Put Oilheat's New Message to Work for You Now
By Rich Rutigliano, PriMedia, Inc.
The leaders of our industry are launching a bold initiative to replace traditional Oilheat everywhere with ultra-low sulfur fuel and aggressively incorporate renewables. It's too early to predict the outcome, but we can examine this new vision for Oilheat and assess its potential from a marketing perspective.
First, some background. The leaders of most major Oilheat associations convened in Baltimore in September 2009 to chart a new course for the industry. The facts were sobering: Oilheat lost about 11 percent of its market share between 2000 and 2007, the natural gas industry has become more aggressive, and lawmakers and regulators - pressured by the global warming debate and consumers' growing environmental concerns - have displayed a growing bias against Oilheat.
We have a target on our back, and our leaders concluded in September that the best way to escape the line of fire is to offer our customers solutions that are "leaner, greener and cleaner." That means getting the sulfur out of the fuel, incorporating biofuels, and migrating customers to hybrid oil-solar equipment. Despite some concern and dissent, our leaders agreed to approach state and federal regulators and actually request mandates on fuel composition. They have proposed that today's heating oil be replaced in 2011 with ultra-low sulfur heating oil blended with biofuel - by law.
If enacted, this solution could usher in a renaissance in Oilheat. It won't bring back our lost customers, but it will eliminate some burdensome environmental baggage, because an ultra-low/biofuel blend can burn cleaner than natural gas. Eliminating the sulfur also will enable manufacturers to build condensing equipment that is affordable and achieves AFUE ratings in the 90s.
Dealers should track the initiative's progress closely and prepare to capitalize on the new message of cleaner fuel and renewability. Customers are restless about global warming and the long-term viability of Oilheat, and you can use these positive messages to position your company as part of the solution, instead of part of the problem. By aggressively spreading Oilheat's new positive message, you'll be able to stem customer losses to conversion while also giving your company a new clean, green image.
The most significant component of the transition for Oilheat operations will be the move to ultra low sulfur fuel, which will lead to several significant changes. Service intervals will be extended, higher-efficiency equipment will come to market, and the price of product could increase.
The price ramifications are worrisome, but, frankly, less threatening than the prospect of continuing to use a sulfur-rich fuel that makes the industry a sitting duck for regulators and environmentalists. The National Oilheat Research Alliance (NORA) estimates that dealers will absorb a 16-cent increase for buying ultra-low and biodiesel but expects them to see a complete offset in reduced costs for service and logistics.
The extended service interval and the improved availability of high-efficiency equipment will be important developments that benefit you and your customers, but more about those in a moment. First, let's focus on the issues that you can use in the near future to enhance your company image.
Help Customers Make Small Changes
A good starting point is to rebrand your company as an agent of change. America is experiencing hard times, and there is strong public support for abandoning tired ideas and embracing new solutions. Barack Obama rode that sentiment into the White House, and many good-natured Americans remain eager to pitch in and do their part.
Unfortunately, oil has become a powerful symbol for everything that ails our country. It is closely linked in the public eye to hot-button issues like global warming, U.S. military engagement, and corporate greed. These perceptions may be irrational and unfounded, but they are entrenched and powerful, and politicians - not to mention the highly opportunistic natural gas industry - are stoking the flame.
The upshot is that consumers are proudly ditching oil wherever they can. They are buying more hybrid cars, reducing their driving miles, and converting to natural gas heat in droves. Your customers may appreciate your company and respect your employees, but many of them can't wait to stop using your product and boast to their friends about how they're "getting off oil."
You can calm your customers and keep more of them in the fold by giving them a new idea of what it means to be an Oilheat customer, while also raising questions about the competing fuels. A vital piece of the new message is the concept of renewable "liquid fuel." It starts with today's biofuel blends of B2 and B5 and could lead to a future of pure biofuels with no petroleum component at all. You can't foresee the entire evolution, but you can encourage your customers with a future vision that includes replacing a growing portion of their oil with clean, renewable biofuel.
If you sell a blend of heating oil and biofuel, you are, in fact, an agent of change, and your vision for the future might be enough to stop conversion-minded customers in their tracks. If they can use less oil without spending thousands of dollars to invest in a new heating system, they might stand pat and embrace your brand of change.
Use your marketing channels - website, newsletters, message on hold, truck signage - aggressively to promote a connected set of "liquid fuel" concepts and images. Talk about a secure energy future based on versatile oil burners that will consume a variety of interchangeable liquid fuels. Highlight the strengths of biofuel: cleanliness, renewability, flexibility and reduced emissions.
You can solidify your new image as alternative energy provider by adopting the NORA model and expanding your product line to include solar solutions. Today's solar systems integrate easily with Oilheat, and you can provide an immediate reduction in oil consumption. By offering solar, you also give customers a way to take advantage of tax credits for energy efficiency and renewable energy. The federal energy efficiency tax credit provides a 30% savings on solar installations through 2016, and some states offer additional incentives.
Offering biofuel and solar-Oilheat hybrids might soon be essential as a purely defensive move. Competitors in your market are likely to embrace the new model before they are required to, and you could find yourself struggling to compete if you're offering only Oilheat with an outdated message.
Equal Footing on the Environment
At the same time, you can further diminish customers' desire to switch fuels by promoting the pending move to ultra low sulfur heating oil. Customers may feel more comfortable using heating oil if they realize that it will soon be no more polluting than natural gas.
With Oilheat on equal footing in terms of emissions, you can start promoting your liquid fuel as the preferred choice for the environment. Natural gas has a serious methane leakage problem that oil doesn't share, and wood burning generates 1,000 times more particulate matter than oil does. By explaining those facts to customers and prospects, you can make them think twice about replacing Oilheat for any environmental reasons.
Be sure also to remind customers frequently that converting fuels is considerably more expensive than upgrading an Oilheat system. If you succeed in delivering a healthy dose of change and neutralizing the environmental argument, you may help a lot of customers realize they are better off staying with you - or in the case of prospects, switching their business to your company.
The pending move to bio-blends and reduced-sulfur fuel provides some purely good news that can benefit your company in the near future, but other parts of the message should be handled with care. For instance, you probably should tread lightly for now on the prospect of reduced maintenance. It could be a strong selling point once the cost of service decreases, but for now the issue could just muddy the waters. It would be hard to discuss future ease of maintenance without casting aspersions on the fuel that you have sold for years - and continue to sell now.
Even more delicate is the issue of equipment upgrades. Sulfur reduction will enable manufacturers to build equipment that is more efficient and less expensive, because they won't have to leave extra space to allow for scaling or use specialized metals that resist sulfuric acid. Condensing appliances will be less expensive to build, and system efficiency could improve across the board within a few years.
Given that forecast, how will you handle equipment sales in the meantime? Will you be willing to persuade a loyal customer to upgrade before the new equipment comes to market and create the risk that they'll eventually wish they had waited to upgrade? This is a serious dilemma that hamstrings your equipment sales.
For the time being, you are safe continuing to sell as you always have. There is no guarantee that sulfur reduction will be achieved any time soon, and no way of predicting when new equipment will come to market that is a better value than today's equipment. This is an issue that needs to stay on your radar screen, however, so you can devise a sound strategy for straddling the worlds of today's and tomorrow's equipment when the time comes.
Good news has been hard to come by in Oilheat. Now that you finally have a consumer-friendly message to spread, seize the opportunity to stem your conversion losses and get your business on a more profitable track.
Richard Rutigliano is President of PriMedia, Inc., a full service marketing and communications firm with offices in New York City, Long Island and Boston. The company is now offering free marketing consultations to Oilheat retailers. Phone: 800-796-3342, or visit their Web sites at www.primediany.com and www.oilheat-advertising.com.