5 tips that can make a difference according to behavioral science
A few months ago, I was talking with a friend at a solar proposal company. They had just completed an in depth analysis of the state of the industry. One statistic stood out:
Only 6% of all proposals generated led to signed contracts.
That’s 16 proposals for every solar system that gets sold. No wonder the cost of customer acquisition is still so high.
One of the reasons for the low conversion rate is that most customers are still deciding to go solar or to not go solar. That’s right. Most sales are not competing against other solar companies but rather they’re competing against the option of “doing nothing” which is a pretty easy decision for the customer to fall back on.
And so the question is, “How can we break the customer out of that mindset and ensure that “doing nothing” is not a viable option?”
First, knowing your customer is the most important principle to build upon. As explored in our article on the empathetic sales team and solar buyer personas, having an understanding of your customers and customers will help you develop an approach that strikes the right cord.
Second, there are specific tactics you can use within your solar proposals. The proposal presentation is a key event in a customer’s journey from solar-curious to solar-powered. The excel spreadsheet presentation has largely been replaced with professional proposals generated by purpose built tools integrated into a businesses solar software stack. Professional and well-polished proposals help a solar sales rep build trust, educate the customer, and ultimately welcome a new neighbor to their solar community.
In this post we focus on some of our favorite tactics taken from behavioral science and marketing research that have been proven to demonstrably increase close rates and average selling prices.
Price anchoring is a well known tactic, but it serves as a good introductory example of how our minds can be shaped.
In general, our perceptions of what is “expensive” and what is “cheap” are relative. As an extreme example, imagine if the first quote a prospective solar customer ever receives is for the incredible price of $1/W. Without any previous knowledge of solar, how would that customer know that $1/W is a ridiculously good price (in the US)? They wouldn’t, and there’s a good chance they would still solicit proposals from competing solar companies.
A price anchor serves to communicate to customers “what solar should cost.” When you position your company's offering at a discount to the anchor price, it will be interpreted by the customer as providing a superior value.
An often cited quote relating to Price Anchors goes, “How do you sell a $2,000 watch? First show them a $10,000 watch.”
The order and timing of the anchor pricing is critical to a successful proposal. The anchor price should be presented early in the discussions to give the customer a point of reference as you then build trust and value before delivering their personalized proposal at a discount to the original anchor price.
Some of the most popular industry examples of anchor pricing include:
Good Better Best (G-B-B) pricing is the practice of offering your customer a “good,” “better,” and “best” option that varies in price and feature set.
The value of providing your customer with multiple options can be extrapolated from a simple trick parents have been using to gain compliance from unruly children for eons. Parents have long known that if you ask a child, “Will you clean their room?” The expected answer will be, “No!” However, if the parent reframes the proposal to, “Do you want to clean your room, or do you want to mow the lawn?” The child is likely to answer, “I’ll clean my room!”
The equivalent mistake of a solar rep is to present a proposal with only one option for “going solar.” By providing a singular option, the rep is inadvertently asking the customer to choose between “Going solar,” and “Not going solar.” With this presentation, half of the outcomes are “don’t go solar,” and the rep’s close rate is sure to reflect that.
As autonomous individuals, we like to have options and we like to feel in control, which partly explains the success of G-B-B. Examples of G-B-B pricing are all around us. We can use our Apple iPhone, iPhone Pro, or iPhone Max to call an UberPool, UberX, or UberBlack, and then we can pay for that ride with our credit card that comes in “Silver,” “Gold,” and “Platinum.”
G-B-B is ubiquitous for a reason, it works!
By presenting a proposal that employs G-B-B pricing, the customers may now choose from “Good Solar”, “Better Solar”, “Best Solar”, or “not going solar.” Immediately the odds of them choosing one of the options for “Going solar” have vastly improved. By framing the set of choices, the customer is making a choice to look carefully at your company, also increasing the odds of being the company chosen.
Offering a relatively low priced Good option can allow a business to reach new markets. It should be better for a business to have a customer of the Good product than no customer at all.
Beyond improving close rates, G-B-B can also be employed defensively to protect the margins of your higher priced offerings. A sales rep can simply remind the customer that if the Better or Best products are out of budget, the Good product would make an excellent choice, as opposed to conceding discounts on the premium product lines.
The “Best” price option should have the highest margins for the company, likely by including an additional service like active monitoring.
The “Better” option could be your goldilocks product that’s in the sweet spot. Or, it could serve as a decoy offering...
Customers want to feel like they’re in control and making an informed decision about their choice to go solar. However, most are first-time solar customers who are making a selection from an unfamiliar set of options which can be overwhelming, especially given the price tag, and the long term commitment a customer is being asked to make. A customer’s discomfort at this junction can lead to non-decisions and lost deals.
What is the solution then? Give the customer a “decoy” option that allows them to easily conclude that one option is clearly worse than others - helping them to move forward confidently with another of your proposed options. Typically, among 3 options, the differences between the options are not evenly distributed.
Going back to our example of assigning chores to a child. Imagine 3 options: “Scrub the toilets”, “Mow the lawn” or “Clean the Bedroom”. The decoy is scrubbing the toilet, which makes the choice between lawnwork and cleaning the room that much easier. The child is actually choosing the option, but the decoy has framed the decision as a legitimate choice, rather than being forced into a simple binary.
How do you apply a decoy offering in a solar proposal? Take for example, a solar sales rep who presents the following three options to a prospective customer. Which one do you think is the decoy?
Gold: 5kw System @ $15,000
Platinum: 7.6 kw System @ $22,500
Future Proof: 7.6 kw w/ EV Charger @ $22,900
It’s the Platinum system! The purpose of presenting the Platinum system is to help the customer determine for him or herself that the lower priced Gold system or the nominally more expensive Future Proof provide strong values.
Also, as you can see, the decoy offering helps to support higher average selling prices.
“I hate losing more than I like winning,” is attributed to Moneyball protagonist Billy Beane of the Oakland A’s, and concisely describes the concept of Loss Aversion. Loss aversion is the behavioral phenomenon where we prefer to avoid losses over acquiring the equivalent gains.
Loss aversion can be employed in solar proposals by positioning the loss of something if the customer chooses not to move forward. The most commonly employed loss aversion tactic in solar is the ITC step down. Common examples of other loss aversion tactics that be employed on a solar proposal include:
People love getting something for “free” or at “zero cost.” Customers are loss averse, positioning something as “free,” can help to navigate the loss aversion because there is no perceived cost to engaging in a “free offer. ” As a best practice, ensure that your proposal includes something for “free,” and be sure to point out that it’s included for free. Examples of “free” add ons that can be used to increase close rates:
With a maturing solar industry comes increased competitive pressures and larger customer bases. As early solar businesses scale to support the needs and demands of the new energy consumers, those that creatively employ behavioral science tips in their sales strategies and proposal presentations will see higher close rates and increased margins.
For more on how behavioral science can help us in solar, check out the book Predictably Irrational, by Dan Ariely.
Would you like to review the structure of your solar proposals with us? Contact us.