make a business of solar. The panel itself will be just an item in a catalog (the solar panel manufacturers are going to be commoditized unless they take branding more seriously).

People trust retailers. They trust Nordstrom, Target, Walmart and Best Buy. They are trusted brands, and it’s easy to buy from them; hey back-up their merchandize with an enjoyable experience and service support.

Is the retail analogy too much of a stretch for solar? Not at all. There is speculation that Walmart is considering selling Chinese-made electric vehicles. At $35,000 each, a vehicle is a comparable investment to a solar panel system.

It’s not about the product. It’s not about installation. It’s about the value delivered around the product – the relationship, which is essentially a marketing/brand approach.

Walking across the floor at Solar Power International conference and expo in Anaheim, it was easy to imagine strolling through a Turkish market. But instead of the visual whirl of textiles and scent of exotic fragrances, the air was abuzz with the earnest pitch of more than 900 solar vendors selling their wares from their branded tents. Welcome to the great solar bazaar.

The territory is solar and there are thousands of companies scrambling to stake a claim. An overpowering whirl of sound-alike solar names (just get ’sun’ or ’sol’ in there) is reminiscent of the Internet bubble when it was just enough to have dot com in your name, never mind the business model. This is clearly an industry in the “tornado” as Geoffrey Moore characterized it in “Crossing the chasm”. It is a dynamic phase in the technology adoption lifecycle and solar is, after all said and done, a technology in search of a commercially viable future.

In tornado phase, the branding imperative is simply to get the name out there and build awareness. It’s all about the technology. Incremental increases in solar panel efficiency are claimed as major differentiators. The collective imperative of the whole industry is cost reduction in pursuit of the holy grail of grid parity – and the inevitable rush towards commoditization, and then oblivion for most.

The great solar shakeout is surely at hand.

Economically, it’s been a seminal year for the entire industry. The housing bust and the credit crunch have put tremendous pressure on manufacturers worldwide to cut costs. The stage is set for a leaner, meaner industry. Very few startups will be around in three years. Technological innovation is not commercial viability.

Another distinguishing feature of Moore’s tornado is the emergence of categories and deep segments. Companies with powerful brands move in to dominate those categories with presence and scale. In the case of the Internet the category winners are Cisco (networking), Google (search), Oracle (RDBMS), SAP (ERP), etc. Brand then becomes the great differentiator built on a superior end user experience. Technology is conversation about product features.

In the solar energy delivery chain the race is still wide open. At B2C end of the spectrum several strong regional/national brands will emerge that forge a strong bond with residential/commercial customers based on consultation, service and trust. But trust is the main issue. Watch for a retailer like Home Depot to start selling residential solar systems and contract with local installers.  They have a trusted brand. Installers currently are doing nothing discernible to add value to the relationship.

At the B2B end Applied Materials already has a strong awareness and respect and also has a major commitment to a future in solar. The challenge for the Applied’s, Sharp’s and Kyocera’s is to leverage a brand which is known for one thing into a market that is related, but distinctly different in its customer characteristics.

SunPower is doing an interesting job of attempting to build awareness across the entire spectrum of categories, from residential to utility scale, albeit in select markets.

In its 2008 annual report SunPower acknowledges the importance of branding: “In today’s economic and competitive environment, brand is becoming an even more important differentiator and a significant competitive advantage.” Fine as far as it goes, but can SunPower’s awareness building be sustained across such a wide industry sweep when other brands begin to dominate narrower categories? Awareness, aided or unaided, is not brand building. Ask the founder of Pets.com. The guess is that SunPower will eventually coalesce its business focus and brand building on a narrower category it can dominate in and scale

So what about branding in the solar industry? What’s it’s role? Does it have a role?

The big branding mistake lies in the belief in that it’s all about awareness and PR. Awareness won’t get you very far if you have no proposition beyond solar. Branding, especially in a technology-based industry like solar, is a framework for thinking about your reason for being as a business.

Branding is a way of continuously sensing people’s desires and rapidly delivering compelling value to satisfy those desires. It’s about being constantly on the lookout for ways to connect with people and “go deep” into your relationship with them, and their relationship with you and each other. It’s about new processes, new business models, new ways of thinking, and new ways of interacting.

Forget about trying to differentiate through incremental technological advances. Today’s breakthrough is tomorrow’s commodity. Stay tuned in and connected to the living, breathing marketplace of your audience’s fears, challenges, and aspirations, and build your brand around that.

–

Alan spoke at the Solar Power International Conference last week on Building Brand Recognition. Please contact Anant Sanchetee at anant@riechesbaird.com for a copy of his presentation.

I would like to thank all attendees of my speaking engagement on Building Brand Recognition at the Solar Power Conference in Anaheim earlier this week. We walked away with an array of opinions on what the future of solar energy could look like for solar companies and their core audiences. I look forward to keep the discussion going at this blog

For those who requested copies of my presentation or leave behind, please contact Anant Sanchetee at anant@riechesbaird.com or call at 949.586.1200.

Thank you.

As the solar industry matures, the importance of building a strong brand built on a compelling and differentiating value proposition becomes vital to success. Participants in this session will learn from a brand expert about the value of branding as it relates to the solar industry, what a brand is and why it is more than just PR, and how to brand your company successfully.

More details at: http://s36.a2zinc.net/clients/sepa/sepa2009/public/SpeakerDetails.aspx?FromPage=SpeakerList.aspx&ContactID=2578&IndexInList=18&SortMenu=103005

For such a small company, Nansolar has done a remarkable job of building its brand since its founding in 2002. Much of the credit has to go to CEO Martin Roscheisen for evangelizing the company and its technology with a lot of noise. Time magazine went so far as nominating Nansolar’s technology one of the top 50 best inventions of 2008.  The question has always been:  is there any substance behind the noise?

Read the related NY Times article at:

“Since its founding in 2002, Nanosolar has raised a lot of money – half a billion dollars to date – and made a lot of noise about upending the solar industry..” (read more) – Sept 9, 2009 – NY Times