Third-party lead generation companies increasingly pop up in residential solar, connecting homeowners to solar installers. Can this help drive down soft costs in the U.S.?
It’s a challenge to find customers in the residential solar business. In reaching out to homeowners, an installer spends an average of $3000 per successful customer acquisition, according to GTM Research. So now, specialized lead generation firms are using marketing expertise to identify homeowners and sell leads to installers, hoping to be beneficial middlemen.
The U.S. solar market is experiencing robust growth. 2013 was a record year, with 2.3 GW of solar installed, reaching a cumulative 10 GW. That’s some 400,000 solar projects in total! For the first time in 15 years, the U.S. will have added more installations than solar poster-child Germany. And residential is the fastest growing segment of the U.S. solar market, according to the Solar Energy Industries Association (SEIA).
But customer acquisition costs are only 7 cents a watt for Germans, compared to about 49 cents a watt in the U.S. “Soft” (balance-of-system) costs, which include customer acquisition, have become the largest contributor to total system costs in the U.S.
The huge expense of finding homeowners creates a business opportunity for lead generation companies. They employ the whole gamut of marketing techniques, then sort leads into different levels of quality using “filters.” Filters include credit scores, annual electric usage, whether both spouses are in the house at the same time, and roof shading. Installers can set their own thresholds for the filters, paying a premium for stricter requirements.
The impact of lead generators on the market is probably beneficial overall. There are some concerns as well. Many lead generating companies sell the same lead to multiple installers. PV Solar Report founder Stephen Torres points out that “Customers get annoyed … the lead gen firm needs to maximize its profit from each lead by selling it to multiple competing firms, who tend to overwhelm customers because there is a shortage of qualified, hot leads.”
Other lead generators broker leads exclusively to individual installers. For this article, PV Solar Report spoke with Los Angeles-based Renewable Energy Leads (R.E. Leads) Marketing Director Joseph Mauro. “We’re 100% exclusive,” he explains, “so we sell our leads for a little more. There are companies that resell their leads, and charge $40 to $50, but they’re selling that [lead] five different times, which saturates the market and leaves a bad taste in the customer’s mouth. When we sell a lead to a company, it has that lead forever.”
Mauro says that his prices depend on the criteria an installer requests: “If someone wants a ton of filters, those leads could cost $150,” although R.E. Leads’ price drops to $100 if, for example, credit score and electric usage filters are relaxed a bit.
Especially in the largest residential solar markets, such as southern California, there are many competing lead generation firms. Their existence is a testament to the both the impressive growth of solar and also the potential to reduce customer acquisition costs. It remains to be seen how lead generators will impact soft costs in the U.S., or if certain marketing techniques are more effective than others in that regard. After all, many installers have well-developed marketing departments of their own. So the lead generation companies that offer the most value may be the ones that bring something different to the table.