Ward Off Fuel Conversions with a Balanced Approach
By Richard Rutigliano, PriMedia, Inc.
Oilheat dealers have seen plenty of hard times through the years, but today's challenges might be greater than any that have come before. Oil prices are near an all-time high, many customers are struggling to pay, and gas utilities are aggressively pressing their unprecedented advantage in price.
On top of these challenges, the heating season is off to a miserable start, with some of the warmest November weather in history.
Dealers might be tempted to hunker down and trim their communications investments, but silence can prove very costly when customers are looking elsewhere in the hope of reducing their heating costs. The gas utilities are ramping up their marketing, and it is vital to defend your business and your fuel and help customers see that they are better off with you in the long run.
Despite all the factors working against Oilheat, there is still a compelling story to tell. Oilheat retains a huge advantage in customer service, and there is good reason to believe that the current price inequality will disappear as utility gas producers develop new markets for their product. Oilheat is also transitioning to cleaner fuel that will erase any environmental advantage for utility gas.
Find Your Message and Deliver It
Truth is on our side, but it helps us only when we communicate the facts effectively to the customers. You can help yourself by honing a pro-Oilheat message and delivering it to customers succinctly and consistently. At the same time, you can articulate your company's value proposition and make it easy for customers to do business with you.
There has been robust debate within the industry about the merits of "bashing gas." Is it more effective to promote your company and your fuel on their own merits or to mix promotion with some truth telling about the competing fuel? Given the aggressive utility marketing we're seeing in Massachusetts and the pro-gas policies in states like Maine and Vermont, the question has been answered for us. We need to educate customers aggressively about the negatives of gas to help them see through the utility propaganda. They are making Oilheat look bad, and we need to tarnish their luster to level the playing field.
One of the best arguments that an oil dealer can make is that homeowners are better off buying from a local company that is competing hard for their business rather than switching to a utility. Consumers strongly prefer working with local companies, according to a 2011 survey by WebVisible. The survey found that 83 percent of customers prefer local businesses and cited three primary reasons: They want to support their communities, they prefer a business close to home, and the service is more personal.
Oilheat's advantage is particularly strong, because the alternative energy supplier is usually a utility, and customers are not fans. National Grid, the same utility that is spending more than $700,000 to lure customers away from Oilheat in Massachusetts, was lambasted in a customer survey run by Patch.com after the latest widespread power outages in Massachusetts. Of 231 respondents to the question "How would you rate the performance of National Grid in responding to the recent power outages?" 102 chose the response "Terrible - National Grid needs to completely overhaul how they respond to power outage emergencies." Another 46 chose "Poor - I think National Grid could have done a better job getting power back sooner." That's 64 percent rating the utility's performance either terrible or poor.
Rapid response to customer emergencies is one of the most important services that oil dealers provide. Customers understand that the importance of prompt, reliable response to a heat emergency, and most of them likely appreciate the peace of mind they feel knowing that you offer "I'll be right over" service. Nonetheless, it is reasonable to assume that they might overlook that concern when considering a fuel conversion - unless you have been reminding them.
Raise Doubts About Price
Another topic that requires some truth telling is price. Utility gas enjoys a substantial advantage now, and customers need to be educated about how prices can change. Gas prices are low because there is a pronounced mismatch between supply and demand. Gas production has skyrocketed in the shale formations in Texas and the Northeast at a time when demand is sagging due to the economic downturn.
Without any word to the contrary, consumers are likely to believe that low utility gas prices are here to stay. We need to communicate all the reasons why prices could rise in the years ahead. Here are a few points that our customers should hear:
- Energy prices tend to equalize. When one fuel enjoys a price advantage, demand for that fuel increases and prices rise.
- Natural gas producers are seeking to increase exports of liquefied natural gas (LNG). Dominion Resources is now seeking federal approval to allow 1 billion cubic feet of gas per day to be exported through a terminal it owns in Maryland, and Cheniere Energy has signed a long-term contract to supply overseas electricity providers. Increasing exports set the stage for higher utility gas prices at home.
- Electric utilities are increasingly replacing coal-fired generation plants with gas-fired plants. NaturalGas.org reports that natural gas-fired electricity generation is expected to account for 80 percent of all added electricity generation capacity by 2035. As more gas is used for electricity generation, prices will rise.
- Utility gas could be more widely used in transportation in the years ahead. Congress is looking to promote the use of natural gas in transportation through the NAT GAS Act, and the group Natural Gas Vehicles for America says the United States could replace 10 billion gallons of gasoline per year with domestically produced natural gas within 15 years. Using more natural gas for transportation will drive up prices.
- Gas production costs could rise if federal regulators implement new rules for gas drillers.
- Demand for utility gas will increase as the economy regains strength. The U.S. Energy Information Administration predicts that global natural gas demand will increase by almost 50 percent by 2030.
Using solid information like this, oil dealers can help customers understand that today's attractive natural gas prices could rise rapidly in an economic recovery.
Environmental Arguments Favor Oilheat
The idea of defending oil on environmental grounds might have sounded preposterous a few years ago, but it's now both possible and necessary. The utility gas industry is pounding Oilheat as a dirty fuel. Consider this statement from a National Grid commercial: "Natural gas burns cleaner than oil, releasing less carbon emissions in the air so it's better for the environment." Repeating a simple statement like that again and again is enough to convince consumers that natural gas is the cleaner fuel. Dealers can neutralize this argument by educating consumers about methane pollution and clean heating oil.
First, combustion emissions from Oilheat and gas are nearly identical when traditional Oilheat is replaced with a blend of ultra low sulfur oil and biofuel. Just a few months from now, New York City residents will make the switch to an ultra low/biofuel blend, and similar changes will follow within a few years in many Oilheat states. In the meantime, dealers have the option of making the switch themselves and promoting cleaner fuel.
Then there is the matter of pipeline leaks and rampant methane pollution. Methane is a potent greenhouse gas, and the American Energy Coalition (AEC) website has detailed information about how utility gas production aggravates global warming. With combustion emissions being roughly equivalent, methane emissions tip the balance and make utility gas the dirtier fuel. Consumers need to understand that utility gas is not a pro-environment choice.
Consumers should also understand the concept of gas utility "leak management" and what it means for the local environment. Utilities classify known gas leaks according to how much risk of fire or explosion they present, and they often monitor leaks that are considered non-hazardous rather than repair them right away. As a result, gas routinely wafts through neighborhoods and kills shade trees. The AEC website has a section dedicated to methane leakage on its Science & Research page.
Get the Word Out
We have a great message about our own strengths and the shortcomings of utility gas, and dealers need to communicate it proactively. Most customers are not going to call and ask for your opinion before making a fuel conversion, so you need to communicate regularly now - while they are still your customers.
A website is a great place to start. Expand your site to include a special section aimed specifically at customers who are considering a fuel conversion. Once the information is in place, you can direct your customers there using a combination of customer letters, newsletters and bill inserts. Consider publishing a special edition newsletter that deals specifically with the perils of fuel conversion.
Impress Your Customers
It might not be easy to muster resources for marketing in these lean times, but it's vital to present a pleasing image and value proposition to your customers so that they will continue to prefer you. Start by fine-tuning your message on energy savings. Present yourself in all your customer outreach as a conservation advocate that helps customers reduce energy consumption and costs. Help them feel confident that they are in good hands not only for emergency service but for incorporating advanced technology to minimize their energy needs.
At the same time, address customer convenience, particularly online. Enhance your website with self-service features such as account lookup, payment and ordering, an a rewards program and program enrollment. E-commerce pioneers like Amazon have trained customers that they can do business online without ever using the phone, and you can strive for the same standard.
By communicating proactively and improving your own image, you give yourself the best opportunity to retain your customers in these challenging times and keep your business vibrant.
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.