Sun Heat

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Solar Water Heater Distributor Business Plan

Market Analysis Summary

Sun Heat has identified two distinct market segments for marketing their products. The first segment is the "DIY" segment of handy individuals. The second is the "Convenience" segment that will utilize a skilled installer to have the system installed at their home. The solar water heating industry is reasonably diverse. There are some companies that sell kits that must be assembled and then installed by the individual. There are other companies that only sell professional installed systems. Some companies sell solar water heaters specifically for swimming pools, others market their products for households.

4.1 Market Segmentation

Sun Heat has identified two market segments to target.

These people do a lot of repairs and upgrades on their home. They have lots of building and repair skills and like to tackle projects while learning new skills. This customer segment has a variety of motivations for do-it-yourself work. One motivation is saving money. Another is the satisfaction of completing the project on their own. Additionally, customizing the project may be appealing. Some demographic information of this group includes:

  • Age 29-56.
  • Primarily male.
  • Married with at least one child at home.
  • Household income ranges from $50,000-$80,000.
  • 73% have an undergraduate degree.
  • Undertake at least one project every three months.
  • Spend $250-$3000 per year on assorted projects at home stores such as Lowes or Home Depot.

This segment is looking for the advantages of a solar based water heating system without the challenge of installation. They appreciate the value of the solar heating system. This group recognizes the environmental and/or economic benefits of solar water heating and will choose a professional installer. Demographic information is as follows:

  • Ages 35-65.
  • Married with at least one child at home.
  • Household incomes of $62,000-$110,000.
  • 79% have an undergraduate degree.
  • 27% have a graduate degree or post undergraduate coursework.
  • Have paid a contractor to carry out at least one home improvement project within the last 12 months.

Market Channels
Sun Heat will be be sold through several channels:

  • DIY Retailers: This channel purchases Sun Heat products in quantity and then resells them to individuals to install.
  • Professional Installers: This channel is comprised of approved Sun Heat installers.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
DIY 9% 3,968,987 4,326,196 4,715,554 5,139,954 5,602,550 9.00%
Convenience 8% 2,789,254 3,012,394 3,253,386 3,513,657 3,794,750 8.00%
Total 8.59% 6,758,241 7,338,590 7,968,940 8,653,611 9,397,300 8.59%

4.2 Target Market Segment Strategy

Sun Heat has decided to concentrate on these two market segments for several reasons. One reason is the lack of high quality products currently available to the DIY crowd. Another is the sheer size of the do-it-yourself market. This segment participates within the $23 billion DIY home improvement market and within the last six years has grown at double digit rates largely fueled by the Internet making information available to assist do-it-yourselfers in completing home improvement projects. The increase in size and activity within the available market makes it particularly attractive.

The new wave of environmentalism provides another reason of targeting these two market segments. More and more people want to reduce their negative impact on the environment and solar hot water heating is an easy and economical way to do it.

4.3 Industry Analysis

The industry is composed of many different manufacturers of solar water heating components and systems. Some companies operate serving the industrial market, others serve the residential market. There are several companies that make components they sell to different assemblers. There are other companies that make all the components for their systems in-house. Some solar heating systems are complex using computers to make adjustments such as the angle of the collectors based on the sun's position. Others systems are quite basic. It is interesting to note that almost no one competes within different markets, each company has chosen a different niche and sticks with that one alone. To be noted in section 5.1 is part of Sun Heat's competitive edge, serving two markets. This makes perfect sense since the products for the two markets are quite similar.

4.3.1 Competition and Buying Patterns

Sun Heat has several competitors. Its main competition comes from:

  • Mega Sun: This is a Helioakami company. Their products are good but because they are made in the EU (Greece) shipping and manufacturing costs make their prices less competitive.
  • Solar Energy Systems: This company, based in CA manufactures very basic, do-it-yourself systems. Their products are noticeably cheaper but are of poor quality with few features.
  • Shell Solar: This is a high end manufacturer pioneering the use of copper to increase efficiency. While their product is more efficient, the cost of copper makes their products too expensive for much of Sun Heat's target market.
  • Imagination Solar: A simple but inefficient DIY system.
  • Go Solar Company: This company currently manufactures solar electric systems but will be releasing a solar water heating system within the next 11 months.

The buying patterns of customers is as follows:

  • DIY: These customers will typically go into a Lowes or Home Depot and solicit the advice of the floor sales agents.
  • Professional Installs: These customers typically rely on word of mouth or advice from their contractors.