Tuesday, Oct 26, 14:00-15:30 PM CEST
Solar - Marketing
Lessons from early experience suggest that marketing campaigns can be extremely costly and time consuming in rural areas, often requiring door-to-door and direct contact. Simple consumer awareness is usually insufficient by itself. Dealers benefit from marketing assistance in early phases of new market development until a “critical mass” of customers develops that makes marketing easier.
Customers living in close proximity to towns are generally better informed about solar products than people in villages and tend to make highly informed purchasing decisions. They would not buy the lamps on the occasion of a particular promotion event, but rather collect detailed information about the products promoted and later compare them with the full range of offers available with retailers in the town.
Lifestyle and entertainment are key drivers of market growth. Both are as important for low-income populations as they are for those living in more affluent neighbourhoods – a fact attested by the significant number of TVs, radios and bars in semi-urban and rural Africa. Marketing campaigns should take this into consideration and address these aspects when promoting solar systems.
Marketing Through Freelance Sales Agents
Marketing through freelance sales agents requires a high level of trust especially if products are handed out on commission base without asking for any collateral. There is a high risk that sales agents don't repay the cost of all received products. Consequently, selection of freelance sales agents has to be taken with care. Alternatively, products should be handed over to sales agents only against up-front payment to ensure that they, in turn, will enforce payment by households. However, for such a model capital availability on the side of the sales agents would certainly emerge as a bottleneck. Lack of accountability by the freelance sales agents could also be overcome by identifying at least 2 guarantors for each agent.
An important factor for marketing of products is the personal relationship between the agents and the customers. If people trust the agent they feel assured that they can contact him in case of technical problems or defaults. One model taking this into account is that of using the community hierarchy to establish consumer confidence in the community by enlisting community leaders as direct sales agents, who sell products directly in the community making a commission on each sale. By targeting marketing at respected members of the community who exhibit authority, the likelihood is high that they can substantially influence the community to purchase off-grid lighting products, while also serving as a return channel for warranties and complaints – thereby reducing the risk perception of buying a new and unproven product for consumers.
A similar marketing approach is based on a community roadshow partiy sponsored by the lighting company, in which it is announced that a competition will take place for community members to see who can get the most endorsement as the ‘community vendor’. The one with the most signatures receives the opportunity to supply the off-grid lighting products to the community members, under the assumption that this ‘competition’ will select a particularly credible, sociable and persuasive community member.
Marketing Through Established Distribution Networks
Established distribution channels may be interested to stock off-grid lighting products in addition to their other goods and receive the benefit of expanding production by actually using some of the products to illuminate their vending kiosks. Informal distribution channels are also demonstrating the potential to play a significant role in off-grid lighting delivery, with increasing interest on the part of trading networks, kerosene suppliers, company employee living communities, Non-Governmental Organisations (NGOs), farmers’ associations, microfinance institutions, and other informal distribution aggregators which can make earnings from off-grid lighting retail while improving their bottom line by using the lighting products themselves and improving their businesses by providing access to electricity to their employees, community members, or the disadvantaged groups they support.
Marketing Through Cooperation with MFIs or Companies
Most low-income consumers spend approximately US$ 5-10 per month for kerosene, wick lamps and candles. This money could be saved if solar lighting is used. However, consumers are very often reluctant or unable to make an up front investment of US $ 30 or more dollars, due both to the nature of their available cash flows as well as to the real and perceived risks of investing in a potentially sub-standard product.
In fact, the primary drivers for the high market penetration of kerosene are:
- the ability to buy small portions of kerosene over time, as permitted by the availability of cash
- the relatively low risks involved with buying small portions of a well known commodity
Microfinance provides a means to overcome these limitations. However, Microfinance institution face two key problems:
- high transaction costs for loans of small size
- risks of non-payment
Pushing consumers to pay can be done by locking lighting systems until fees are paid. Another option is the cooperation with companies, which sell quality lighting products to their workers with loan repayments deducted from salaries.
Marketing Through Payment in Instalments or "pay-as-you-go" Systems
Another promising alternative to consumer finance is that companies are starting to allow consumers to purchase single product components over time, until the full system or desired number of products is achieved (as funds become available for the end-user). This model enables consumers a modular approach to pay for each component or product within their budgetary limits, and slowly build and expand their lighting system when they can afford to, following a kind of Lego building approach.
Marketing Through "fee-for-charge" Models
Most products currently on the market are integrated systems that combine a light source (usually LEDs or Compact Fluorescents (CFLs), a battery, and a power source (often small photovoltaic modules) sold either in one housing or as separate components. The distributor markets the product and receives payments up-front or in instalments, when consumer financing is offered. However, some companies are testing other kinds of charging models, offering consumers who purchase a light without its own charging mechanism to pay a fee each time a charge is needed, thus saving on upfront costs of purchasing a solar panel or other off-grid charging device. OSRAM, for example, through its O-HUB model is investing in central charging stations, employing the model whereby lights are sold separately from the power source and recharged against a fee in central charging stations. This model not only allows them to reduce the cost of the lamps, exploit economies of scale, and create a continuous revenue stream by charging fees but, additionally, to be able to offer other kinds of services which leverage the charging infrastructure, such as water filtration or mobile phone charging. A similar model is also being pursued by Thrive of India. This model also makes it easier for them to provide after-sales services and support. The downside to this model is the high initial investment to support development of the charging station infrastructure in addition to potentially resistant consumers who may be unwilling to take the lamps to the nearest charging station, especially if there isn’t one within easy proximity to their home or workplace.
After Sales Services
Consumers have higher trust in products if spare parts (notably spare batteries)are easily available and if warranties are provided. Especially in a model of direct marketing of lamps or SHS to households through sales agents, a written warranty may be crucial to ensure that customers have due trust in the product quality. A 1 year warranty or one year customer service is the minimum what customers expect.
-> See also After sales services
- E. Martinot et al.: World Bank/GEF solar home systems projects: experiences and lessons learned 1993-2000, Published in Renewable & Sustainable Energy Reviews 5(1): 39-57 (2001).