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Cleantech Companies: Differentiate or Get Squeezed on Price

2 minute read

Cleantech executive teams are almost universally concerned with the impact of commoditization of their companies’ long-term growth. But if your product isn’t differentiated, then competing is just about winning on price – otherwise known as commoditization.

The drop in the costs of solar, wind and battery storage have been dramatic: In the last four years, utility-scale solar costs dropped 36 percent and wind costs declined by 24 percent, according to Lazard. Lower prices made solar and wind the cheapest forms of new power generation in many parts of the country – one of the big drivers in their rapidly growing adoption.

This is a favorable trend for industries, but it comes with a requirement for their companies to differentiate or see their growth squeezed. And, real differentiation is something that’s been hard to come by in the cleantech space.

There are a number of reasons for that. We’ve gone deep on that topic in several pieces (here, here and here). But the meat and potatoes reasons are:

  • CEOs with technical backgrounds (financing and engineering) want hard-and-fast numbers from marketing differentiation, which is naturally resistant to cause-and-effect quantification.
  • Most cleantech firms sell B2B industrial products and services, the sort of sales that have historically been driven almost entirely by sales staffs.
  • The focus on dropping costs has produced a cost-first mentality in marketing.

Commoditization is why most domestic air travel sucks. The customer base is buying on price first and foremost, so airline profitability relies on packing planes with bodies, and packing bodies into small spaces. Airlines get away with it by delivering people from Point A to Point B without spilling soda on too many laps.

For cleantech companies, though, commoditization is a serious growth constraint. And it’s typically a self-inflicted one. As young industries, solar, wind and battery storage companies are actively training their customers to buy like airline travelers. But commoditized buying is at odds with the realities of most B2B cleantech sales. A cleantech purchase is often a long-term investment in which important factors go into the long-term user experience.

Take wind farms. Training the customer base into commoditized buying customers overlooks some very important considerations that will play into the long-term value of the project: The track record of the project development team, the strength of its community acceptance program and the return on investment over 20 or 30 years. For rooftop solar installation, there’s the quality of financing, the skill with which the homeowner’s roof is treated when the panels are installed, and the customer service after the installation is completed. And for energy storage solutions, it could be the ability to tap into ancillary services and capacity markets, and contributions to grid modernization. 

But if a company under-invests in educating customers on what to consider, they’ll just consider price. That’s what’s happening in the cleantech industries right now because of chronic under-investment in differentiation.

Continuing to rely on outdated websites, treating digital media like just another distribution channel, and relying solely on sales staff to educate customers are not the answer.

Committing to differentiation is. 

Topics: Marketing & Communications