Minimizing Customer Losses After Price Spikes

Imagine you come home from work early one day, walk into your bedroom and find your spouse in bed with someone else. The other man or woman flees, and your spouse apologizes. That’s the end of it right? Things just return to normal?

Of course not. Yet from talking with some oil and propane dealers recently, that seems to be their take on the aftermath of this winter’s extraordinary price surge. When I ask about their strategy for communicating with customers in the next six months, I often hear that “calls are starting to die down,” “the media is doing a good job getting the word out” or “I’m afraid if I raise this issue, I’ll just open a wound.” Unfortunately, history tells us these dealers are wrong.

Whether it’s justified or not, a large number of propane customers feel they’ve been taken advantage of this winter. And they’re not going to forget the pain of the highest bills in recent history anytime soon, regardless of whether prices drop in a week, in a month, or in three months. The real question is, “How badly will you (the propane dealer) get hurt from this mess?” And conversely, “How much can you benefit by playing it smart?”

Learn from Others’ Mistakes

We’ve learned an extraordinary amount about price spikes and their impact on energy consumers over the last 20 years. We’ve interviewed thousands of propane and oil customers, and have orchestrated recovery strategies for many industry leaders

Based on what we’ve seen in the past, there are two things that are crystal clear. First, this kind of price spike is very serious for customers. It’s an experience that can severely erode their trust in you and their confidence in your product. More than any other marketing challenge you’re likely to face, it puts more of your customers at risk of leaving you, and at risk of leaving you within a very short time frame. Second, most of you hurt yourselves badly either by underestimating your need to communicate or by doing a poor job when you do.

Here are some mistakes dealers commonly make, as well as some of the steps you can take to minimize your damage and maximize your gain.

Mistake #1 – Thinking that as long as they don’t blame you for the spike, you’re out of the woods.

Have you ever had a friend tell you, “Wow, you must be doing great with propane prices so high?” The research shows that even if customers don’t blame you for rising prices, many think you make more money as a result. You don’t pull the trigger. But you drive the getaway car.

Is that fair? No. But fair doesn’t enter into it. Here’s how this often plays out…

Your Reality	Customers’ Perception
You struggle every time you have to raise prices to keep up with surging wholesale costs.	You raise prices fast but lower them slowly.
You time deliveries to make sure you don’t run out on anyone and always have fuel for your customers.	You time deliveries for when it suits you best.
You short-fill tanks because prices could go down and you want to protect customers.	You wait to make deliveries until prices are highest.

You know better than anyone that these perceptions are wrong. But the perception of your customers is the reality of your business.

Here’s another reality. You have a powerful story to tell that can build trust and appreciation among your customer base. For starters, you hate price spikes. You also don’t raise your prices as much or as fast as wholesale prices rise. Your delivery efficiency plummets in times like these. You suffer extraordinary cash-flow and operational challenges, especially when high prices are coupled with supply allocations and severe weather conditions. And yet you still manage to keep your customers safe and warm.

But guess what? Most of your customers don’t have a clue about this. Because you don’t do a good enough job of telling them! All they know is that they are paying a lot of money, it hurts, and there must be someone to blame.

Mistake #2 – Ignoring the wake-up call.

In a large research study conducted by one of our clients, customers were asked, “What is the one thing that would cause you to leave your propane company?” “High prices” was a predictable answer, but surprisingly not the most common answer. The number one reason customers would leave was “if I thought they were cheating me.” And when prices are this volatile, that conclusion is much easier for customers to reach. This raises the prospect of a very dangerous spring, summer and fall.

At this point, you might be thinking, “My customers aren’t that cynical. In fact, lots of them are thanking me for getting them a delivery.” And there is truth in that. Many of your customers appreciate all you did for them. But what about the 10% or 20% or even 30% who aren’t as happy? These are the customers who don’t call you and give you the opportunity to tell your side of the story.

Here are just a couple of examples of the thinking that is pervasive among your customer base right now:

From a newspaper article: “I paid $3.80 for my delivery. It blew me away. So, I started making some calls. Some companies were even higher. But I also found one at $3.30, though they weren’t taking new customers. I tell you, when this winter is over, I’m going to start calling around again.”

Facebook Page of a national propane company: “Just got a delivery for $4.20. That’s the last time you price-gouge me.”

Finally, consider this customer satisfaction study: A propane company measured overall customer satisfaction in each of the past six years. Every year that prices increased, the company experienced a decline in customer satisfaction. In one year, when prices rose 25 cents, overall customer satisfaction dropped by 20%. What do you think will happen after this winter, when prices rose by $1 or $2 per gallon?

Mistake #3 – Forgetting that it’s your job to tell your story, not anyone else’s.

You can complain about this all you want (and in some cases, you might be justified), but dealing with your customers’ perceptions is your job. It’s not your state association’s job, it’s not PERC’s job. Nobody has more to lose (or more to gain) than you do. And now more than ever, you need to tell your story to your customers and protect your business.

None of your communication tools — newsletters, letters, phone calls, bill inserts, evaluation cards, websites, etc. — can change the fact that prices were high. But done well, and done with the right frequency, they can fight all the other misconceptions that undermine you, and emphasize that you really care about your customers, that you didn’t try to screw them, that you are worth staying with, and that you still have a great product.

As you devise your communication plan for the spring, summer and fall, consider a change in your approach. Instead of asking yourself, “What do I absolutely have to do to protect myself?” ask yourself, “How do I use this situation to strengthen customer satisfaction and win confidence and long-term loyalty?”

Mistake #4 – Wasting your time trying to build a better marketing mousetrap.

We’ve seen too many propane dealers waste their time trying to come up with novel approaches, when there are proven strategies and tested communication approaches that will work really well to tell your story and strengthen customer satisfaction.

Here are five guidelines that I’d strongly recommend implementing in your marketing campaign to combat the perceptions of a frustrated, unhappy base of customers struggling against high propane prices.

Good communication is good. More good communication is better. Even more good communication is best. In other words, you win by communicating better, smarter and more often than you are used to. Consider the difference between Exxon’s awful communication strategy after the Valdez crisis, and BP, which, after some early missteps, rallied to save its brand in the U.S.
Your strategy starts with your end objective in mind. For most of you, the result you want is for your customers to feel a) you didn’t take advantage of them, b) you took many steps to protect them, c) you really care about them, d) you’re good people who deserve their trust and confidence, e) your product is still better than the alternatives, and f) your company is better than the “let’s make a deal” propane companies.
Creating this result doesn’t happen just by stating these points to your customers. You have to find different ways to help them reach this conclusion, and stagger your communications so they aren’t received all at the same time. This is a campaign that calls for multiple “touches.” You need to fight your tendency to think results can be accomplished with just one letter, or call, etc. As we like to say around the office, “It takes a campaign to raise awareness.”
Don’t be afraid to address some of the sticky questions, and do so in a way that positions you on your customers’ side with empathy. For example, you might explain in a letter that “although it was out of our control, we appreciate how hard this winter was for you, and we’re really sorry about that.” If you’re thinking like some of my clients, you might say, “Wait a minute, we never want to say propane makes it so hard for them.” But the truth is, you need to get real with people so they think that you truly care. People really like it when you are straight with them. You cannot believe how much trust that engenders.
Find creative and subtle ways to get your points across. For example, in many of the newsletters we create for our clients, we are writing owners’ columns that give people a window into what was really going on — the struggles to get supply, the long hours your staff worked to keep pace with the cold, your own surprise, dismay and pain about wholesale prices rising 10 or 15 cents in a day, etc. Told in a clever way, it can be interesting to the reader, helps them understand the things you did to protect them, and creates greater customer engagement.