GTM: Residential customer-acquisition costs will come down – eventually

In a just released report on residential-customer acquisition costs, GTM Research says with national installers changing strategies, the costs will rise this year – but they will slowly come down in 2018 and beyond.

July 13, 2017 Frank Andorka

Shifting sales strategies by national residential installers like SolarCity will cause customer acquisition costs to rise in the short term - but as the market adjusts, GTM Research predicts they will fall below their previous 2013 lows.

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Most residential installers are still seeing customer-acquisition costs continuing to rise, which puts a strain on many of their bottom lines. But new research by GTM indicates that trend is about to change.

While the plummeting prices of residential solar equipment continue, the anticipated drops in customer-acquisition costs haven’t followed, says Allison Mond, GTM Research solar analyst and report author. In fact, the opposite is true – costs have risen 30%, from $0.41/watt in 2013 to $0.52/watt in 2016 – an average increase of $800/customer based on a 7 kW system.

If residential installers can hold on for just two more years, though, those prices are expected to start a steady decline. “We expect customer-acquisition costs to decline to $0.40/watt by 2022 by means of further market maturity, proliferation of the long tail of installers and changes in lead generation strategies,” Mond writes.

For now, acquiring customers remains one of the largest portions of installation costs – and as companies like Vivint Solar and SolarCity retool their sales’ strategies to become more retail-oriented instead of the more prevalent door-to-door selling, those acquisition prices will, at least in the short term, continue to grow.

“As the publicly held installers aim to control costs by pulling out of particular geographies and reducing marketing spend, smaller installers are adversely affected by the decreased presence of their larger competitors,” Mond writes. “Advertising and marketing by SolarCity, Sunrun and Vivint Solar have benefited the long tail of installers by bringing awareness of residential solar to the masses, and it will be difficult for the long tail to make up for that awareness in the short term.”

The flip side to having the often biggest competitors pull out of markets is that…well…the biggest competitors are pulling out of the markets. Mond suggests their absence will elevate the importance of local and regional installers to fill the breach.

“The installer landscape is evolving and smaller local and regional players are gaining marketshare relative to the biggest national installation companies,” Mond writes “Smaller installers are able to obtain customers more cheaply than are their larger competitors, and this shift in the makeup of the market will bring average customer acquisition costs down.”

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