This is the truest axiom in the history of sales.
Everybody instinctively knows this but seldom apply it to actual purchase decisions. In the solar world, it seems even the most rational and experienced customer throws this truth out the window when it comes to buying a system. It’s because people don’t understand the difference between the purchase price of something and the cost of actually owning it, or what we call TCO, Total Cost of Ownership. You see, TCO is all that counts. To illustrate this point I will provide two actual real-life examples that happened to me in my journey through a sales career.
Back in the mists of time, I was a salesman and later manager of one the country’s largest retailers. We won’t name names but let’s just call them Harvey Norman. I tended to specialize in selling business equipment and I would spend a lot of time banging on about TCO. One day, a fellow came in who owned a sandwich shop and wanted a fax to take in orders. (yes it was that long ago!). I asked him how many orders he takes by fax a day and he said about 80. He looked over our fax range and wanted to buy a Canon inkjet fax for about $300. I said NO! It will cost a fortune to run. I told him he’d be better off with an $800 laser fax from Hewlett Packard. He looked at me like he’d caught me with my hands in his pocket lifting his wallet. I told him there was a substantial difference in the economics and the inkjet would rob him blind over time. Unconvinced even by my mathematics he brushed me aside and took the inkjet. From that day I saw him every week to buy a $59 inkjet cartridge. Here’s the numbers:
Canon Inkjet fax = $299
Average cost per page at 15% coverage = 22c
Pages/per day = 80
Days trading per year = 310
Total annual cost of printing = $5456
Plus initial cost = $5755
A lot of money right?
Now here’s where I tried to help him.
Hewlett Packard Laser Fax = $799
Same figures as the Canon but average cost per page at 15% coverage = 6c
Annual cost of Printing = $1488
Plus initial cost = $2287
A massive difference. His rashness would have cost him well over $3000 in wasted printing costs. His wife was not so fooled. Two months later she marched into the store with the Canon in its box, plonked it on the service counter and said. ” He’s an idiot. Can I have the laser?”
The Canon was a fine product just not right for that shop. This isn’t a random story, it happens every day for every retailer. It’s because of this I have a pair of Chukka boots for $695 made by Loake. These replaced my Julius Marlow chukkas I got for $129 on special and everyone says I must be an idiot for paying that for a pair of boots but they are as wrong as the sandwich guy. The JM boots look great but are stiff and hard to wear. From experience, I know that once you break them in, the applied patina starts to crack on the leather and they are very difficult to restore to perfect condition without major refinishing. I’ve worn them twice so the cost per wear is $64.50.
The Loakes, on the other hand, are made from Cordovan Shell leather on Goodyear Welted soles. They are comfortable and hard wearing and I can easily polish them and remove scuffs and scratches. So far I’ve worn them about a dozen times so my cost per wear is down to $57.92; cheaper to own than the JMs. The more I wear the Loakes the cheaper they are to own. You could say that about the Marlows as well but I’ve stopped wearing them. On top of this, I could wear the Loakes for 30 years and then have them resoled and restored which is much harder to do with the JMs which won’t last 30 years.
These parables apply to solar. The dominant players in the solar industry market share are the low cost operators who have raced to the bottom on prices and commoditized what should be a carefully thought out purchase that is designed properly and installed to the standard. Their systems are off-the-shelf standard offers sold with no thought to the actual installation. Potential buyers are deceived with claims like “German Designed” and “Tier 1 panels”. Unfortunately, their cost cuts are usual made at the installation and a extremely large percentage of these systems fail and are never repaired and when that company leaves the market, the customer is left with a dangerous or dead system nobody else wants to touch. In fact, 1 in 6 systems installed and inspected have been regarded as unsafe. Almost always, it is a cheap system that leaves you at risk.
At EnviroGroup, there is a cost to having the service team we have. There is a cost to having the engineers we have and the design oversight we provide. We have really good competitors and these costs apply to them as well. We know what they charge for their systems and we try to stay close to them ourselves. So, our prices are not high, they are the standard. If you are getting prices $2-$3k less then there is something missing. There’s something not being provided and you need to ask why. We are still servicing systems we installed in 2006 and we are still in business giving free advice and quotes. This is what you get for the money, an installer that still exists and has your back. This is why the Total Cost of Ownership is the only cost that counts.