By Philip J. Baratz Angus Energy pbaratz@angusenergy.com Oilheat Marketing... Do you know what you don’t know? @AngusEnergy As recently as a generation ago, being a /company/angus-energy Access to information is greater than ever in history and the more progressive /AngusEnergy dealers are starting to use that information, not only to figure out how to better serve existing and new customers, but also to help figure out which (existing and potential) customers are simply the wrong fit. I would define a “wrong fit” as a customer whose cost to serve—acquire, deliver, credit, service, etc.—is more than the value that will be received from them in profit margins. You intuitively know which customers are more likely than others to leave or to be a hassle to serve. The trick is to recognize this formulaically and not intuitively (hopefully you have too many customers to do a “gut check” on each and every one of them). More progressive dealers are realizing that, as customers get more access to data, they seek the best pricing, service and ease. Convenience is very big in the world of the new customer, but simply saying that you will deliver via automatic delivery doesn’t cut it as it once did. Dealers need to add efficiencies into their ranks, while churn rates increase alongside the pressure on profit margins. Planning a dispatch system around the notion that you want to be as close to certain as possible that no one will ever run out is a noble idea. However, always living with the fear that “next week, the temperatures will become arctic and all supplies will dry up,” as a reason to deliver 145 gallons into 275 gallon tanks will accomplish only a few things. One of which is that you likely will not have many run outs. The other is that your more sophisticated competitors will be making one or two fewer deliveries per year, as they use remote monitoring to allow for more efficient deliveries—while still having few, if any, run outs. There are many things that you may not have needed to know in the past that are required knowledge to remain competitive today. Fortunately, almost all of them are not that hard to find—you just need to reach out and find the right people to guide you. What you don’t know has likely been hurting you more than you realize over the last few years. It might be time to become one of those “progressive dealers.” ICM heating oil dealer was far simpler than it is today. Not that it was simple, but if you provided good service, fair pricing and avoided run-outs, you were very likely a middle-of-thepack competitive and successful dealer. Then things got a little more complicated, but were still somewhat manageable. Budget plans, service contracts and pricing programs—complicated enough as there were—led to the need for better “back office” accounting and customer relations software systems. Still, most dealers were able to master and teach enough of the basics to remain competitive—the playing field was fairly flat, and there were not all that many economies of scale to “disadvantage” the smaller dealers. Hedging has become more complicated, with the various changes in the sulfur content of heating fuels, and the seemingly more unpredictable winters wreaking havoc on budgeted volumes and margins. Weather hedges have gained in popularity, but paying for another form of “insurance” at the same time that we are seeing increasing customer churn can be a real burden on companies. The tightly formed package of skills needed to manage a heating oil business has started to unwind. In 2016, we are faced with more uncertainties than we have had in the past. Where will prices go? Will this winter be the cold one we have been hoping for? Will conversions to natural gas finally slow down? Should oil dealers sell propane? How much should be spent on technology and where should those dollars be invested? Is there enough supply of my type of oil to avoid a basis blowout? Will my delivery dispatch method continue to serve me well or do I need to find efficiencies in my systems? The consumer of 2016 is not the same consumer that your father sold oil to and has very little resemblance to the consumer that your grandfather sold oil to. The new consumer is more concerned about work-life balance than the previous generation. He or she is not as trusting or actively seeking a relationship with a particular vendor (such as an oil dealer). He or she is hardly ever more than 10 feet away from the newest version of their smartphone, and—there is some good news—he or she often falls into some very definable categories (segments). 30 ICM/September/October 2016
ICM September-October 2016
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