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

What do you think these companies have in common?

1st 5th

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.

2

3rd

2nd

*http://www.solarenergy.net/News/2010051301-the-top-five-fortune-500-companies-using-solar-power.aspx

Green Energy Sector

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• Shrinking supply sources.

• 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.

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

MARKET EVOLUTIO

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DEVELOPMENT FA C T O R S

The US ‘Green Market’

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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

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.

PV Technologies

5

34%

24%

22%

12%

8%

% of Revenues (2010)

Industrial Automa-tion

Process Man-agement

Network Power

Drive Technology

Climate Tech-nologies

Industry leader in

• PRODUCT INNOVATIVENESS• QUALITY• PERFORMANCE

AT A GLANCE• Solid balance sheet

• Strong Profitability

• High Cash Flow

• Investments in R&D and Technology

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

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 PVT’s

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 6

Solenergy’s evaluation

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PV Tech needs to get a

G O O D E VA LUAT I O N of its projects in order to get the contract and to

confirm its leadership.

Solenergy is used to evaluating the

companies they invite to bid on their major

projects.

Evaluations are conducted by Greg Morgan, chief electrical engineer at

Solenergy and very respected among the industry.

Solenergy often includes its comments and opinions in press releases. Morgan

judgements are highly influential throughout

the entire industry.

The problem

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PVT’s prices are significantly higher than competitors ones. PVT’s better quality could explain the difference but Morgan was surprised of the spread being so wide.

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.

MORGAN’S EVALUAT IO

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OUR BEL IEF

Salvatori heard that Morgan’s evaluation was bad for PVT.• Solenergy was about to conclude the selection process.• The evaluation was mainly based on prices.

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

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

2.Offer a 99% UPTIME

GUARANTEE at no cost for the customer

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Are PVTs products really more expensive?

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PRICE is not the only element to take in consideration when evaluating a product

SOMA Energy BJ Solar PV Tech 1 PV Tech 2

Nominal AC output power 1.0 MW 1.0 MW 1.0 MW 1.25 MW

Efficiency rate 96.5 95.0 97.5 98.5

Expected life service 12.5 10.7 13.2 13.2

List price $170000 $160000 $180000 $187500

Effective Power Output 0.965 0.95 0.975 1.23125

Expected Lifetime Power Output

12.0625 10.165 12.87 16.2525

List price/Exp. Lifetime Power Output

14093.26 15740.28 13860.01 11536.68

COMPETITIVE ANALYSIS OF THE PRODUCTS

Alternative 1: extending the warranty to 20 years

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).

S. Would contractually prepay

the warranty at the rate of 18% of

the purchase price

PROs CONs

• Reliable: sign of good quality;

• Assure it will not break;

• Higher standard

• Relatively costly;

• Warranty is not a key factor;

• Warranty doesn’t always mean quality

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Alternative 2: Uptime Guarantee

U p t i m e G u a r a n t e e

9 9 %

PROs

CONs

• 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.

• 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.

Economic impact

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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&

Expensive13

Alternative 4: direct approach to Morgan

PROs CONs

• More personal approach: we demonstrate we are ready to personalize our product for them;

• First step to build a long term relationship

• We rely on not public information;

• Call for help could make us appear as desperate

One possibility is to approach Morgan

directly in order to understand the

situation and underlining our skills.

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PVT is not competitive for Solenergy

1 2Criteria are not aligned The B2B relationship is not managed properly

Relevant criteria for PVT:

• Efficiency;• Reliability;• Productivity

Relevant criteria for Solenergy:

• Price

From PVT’s perspective these are elements that real add value to the customers into the long run

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

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Salvatori discovers that PVT is going to lose the

auction

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

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If Morgan confirms that the evaluation is real, we should understand the roots of the problem and figure out with him a solution, after proving him that our product is the best one.

B2B marketing is all based on NETWORKING, it should not be considered begging. Customer relationship management is fundamental to build a successful company. If we do not manage to convince him about the superiority of the product, we can adopt a strategy based on his needs to sell our products.

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Is this situation just a "brush fire" or

an important problem?

Impact on the company

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Inverters’ sales account for only

4.1% of total revenues, the

economic loss is not incredibly significant.

Losing an important and powerful client can

certainly have an impact on the overall

reputation of the company.

4%

96%

Photovoltaic Inverters

Other

IMPACT ON

IMAGE

IMPACT ON

PROFIT

What should the company do now?

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1. Salvatori is the only one responsible for KAM

2. There is no contingency plan

3. The quality perceived is not as excellent

SERIOUS

ISSUES

1. Hire more trained sales people

2. Develop a contingency plan

3. Focus on COMMUNICATION

SOLUTION

General Approach B2B Communication

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PERSONAL SELLING

TRADE SHOWS &

EXHIBITIONS

PUBLIC RELATIONS

DIRECT MARKETING

ADVERTISING

SALES PROMOTIO

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“It’s not about the seven spokespeople in our PR department but in how we can use our 60,000 employees as communicator.”

Hubertus KuelpsHead of Global Communications

Excellence in Managing the B2B Customer Relationship

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Good communication is key to success:

• Avoid an intense sales-based culture• Don’t talk big and deliver small• Be flexible and responsive• Regular, at the right level and consistent• KAM development cycle

Obviously there’s been a communicational

issue between Salvatori and Morgan.

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Thank you for your attention