For What It's Worth: a Renewable Energy Parable Mick Sagrillo c.1992 Mick Sagrillo Once upon a time, there was a fellow in need of a wind/PV hybrid system. He contacted his local renewable energy dealer to discuss his needs and size his system. Over the course of a dozen long distance phone calls, the dealer gathered all the necessary data and put together a complete package for his client. The package, consisting of wind generator and tower, PV array and tracker, inverter, battery bank, and standby generator, totaled almost $9000. The dealer, figuring that he would also be installing and maintaining this system, decided to split the retail mark-up with the client. He knew he could make some money on the sale of the equipment and some money on the installation. The dealer offered the client a $700 discount on the entire package. This brought the package down to $8333. The dealer then offered to do the installation for what appeared to be a very reasonable price. The client accepted the installation, too. He was very happy with the package deal. On a whim, however, the fellow called a "renewable energy department store", you know, the ones who sell everything from major pieces of equipment to solar key rings. The fellow explained all of the specifications of the package that was put together by the dealer, including the price quoted. The man at the RE department store commented on what a good deal the fellow was getting. He then offered the fellow the same package, but priced $50 less than what was quoted by the local dealer. The only stipulation was that the fellow had to accept the offer before hanging up the phone. The fellow, seeing a small but additional savings, took the bait. Four weeks later, all of the equipment was delivered to the client. Now the fellow had no idea how to properly install the system, so he called the local dealer back and explained the situation. He offered the installation to the dealer, but said that he only expected to pay the installation costs from the original price quote. The dealer balked. From his perspective, the dealer had already done a great deal of work for an apparently unappreciative client. He had developed the package price thinking that he would be doing the installation as well as making the equipment sale. But with the equipment already bought, he would be losing money on the installation. The cream, he thought, had been skimmed. He felt that he had been somewhat burned in the deal, and was not interested in being taken advantage of again. The dealer declined the offer to do the installation at the original price. Angry at having the dealer refuse to do the installation at the original price and not willing to pay the real cost of the installation, the fellow told the dealer that he would find someone else to install the system, or do it himself. The fellow tried to get others to install the system for what was originally quoted by the dealer, but was repeatedly turned down. Two years later, all of the equipment is still in the original crates. So, what can be gleaned from this story? Mistakes were made by both the dealer and the client. Let's take a look at those mistakes and their "why's". The Dealer The dealer painted himself into a corner by quoting prices as he did. He assumed that he would land both deals, the sale of the equipment as well as the installation. I have a sign above my desk that "assumption is the mother of all screw-ups." In retrospect, that sign has serve me well many times. Dealers must never take customers or their needs for granted. What the dealer should have done was quote three prices, not two. Quoting separate prices on the equipment and on the installation, followed by a significantly discounted installed system price would have left no doubt in the client's mind as to where the money could be saved. If the client decided to buy the equipment somewhere else and hire the dealer for the installation only, the dealer would still be covered for his time and effort. If the dealer felt that he should be compensated for his time in designing and sizing the system, then he should have specified that to the client up front. These choices should belong to the client, not the dealer. I never liked playing "mystery speed limit" or enjoyed getting hit with surprise bills. Why should my customers be treated differently than I want to be treated?! The Customer The major mistake that the customer made was to underrate the value of his local dealer. The large "RE department stores" may be able to offer great prices sometimes, but they will never replace the local dealer. Local dealers not only sell and install equipment, but they offer something far more valuable to the customer: their expertise and their service. They sell, install, do maintenance, troubleshoot, and answer question. But most importantly, they are readily available and are close at hand. The "RE department stores" may occasionally offer slightly better prices, but they cannot offer the helping hand of the local dealer that comes only with years of experience working in the field. Some system owners do not need a local dealer. They are fully capable of installing and maintaining their own renewable energy systems. Many of these folks even evolve into renewable energy dealers, but occasionally even they need to kick ideas around with someone who has been around the block a few times. Some customers try to bypass the local dealer and buy directly from the manufacturer. Most manufacturers will sell directly to end users. However, no money is saved by purchasing equipment from a manufacturer rather than through a dealer. Manufacturers would rather not deal directly with the public, answering detailed questions or troubleshooting over the telephone. This is why they have developed a dealer network in the first place. Dealers almost always have better access to the manufacturer than an end-user for answers to those tough questions. The Relationship Customers and dealers need each other. A dealer needs customers: access to manufacturers, expertise, and experience are worthless without clients that need these things. But customers need the dealers, too. Their product is not just hardware, but also the expertise and service that comes from years of experience. Hardware is worthless without the knowledge of how to install it, make it function properly, and keep it working for many years into the future. Dealers have invested hard-earned dollars in tools and equipment. They have considerable sweat equity built up from the "college of hard knocks." Most are very small businesses, sole proprietorships or family-run businesses. Just like a mechanic or furnace repairer or even the customer, they have a right to earn a living, too. Customers should not expect dealers to spend long hours on the phone out of the goodness of their heart explaining how to install some piece of equipment that was not even purchased from them. We're all in renewable energy together, customers and dealers. The dealer should not be interested in getting rich from every sale or installation. First, it's not fair to the customer, and second, you'll soon drive away all of your prospective clients. Put yourself in your customer's shoes. They want the best value for their dollar and, as a good businessperson, it's your responsibility to give it to them. The customer, on the other hand, should not try to squeeze the dealer for every last penny. Our customer may have saved $50 on an $8333 order (which, by the way, was only 0.6%!!!), but he wasted $8283 on equipment that was never installed. Again, and I can't emphasize this enough, dealers have a right to earn a living, just as you do. Put yourself in the dealer's position. What you do if your boss treated you that way?! I recently saw a sign on a repair truck that read, "The bitterness of a poor installation or repair remains long after the sweetness of low price is forgotten." That's a good moral to the opening story. Access Author: Mick Sagrillo deals AND consumes at Lake Michigan Wind & Sun, E3971 Bluebird Rd., Forestville, WI 54213 ù 414- 837-2267