Welcome to our 2017 mid year update on the state of play in the solar lead generation market
The numbers on the cost of solar leads and the cost of customer acquisition in the solar industry show a worrying sign for both solar companies and solar lead generation specialists. Retail solar selling prices are falling and the cost of generating genuine new leads is increasing.
When I pause to reflect on the solar lead generation segment right now, we are also seeing an increase in lead fraud in the solar industry. Many lead generators that used to be able to generate leads with telemarketing and door knocking now find these methods unprofitable. Rather than go to their customers and tell them that the price for genuine new leads has to go up they are simply recycling old leads.
So what has become crucial for solar company owners is to know how to differentiate between good and bad lead sources.
Good lead sources are still very profitable for solar companies but the thinking of most solar company owners in relation to lead buying has been scarred by their frustration of dealing with dishonest lead vendors. To help with this we have done two things
- We have discussed below how you can ask questions of lead vendors upfront to stop yourself becoming a victim of lead fraud
- We have launched the first ever online solar lead buying return calculator to help you calculate your returns from various lead sources based on your own business assumptions
Solar company owners consider this:
If I offered you 2 leads a day for $100 each, and we assume only 1 out of 20 will buy an 8 kW system at $3 per watt (so 19 out of 20 will waste your time) most of you would tell me to stick my lead where the sun don't shine.
However, you would be wrong to do so.
Do you realize on the above assumptions that over 3 years you will have generated $1,096,000 more in gross margin (income less direct cost of equipment and labor to install each job) than you spent in leads.
Even before valuing any secondary referral jobs you may get from these jobs.
Jobs won from competitive lead buying puts your business into new circles of consumers, new school groups, new groups of workmates, new church groups, new family groups etc. Valuing this referral work is an important part of understanding the value of competitive lead buying and we discuss this below.
Given this is only one extra job a week it should not increase your overheads and so you should truly be $1,000,000 better off from this relationship over three years.
Most owners of solar companies forgo this chance because of an emotional reaction to 4 or 5 bad leads in a row.
As long as you are confident your lead vendor honestly generated these leads you shouldn't have an emotional reaction to them.
Every 100 leads you buy you just need to check that you sold 5.
Solar Leads Return Calculator
A tool to help you value solar leads to decide which leads to buy and how much return you get from your investment
Finding quality lead sources is not easy, but the great returns make it worth-while
A solar company makes a lot more out of a good lead source than what the lead vendor does. As an owner of a solar company it is important to invest time seeking out good lead vendors.
Companies like SolarCity, Vivint and Sunrun became successful because they understood these economics and were able to not become emotional about the 19 out of 20 tire kickers.
Focusing on the long term economics and not becoming emotional about the tire kicker is a key to success in the solar industry.
Even the very best and most organic lead sources will include tire kickers.
At the end of the day all solar companies can buy equipment at around the same price and all will ultimately be paying their electricians the same amount to install a system.
What will define the successful companies (and what already defines the successful companies) is those that have an honest and open relationship with the few honest lead vendors in the market and then don't become distracted by short term ups and downs.
Most small solar companies have a run of 5 or 6 tire kickers in row and give up on a good lead source and consign themselves to falling out of the solar industry over time.
You need to learn the questions to ask to distinguish good lead sources from bad lead sources
What's more concerning for the industry is that we have a community of solar lead buyers that have no idea what questions to ask to differentiate good quality and profitable lead sources from fraudulent lead sources.
The worst quality lead sources can now include up to 90% fraudulent and recycled leads and so it is imperative that solar company owners become more educated about how to tell good lead sources from bad lead sources.
I note the announcement in April 2017 that SolarCity are no longer going to purchase leads from any door knockers or telemarketers and they are instead going to concentrate on generating organic web leads.
I expect that the rise in lead fraud and TCPA issues led to this decision (they have never purchased leads from SolarReviews).
Here are some questions and precautions you can put in place to prevent yourself becoming the victim of solar lead fraud;
- In the case of web leads: ask the vendor to show you the exact website and call to action the consumer entered their details into (you also need to see the traffic numbers for this website as many of the dodgy lead vendors say they get their traffic from a specific site but the site gets little or no organic traffic and they are really recycling aged leads by form stuffing these old leads into the call to action); or
- In the case of telemarketing leads: tell you the exact name of the call center who generated the lead, show you the script that the phone operator used and provide you the call recording (HINT: get them to use a unique script with the date in it otherwise they will just sell you recordings of old conversations);
- NOTE: Even with click to call and warm transfers dishonest vendors are finding ways to defraud their customers, generally because they know the first call will be from the lead buyers QA team and so one of their own operators poses as the consumer to get the call past the QA stage so they get paid for it. The way to detect this is to have your QA team ask specific questions about the house a scripted operator would not know.
Similarly, it is time that lead buyers started to educate themselves about how the leads they buy are generated.
So many solar companies ring up and ask one question only......how much are your leads?........As the worst lead sources are usually the cheapest solar company owners that ask only this question usually end up buying the worst leads and getting the worst results.
There is no such thing as a generic solar lead.
Each method of lead generation has its own value based on the % of sales conversions that it delivers.
Yet less than 5% of solar company owners would ask this question when enquiring about buying solar leads.
We found it easy to detect lead fraud.
All this dysfunction stems from the fact that lead originators, lead aggregators and lead buyers are not having smart or honest conversations with each other.
A test we did recently on around 30 leads purchased from sub affiliates used by others in the industry indicated that between 30% and 80% were fraudulent. P.S. we didn't sell these leads to our clients we only did a test.
In the case of web leads this was a result of companies form stuffing consumer details collected from old leads into new web forms.
In the case of click to call and warm transfers it was because scripted telemarketers were calling our QA team and pretending to be consumers. We caught this by asking them questions that a homeowner would know about the house but a scripted telemarketer would not know (i.e. what school district the house is in).
The problem with this is that solar companies are deciding that they can't grow their businesses by buying leads when in fact they still can if they are able to eliminate these fraudulent lead sources.
What is a realistic conversion percentage and cost of acquisition to expect from a SolarReviews lead
Whilst in April 2017 one of our bigger customers on Los Angeles said they were selling 7.5% of our leads, 5%-6% is a more normal conversion rate in the big solar markets such as California, Massachusetts and New York.
Selling prices in the solar industry in America have fallen to around $3.00 per watt and lower but they are still above countries like Australia and Germany where retail selling prices are around $2 per watt.
It is still possible to make excellent profit in the residential solar industry in America at these market prices but to do so you need to know 3 things:
- How to differentiate between good and bad sources of leads. If a lead vendor can agree to lower and lower lead costs when the cost of generating genuine new leads is increasing you need to start wondering about the quality of the leads you are buying and how many of them are just recycled old leads;
- You need to know how to value your solar leads to know at what price and at what conversion percentage do leads become unprofitable; and
- You need to start understanding a lot more about how the leads you buy are generated and start having a partnering approach with quality lead vendors where both you and the lead vendors understand the issues each other are facing.
It is still the case that with at least half of small solar companies that call in and ask us about buying leads that:
These people don't want to know how many solar companies our leads are sold to, how they are generated and what the QA process is that we go through before deciding if a lead is good enough quality to be sold. These people usually have no idea of their cost of acquisition or their conversion percentages from each of their lead sources. To be frank we don't worry about these folks too much as most go broke and most have unrealistic expectations from a lead source.
When we know we have a smart company is when they ask us what the CoA (cost of acquisition) and conversion rates are on our leads in their service areas, how we generate them and how we QA them. We discuss an acceptable cost of acquisition and they share their CRM with us so we can check conversion rates and calibrate our lead fees to be within acceptable acquisition cost for an area.
If you are selling cash systems at $3.00 per watt and can get a lead cost per acquisition of less than $1,500 you are making out like a bandit. Even up to a lead cost per sale of $3,000 you are still making an excellent return on investment. Generally speaking you should buy as many leads as you can from any source giving you a cost of acquisition.
I know there are some areas where cost of acquisition is much lower and selling costs are lower (i.e. Florida and Texas) but this just means you guys should be buying as many as you can because competition is pushing up the cost of generating genuine new leads and the cost of acquisition will increase towards national averages. In short, if you are in these areas make as much money as you can while the going is good.
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At SolarReviews we have a different approach to solar lead generation. Our approach can be categorized as both organic and holistic. It is organic because we use our three websites to generate leads rather than outbound email or telemarketing methods.
Our three websites are
The largest dedicated solar reviews and ratings website in America. The site contains reviews of both solar installation companies and solar panels
Originally developed with support from the US Department of Energy this site houses the leading "solar panels payback calculator" in America.
Together these sites contain some of the most informative and unique content available on the internet for consumers who are considering installing solar panels on their home or business.
With approximately 3 million unique visitors per year and plans to double this traffic by 2018 these sites also represent the largest block of web traffic in America relating to information for homeowners that are considering installing solar panels.
All solar leads that we provide to solar installers are generated through these websites and so you can see the exact information and call to action that has led to a consumer requesting a quote.
What method of lead generation delivers the best solar leads
There are a number of different types of solar leads generated by a number of different types of solar lead generation companies.
Generally speaking there are single source lead providers. These are usually website owners that just sell the leads that are generated through consumer use of their web properties. These leads are usually organic because it is the consumer that has initiated the contact.
These are telemarketing firms that buy lists of home owners and call them. Many of these call center's are overseas.
Outbound email marketers
They buy or develop lists of email addresses and email call to action content to try and get these consumers to engage.
Lead Aggregation Companies
These are companies that get their leads form many different sources and in many different ways. The advantage of these firms is that they can offer volume but the disadvantage is that as a lead purchaser you do not know how each lead was generated. It is very hard to vet quality form these lead vendors.
Advantages of Outbound Lead Generation methods
The advantage of outbound lead generation methods is that you can target a specific location and so can generate a large number of leads within a desired geographic region. It is much harder using organic methods to to generate a large volume of leads in a targeted geographic area.
However, what is happening in the American residential solar panels market is that locations in which solar offers the best returns have become so saturated with telemarketing and email marketing efforts that it is very difficult to generate solar leads in these areas at all.
Disadvantages of telemarketing, email marketing and other out bound lead generation methods
There are quite a few disadvantages to outbound lead generation methods.
The most common telemarketing script used goes something like this:
Hello Mr/Mrs.....Are you aware that you may be eligible for a government program that could reduce your power bill by 50%. I need to confirm your details and we will get a program officer to contact you. Are you Mr/Mrs.....of.....(Address).....and would you say your power bill is over $100 per month.
At the end of the call they read a TCPA disclosure but at no stage have they actually asked them if they would like to install solar panels on their property or if their property would suit solar panels.
What makes matters worse is that it is impossible for you as a purchaser of this type of lead to know if the people in the phone recordings are real or if this recording is recent.
We trialled leads form a telemarketing source and found every possible type of lead fraud. Leads that were supposed to be sold to us exclusively had been called by many solar companies, telemarketing operators made up information when the customer would not tell them an email address or utility spend and we even had one lead from a person who had been dead for six years (seriously this is true).
Advantages of Organic Solar Lead Generation Methods
The main advantage of organic solar lead generation methods are that they produce a higher quality of lead because it is the consumer themselves who has initiated the contact.
Specific Advantages of the SolarReviews organic lead generation methods.
A specific advantage of the SolarReviews organic lead generation method is that consumers only request an estimate once they know quite a bit about you. They know where your office is, how big your company is, what brands you sell and most importantly they have read stories from your customers about what it was like to deal with you.
It is almost like they have already gotten a personal recommendation from a friend when they contact you through SolarReviews.
The only downside of SolarReviews leads is that they are quite low in volume. Most solar installers that subscribe to solar reviews say that leads they get through this site are their best converting lead source but their biggest complaint is that they'd would like a higher volume of leads.
Therein lies the biggest conundrum in solar lead generation.
"Targeting quality reduces volume and targeting volume usually reduces quality."
Published: , updated on