PV Technologies, Inc.: Were they asleep at the switch?

What do you think these companies have in common? 1st 5th

3rd

2nd 4th They are the Top Five Fortune 500 Companies using Solar Power* With green being all the rage these days, many Fortune 500 companies are making the switch to solar power by partnering with solar power companies and using solar energy to power their offices and retail establishments. A voluntary program called The Green Power Partnership encourages organizations to go green and tracks their annual green power purchases.
1 *http://www.solarenergy.net/News/2010051301-the-top-five-fortune-500-companies-using-solar-power.aspx

Green Energy Sector

Shrinking supply sources. DEVELOPMENT FACTORS

Rising costs of traditional energy sources. Unstable oil market. Increasing environmental awareness.

Public policies in favour of green energies: Subsidies drive the market growth in Europe. Federal program in the US : satisfy 80% of the electricity demand with green energy by 2035.
New competitors focusing on low prices.

MARKET EVOLUTION

Expected 30.4% CAGR in the US between 2010 and 2015.

The US Green Market

Even if it gets more and more challenging, the market is growing at a very high rate. PV Technologies could take advantage of it due to its position of leader.

Installations of PV Tech and market projections

2009: 477 MW for PV Tech 2010: 878 MW for PV Tech Market by 2015: 1906 MW

US MARKET SIZE EVOLUTION

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PV Technologies

AT A GLANCE
% of Revenues (2010)
8% 12% 34% Industrial Automation Process Management Network Power 24% Drive Technology

Solid balance sheet Strong Profitability High Cash Flow Investments in R&D and Technology

22%

Industry leader in
Climate Technologies

Founded in 1993 in San Francisco Specialist in RENEWABLE ENERGIES $30 billion in revenues (2010) 25 countries

PRODUCT INNOVATIVENESS QUALITY PERFORMANCE

Current situation

THE PRODUCT

THE CUSTOMER

Photovoltaic Inverters convert the direct current output of a solar panel into alternative current that is compatible with residential or commercial use. Fundamental components in a PV system. No international standards of quality and efficiency. Growing market (+66% in 2009/2010), supported by strong government incentives.

Solenergy Development LLC Major developer of energy generation systems Among the biggest customers of PVTs solar energy business unit Strong relationship with senior management team The project : Construction of a PV solar energy power plant in Barstow (California) Looking for a supplier of utility scale central inverter

Solenergys evaluation

Evaluations are conducted by Greg Morgan, chief electrical engineer at Solenergy and very respected among the industry.

PV Tech needs to get a Solenergy is used to evaluating the companies they invite to bid on their major projects. GOOD EVALUATION of its projects in order to get the contract and to confirm its leadership.

Solenergy often includes its comments and opinions in press releases. Morgan judgements are highly influential throughout the entire industry.

The problem

PVTs prices are significantly higher than competitors ones.

PVTs better quality could explain the difference but Morgan was surprised of the spread being so wide.

MORGANS EVALUATION

Solenergy was committed to cut costs among the company. Inferior performance could be compensated developing an
enhanced maintenance schedule and a proactive quality control program.

Salvatori heard that Morgans evaluation was bad for PVT.

Solenergy was about to conclude the selection process. The evaluation was mainly based on prices.

OUR BELIEF
PROBLEM: the evaluation had not been published
Information only based on rumours. Hard to contact Morgan.

Different alternatives

1. Offer to extend the original WARRANTY at internal cost from 10 to 20 years

2. Offer a 99% UPTIME GUARANTEE at no cost for the customer

3. Accellerate the introduction of the NEW INVERTER (1.25 MW with 98.5% efficiency)

4. Initiate a DIALOGUE with Morgan to find out the real output of the evaluation

Are PVTs products really more expensive?

COMPETITIVE ANALYSIS OF THE PRODUCTS SOMA Energy

Nominal AC output power Efficiency rate Expected life service List price 1.0 MW 96.5 12.5 $170000

BJ Solar
1.0 MW 95.0 10.7 $160000

PV Tech 1
1.0 MW 97.5 13.2 $180000

PV Tech 2
1.25 MW 98.5 13.2 $187500

Effective Power Output

Expected Lifetime Power Output List price/Exp. Lifetime Power Output

0.965
12.0625 14093.26

0.95
10.165 15740.28

0.975
12.87 13860.01

1.23125
16.2525 11536.68

PRICE is not the only element to take in consideration when evaluating a product
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Alternative 1: extending the warranty to 20 years

S. Would contractually prepay the warranty at the rate of 18% of the purchase price

Extending the product warranty to 20 years while the industry standard is 5 years.

Marketing and sales department: high economic value for Solenergy; Finance, production and engineering department think: competitive advantage already in place (10 instead of 5 years).

PROs

CONs
Relatively costly;

Reliable: sign of good quality;

Assure it will not break; Higher standard

Warranty is not a key factor;

Warranty doesnt always mean quality

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Alternative 2: Uptime Guarantee

Uptime Guarantee 99%

PROs
The offer would be unmatchable by the competitors; It will increase even more the quality and superiority of PV Technologies products; Signal of high reliability.

Economic impact

CONs
Too costly, high impact on the profit; Other customers would ask for it; Short-term solution non sustainable in the future, the market is more and more focusing on low cost solutions.

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Alternative 3: Investment in a new model

Alternative 3: Introdudction of the new 2.5MW Model

Profitability would be in line with the other options and it would be the most efficient and reliable inverter on the market

PROs: No change in pricing strategy, this is what the sector is looking for

BUT
Extremely risky & Expensive

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Alternative 4: direct approach to Morgan

One possibility is to approach Morgan directly in order to understand the situation and underlining our skills.

PROs
More personal approach: we demonstrate we are ready to personalize our product for them; First step to build a long term relationship

CONs
We rely on not public information; Call for help could make us appear as desperate

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PVT is not competitive for Solenergy

Criteria are not aligned

From PVTs perspective these are elements that real add value to the customers into the long run

The B2B relationship is not managed properly

Relevant criteria for PVT: Efficiency; Reliability; Productivity

Relevant criteria for Solenergy: Price

Due to new cost cutting strategy, Solenergy has developed different priorities

Salvatori discovers that PVT is going to lose the auction

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Which one do you think is the best solution?

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The strategy

Speak with Morgan Understand if the evaluation is real and what his real needs are

Adopt an ad hoc strategy

B2B marketing is allto convince him about real,superiority of understand the rootsadopt a If we do not managethat the evaluation is the we should not be considered begging. Morgan confirms based on NETWORKING, it should the product, we can of the Customer relationshipneeds to sell our fundamental to build a that our product is the best strategy based on out management is products. problem and figure his with him a solution, after proving him successful company.

one.
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Is this situation just a "brush fire" or an important problem?

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Impact on the company

IMPACT ON IMAGE

Losing an important and powerful client can

certainly have an impact on the overall

reputation of the company.

4%

Inverters sales account for only 4.1% of total revenues, the economic loss is not incredibly significant.

Photovoltaic Inverters Other 96%

IMPACT ON PROFIT

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What should the company do now?

SERIOUS ISSUES

1. Salvatori is the only one responsible for KAM 2. There is no contingency plan 3. The quality perceived is not as excellent

1. Hire more trained sales people

SOLUTION

2. Develop a contingency plan 3. Focus on COMMUNICATION

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General Approach B2B Communication

PERSONAL SELLING

TRADE SHOWS & EXHIBITIONS

PUBLIC RELATIONS

DIRECT MARKETING

ADVERTISING

SALES PROMOTION

Its not about the seven spokespeople in our PR department but in how we can use our 60,000 employees as communicator.
Hubertus Kuelps Head of Global Communications

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Excellence in Managing the B2B Customer Relationship

Obviously theres been a communicational issue between Salvatori and Morgan.

Good communication is key to success:

Avoid an intense sales-based culture Dont talk big and deliver small Be flexible and responsive Regular, at the right level and consistent KAM development cycle

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Thank you for your attention

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