Even though environmentalists have been advocating for solar power for decades, very few people have installed solar panels on their homes. Of all the electricity generated in America, only 1% comes from solar power. For many environmentally conscious consumers, the installation costs for solar panels are prohibitive and the promised savings seem too good to be true. Solar systems can cost upwards of $20,000 to set up, and even the consumers who can afford this price tag worry that they won’t recover their initial investments. But the solar industry has finally figured out how to answer both of these concerns.
Borrowing strategies used by Tupperware and Mary Kay Cosmetics, solar companies like SolarCity and SolarParty.org are asking satisfied customers to host parties and sell the panels to their friends and neighbors. In return, hosts can earn up to $400 for each person they recruit. By taking advantage of customers’ social networks, solar companies hope to break down some of the barriers they’ve encountered in the past. In an interview with the New York Times, one party guest seemed skeptical of salespeople but reported being much more likely to believe the experiences of his neighbors and friends. After his neighbors shared stories of their energy savings, he began to consider the purchase.
Solar companies have also brought down the installation costs in order to convince more people to sign up. Several companies have lease-type operations that require little if any initial investment from homeowners. These companies own the solar systems and charge customers a monthly fee (up to half of their current electric bill, in some cases) for a guaranteed amount of energy. Since these companies retain ownership of the solar systems, customers don’t have to pay much to have them installed -- but these companies also get to claim all the incentives from the government and utility companies.
Both of these strategies have accelerated the spread of solar panels in American communities. SmartPower challenged 13 Arizona cities to install solar panels on 5% of their homes by 2015, and over half of the towns have already met that goal. Four of them have even passed 10%. According to a recent study by Bryan Bollinger and Kenneth Gillingham, California homeowners are much more likely to install solar panels if their neighbors have already installed them.
The direct-selling approach used by solar companies is an example of a mixed system of exchange with elements of the communal, associative, and moral systems. The companies use a Communal logic when they encourage customers to sell products to their family and friends. Guests at the solar panel parties are more likely to consider the purchase because they have social connections to the host, and the contests hosted by SmartPower encourage communities to build a shared identity around solar power. In addition to the communal logic, the logic of the Associative System of Exchange is also at play. When party hosts recruit their neighbors to install solar panels, they believe that the exchange will be mutually beneficial -- the host receives a referral bonus, and the new solar customer sees reductions in their energy costs. Finally, the participants at the solar panel parties often employ a moral logic when they emphasize the environmental benefits of going solar.
For a deeper analysis of the business strategies used by direct-selling organizations like Tupperware and various solar companies, see Nicole Biggart's book Charismatic Capitalism: Direct Selling Organizations in America.
Citations:
Cardwell, Diane. (2012). “Solar Industry Borrows a Page, and a Party, From Tupperware.” The New York Times. November 30. Retrieved February 12, 2013 from http://www.nytimes.com/2012/12/01/business/energy-environment/solar-industry-borrows-a-page-and-a-party-from-tupperware.html.
Bollinger, Bryan and Kenneth Gillingham. (Forthcoming). “Peer Effects in the Diffusion of Solar Photovoltaic Panels.” Marketing Science.
Biggart, Nicole and Rick Delbridge. (2004). “Systems of Exchange.” Academy of Management Review 29(1): pp. 28-49.
Biggart, Nicole Woolsey. (1990). Charismatic Capitalism: Direct Selling Organizations in America. University of Chicago Press.