Falling Prices: 5 things you should be doing NOW!

Written on: February 24, 2015 by ICM

By Ed Cardell
Senior Marketing Consultant
Warm Thoughts Communications, Inc.
Most fuel companies find themselves in an enviable position this winter: good margins, strong degree days, plummeting product cost, big credit balances building up in budget accounts; this much-needed ammunition to fight back against the gas-conversion narrative.
At the same time, and because this is the oilheat industry after all, there are some land mines in play.
Many customers on fixed price plans (if you offer them) feel that you really could have lowered your price if you wanted to. They think you are making more money off them this winter and, while they may honor their contracts, they itch to shop around once the handcuffs are off.
Your price is dropping, but not as fast as the gasoline prices, or as low as other companies are advertising. Again, they may not act on that now, in the middle of winter, but it poses a risk going forward. For example, Warm Thoughts tracks internet searches for fuel prices, and it is an early warning signal of customer dissatisfaction. Searching is up substantially over last year in many places. There will clearly be some retention challenges for you—and your competitors, for that matter.  Your pain may be their gain, or vice versa. It all depends on how well you play it.
What should you be doing to secure your base, so that the great buzz of this winter does not turn into a hangover come fall? Are there ways to leverage the situation to get new customers or to upgrade your customers and cross-sell more products and services?
In my Breakthrough Groups, we’ve been bouncing this topic around for a couple of months.  It has been a hot topic with my consulting clients, as well. Below are some helpful ideas that, with good execution of customer communications and training, could pay big dividends.
  1. Budget balances: Put them to work
Traditionally, companies will take their budget credit balance and roll it into next year’s numbers, hoping customers won’t ask for their money back. That’s ok, but it sets up the following year (2016-17) to be a bear, especially if prices go up. Customers could get a double whammy: no subsidy and higher prices built into the estimate. That will motivate customers to shop for deals and more will drop off your budget plans.
Alternatively, you could:
    • Give them a holiday. Tell them not to pay their last one or two payments. This is very good for building goodwill. It also leads to less whiplash in the next budget cycle and, perhaps, a reduction in the number of customers requesting their remaining balance back.
  • Use customer credit balance to make it easy for them to get cap protection. If you offer price caps for a fee, use the budget balances to seamlessly renew them. In fact, consider renewing your cap early to take these customers off the table by allowing them to secure their cap before prices have a chance to rise. We’ve done this before with many companies and, if done correctly, it is a big win.
  • Allow your customers to use their credit balance to easily buy your AC service plan, heating plan or some other product or service they would normally have to lay out money for. They don’t have to write a separate check, and you book the sale right then and there.
  1. Convert your pre-buys
If you have pre-buys, this is trickier, but you could consider letting them convert the last vestige of their gallons into a budget cap, lowering their rate on the remaining fuel. You can claim that you negotiated a deal with suppliers, and lock them in for a year or more. Since many pre-buy customers will harbor negative feelings after this season, this might be a good retention play. It gets them off pre-buy, but obviously has some associated costs.
  1. Don’t ignore the rest
Recently, one of my clients and I were talking about the cost savings that “all” fuel customers are experiencing and how best to capitalize on them. Our discussion hinged on this message: “So, you’ve saved almost $1,000 this year as a result of falling fuel prices. What are you going to do with it?” We wanted to convince customers to permanently reduce their fuel bills by improving efficiency with some of their unanticipated savings. Upgrade equipment, buy a smart thermostat, get that long-overdue tune-up done, invest in new heating and cooling technology, and so on. Sure, it is easier for customers with credit balances to make upgrades, but the pitch should be made to all. This year’s savings can pay off year after year, regardless of what happens to prices going forward.
  1. Get real about retention
Train customers ervice staff and actually monitor the calls. Your people need to do a better job at fielding the tough questions, such as: “Why isn’t your price going down faster?” “Why are there companies advertising for 50 cents lower?” “Why can’t you lower your pre-buy price?” You may not do enough to train them to handle this. More importantly, even if you teach your staff some talking points, you aren’t monitoringthe calls to hear what they are actually saying. I do a fair amount of call scoring as part of my sales and customer service consulting regimen, and I can tell you it is worse than you think, much worse. It creates a hole in your bucket, and you don’t even realize how much damage is being done.
Besides teaching the right things to say, you should create letters from the owner or GM that go out automatically when a customer calls in with a price complaint or questions, such as, “I heard you called in with a question about our pre-buy contract. I hope our rep did a good job explaining things. But since this is a complicated issue, I wanted to make sure you had all the information directly from me…”
I’ve written this type of follow-up letter for several clients, and they have been a big success. They show customers that you care and that their complaint matters, and your business relationship isn’t put in the hands of a customer service rep who struggles to understand this stuff, or the spouse who tries to communicate the message they were given to make a joint financial decision.
  1. Reinvent your sales program
Companies pay us good money to do smart marketing that makes their brand stand out and makes the phone ring. The se companies are super-focused on ensuring that return on investment (ROI) is strong and that the promotion is effective. Then, however, they miss the key element. Their salesmanship is poor. Actually, fuel salesmanship is poor at most companies.
This is a huge problem for our industry. Even at companies with dedicated sales teams, 90% of what we hear is quoting the price/selling the deal, and virtually nothing that sells the advantages of doing business with your company. Where there aren’t dedicated salespeople, it’s even worse.
I want to emphasize this point because I don’t think companies realize just how much customer interaction with unskilled or uninterested salespeople hurts business. It is covered up in some companies by fantastic offers that do the selling in place of skill, but result in unprofitable customers who leave within a few years anyway.
With so many customers up for grabs this spring and fall, you can’t afford to let this continue.
Some suggestions:
    • Put tracking numbers on your promotions, website, etc. This will allow you to count how many people are responding to your ads. This is good, but even more important is that tracking lets you hear how the calls are being handled. This is an eye-opening, cringe-inducing experience that you can’t avoid any longer.
  • Develop a real sales pitch that your people will use. If you prefer not to have a script—because it sounds, well, scripted—at least have talking points. The reality is that you must have a structure that gets your people to actually sell: create trust, find their wants and pain points, ask for the sale, get information to allow follow up if you can’t close, etc.
One of the biggest problems is that your salespeople get “ruined” by tons of calls from individuals who will never be your customers. They start gearing  their pitch to cater to the “What’s your price …thanks, goodbye” customers, and miss the chance to sell to the 30% of calls with legitimate potential. They don’t ask questions, they don’t sell the company and they don’t follow up. If you are selling full-service oil in a competitive market, you can’t expect to succeed with order takers.
Stay focused on today… and tomorrow
Don’t get me wrong. We are all thrilled with the competitive advantage that falling fuel prices gives us in the energy market. It is good for our industry and good for us. But this is not the time to sit on our laurels and assume that all is right in the world. Good margins and strong gallons may give you a healthy snapshot of your business today, but your customer count points to what is in store for tomorrow. There is work to be done on several fronts to make sure that we are using this shift to hold onto existing share, as well as to gain new. It starts with the fundamentals of good marketing, great customer service and outstanding sales. As always, there will be churn. The question remains: Are you positioned to be on the winning side?