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The product is passive-solar, but the sales strategy is super-active

By Ruth WalkerStaff writer of The Christian Science Monitor / December 20, 1983



Boston

You might say that Servamatic Solar Systems Inc. is to solar energy what blue jeans are to aute couturem and hamburgers are to haute cuisine.m The Concord, Calif., company makes a solar water heater that is pretty basic. The company describes it as ''passive,'' because it has no pumps or other moving parts, and is virtually maintenance-free.

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Even though the public seems less concerned about energy costs today than several years ago, Servamatic bran-ches have been sprouting across the Sunbelt like blue-jeans stores or hamburger stands.

Solar energy equipment is typically marketed by independent retailers, by ''alternative energy'' stores, or by heating or building contractors. The small-business aspect of the industry has been part ofthe solar energy ''ethic, '' so to speak.

But Servamatic, the nation's largest manufacturer and marketer of solar domestic hot-water systems, does things a little differently. It has a very simple product and a simple but aggressive marketing strategy. Servamatic sells door to door, rather than through high-overhead retail outlets; sales staff is on commission, rather than salary.

The company's complete packages include building permits, financing, installation, and a 10-year warranty. To borrow a phrase from the fast-food industry, Servamatic will ''do it all for you.''

This approach has kept Servamatic in good shape throughout the slackoff in solar over the past couple of years of recession and energy glut. Revenues have risen from some $700,000 in 1979, its first year in the solar business, to $31 million for the year ending this past April 30. Fiscal 1983 profits were $2.14 million.

Says Calvin R. Edmonds, vice-president for finance, ''All our customers have to do is to decide to buy it and wait for it to appear on their roof.''

Servamatic's proprietary ''Sun Flow'' system is rather simple. Water comes into the house and is carried by normal pressure up to 50-gallon rooftop tanks covered with plastic bubbles and looking like skylights. The sun's rays warm the water in the tanks, and an auxiliary conventional heater is needed only on occasion.

This kind of service-to-your-door is part of a great tradition, Mr. Edmonds says. ''The way Americans got refrigerators and vacuum cleaners and all those other things (when they were first introduced) was for someone to sell them door to door.''

Edmonds, visiting Boston and other Eastern cities to introduce the company to brokers and the press, explains that Serv-amatic arranges financing for its customers, usually through Household Finance Corporation or Finance-America Inc. This improves its cash flow and has let it steer clear of third-party leasing.

Company officials also stress that it has no operational debt and that financing for expansion has been generated internally; this means the company can expand without financial strain.

And it has indeed been expanding. Servamatic branch offices have been doubling from year to year: from 9 at the end of 1981 to 18 at the end of 1982, to 36 projected by the end of this year, and 72 as the goal for '84.

Servamatic opens branches with advance teams which come to town and in effect spend 30 days ''cloning'' themselves. Each team member trains a locally hired counterpart, and when the team leaves, the branch is up and running.

The sales goal for the fiscal year ending next April 30 is $57 million, and the company is ahead of schedule on meeting that target. Earnings are expected to be $6.8 million, or 27 cents a share. Not bad for door-to-door sales. Servamatic estimates that 1 out of 4 formal sales presentations results in a sale.

''This aggressive marketing strategy has been a key factor'' in the company's success, says Roy Crispe, vice-president in the Oak Brook, Ill., office of R. G. Dickinson & Co., brokers.

Mr. Crispe is enthusiastic about Servamatic's acquisition last year of Magnetic Seal Inc., of Elkhart, Ind., which makes an energy-saving acrylic storm window. This product will help Servamatic, whose branches are mostly in California, Florida, and Arizona, move into cooler climates.

Servamatic has undoubtedly benefited from federal and state alternative-energy tax credits, which have enabled homeowners to write off much of the cost of solar installations. But the federal credits are set to expire at the end of 1985. Although an extension may be possible, Edmonds thinks his company can cope either way: ''We could just extend our financing on the systems.''

Dickinson's Crispe concurs: ''The tax credits have been a very big help.'' But if Uncle Sam doesn't continue to give the solar industry a boost, the nation's utility commissions will. ''(Electric) rates are going nowhere but up.''