March 2014

What should I do differently


As businesses and industries mature, several different types of leaders and decision-makers emerge. Some take on the “if it ain’t broke, don’t fix it” attitude, while others live by the mantra that “good isn’t good enough.” All too often, we fall into the ill-conceived belief that if something has always been done a certain way, it should not be changed. This is not unique to the oil heat industry, but in our ever-changing landscape, it is something that might be more of an issue here than elsewhere.

When we look at the challenges facing the retail heating oil industry, a number of things come to mind:

  • Loss of customers to discounters (who, unfortunately, now include “full service discounters”)
  • Lack of differentiation to retain customers who are dissatisfied with SOMETHING
  • Lack of differentiation to attract new customers – other than giving things away for free
  • Conversions to natural gas

The ugly cycle of losing customers due to price, and then replacing them with new customers only by offering a lower price (same customer count, less valuable company)
No matter where you look, the challenge is trying to create something to hang on to more of your customers. Usually, you make a delivery, you get paid, and then you hope that the customer will take—and pay for—the next delivery. In order to retain customers, you offer budget plans, service contracts, and pricing programs. These programs are excellent in that it takes the client-dealer relationship from something that is simply four or five transactions per year to one that has a commitment that generally lasts for the course of the year. That is good news.

For example, you might offer a budget that starts on July 1, along with a service contract that runs from July through June, and a price cap program for the winter, with an enrollment deadline of July 1. It sounds good, progressive and easy to manage (although June’s phone calls can be a little frustrating to you and your CSRs).
However, if you think about it, you are affording your customers one time a year to say that they are either “all in” or that they want to shop around right around the same time when all of your competitors are putting on their biggest sales pushes. In essence, you have created a yearly “end point” for the customer to decide if he or she is satisfied enough to stay with you or dissatisfied enough to go elsewhere.

What if, for example, your budget started in May, your price program enrollment was in

September, and your service contract renewal was in January?
Think about it. At any point in the year, when a customer might want to look elsewhere—for good reason or not—the customer may well be in the middle of two agreements with you. Budgets are easily sold to those who want the stable, ratable payments. Starting them in the late spring/early summer works best for your cash flow. If you then renew your price-protection program in the late summer or early fall, your customers are already a few months into their budget payments (let alone the service contract that goes through the first half of the winter), so why not renew with a cap or a fixed price? When it comes to a service contract renewal in the dead of the winter, you need to ask yourself how many customers simply pay winter bills because it’s the winter (most), and how many would willingly give up having a service contract in the middle of the winter (a MUCH smaller number than those who would give it up in the summer).

Though the specifics of this approach would require planning, marketing, training (CSRs and customers) and working on your back office system, isn’t it worth it if it creates a barrier to exit for even a small group of customers? If you need help with any of that thinking or planning, feel free to contact us, and we can point you in the right direction.
There are many things that you might want to do differently. You might want to sell propane, electricity or natural gas. You may want to expand your HVAC services. You may wish to go i plumbing. The list of things that you may want to do with your existing customer base is virtually endless, but most of your time is spent trying to keep your customer base from dwindling even further. Although something as basic as changing “renewal dates” might seem boring, if it keeps more of your customers feeling like their relationship with you is an ongoing one, how different might that feel?

See other similar Articles in the Futures and Options Category.