It feels like we’re fighting a six-front war – No gallons, high prices, a crappy economy, hyper-competitive offers, cheap natural gas, a customer base increasingly willing to churn – with no end in sight. Have I left anything out?
It’s not my style to focus on the difficulties without offering solutions. This year, it just feels just more daunting. The fact is that there are no easy solutions to the multiple challenges you face. But the need to find better answers is increasing. It’s “evolve or surrender” time. Unless you’re content with a diminishing customer base and decreasing profitability at an accelerating rate, you’ve got to find ways to get smarter, and fast.
That’s why I’m so excited about the Breakthrough Groups we’ve been moderating. They bring together eight to ten non-competing companies that meet periodically with a facilitator. They give each company the opportunity to learn from the experiences of each other, from their moderators, and from all of our groups combined.
I decided to launch these Groups because I knew that collectively, there were more solutions to more issues than I could give to our clients as a consultant. Some of the groups feature some very large players (one group averages 20,000 customers per company). Other groups are made up of smaller dealers. The trick is to bring together companies that have similar resources, size, and interests, so the lessons are more transferable. It’s also been important to create an environment that allows dealers to be honest about the issues they are facing. The groups allow dealers to drop all of the posturing that sometimes happens at industry functions when competitors are present and get real.
So far, the results have been exceptional. Because we benchmark operating metrics in an “apples to apples” way, for the first time, these companies can really see how they stack up, where they can improve, and what they should preserve. And there is usually someone who has valuable experience in an area that is important to someone else. It allows the members to leapfrog their learning curve, avoid big gaffes, and more quickly adopt better approaches. We’ve even brought together the sales and service managers for their own meetings, to expose them to the kind of opportunities that owner/gm’s are hearing about and want to pursue.
I wanted to share a few of the many things that came out of our most recent Breakthrough Group meetings last month – some things that are worth thinking about and some things that could be potentially big game-changers for you.
As most of you know, the heating oil contract ends in April 2013, replaced by ULSD. In fact, in NY City, and areas primarily served by Columbia pipeline, my understanding is that it will happen this summer. What is unclear is what the price differential will be between heating oil and ULSD. So if you have price cap programs, how do you come up with your cap price? What if your cost turns out to be 15 cents higher than it looks for heating oil, as some have predicted? You need to think through what you can and should offer, and how to roll out to customer base.
In several of our groups, we’ve had a raging debate between the “innies” and the “outies.” The “outies” used outside sales reps, who were supposed to chase down movers, hand out their flyers in neighborhoods, do a walk-through for new customers, network at chamber meetings, field sales leads on their cell phones, etc.
The “innies” used sales people who were mostly strapped to their desk, handling incoming calls, making outbound calls during slow times, handling retention calls, etc. Some companies used real inside sales people, others used general CSR’s who were also tasked with selling (that’s a whole other story.)
Over the past few years, group members tracked the relative effectiveness of each approach, based on cost per closed lead and other metrics. In every case where companies switched from “outies” to “innies”, their sales numbers increased and their costs went down, often dramatically. Members were able to use each other’s experience to make changes – in the hiring model, job description, management approach, targeted activities, etc – much quicker, with much more confidence, and with better practices than if they were wrestling with this on their own, or with a single consultant.
If you don’t bill your service on a flat rate basis by now, as Gomer says, “Shame, shame, shame.” (Yes, I really am showing my age.) It is one of the most essential tools for adding profitability to your HVAC department at a time when you can’t rely on your oil margin alone. And it can really appeal to customers to boot.
But implementing flat rate to its fullest potential is not so simple, at least as we’ve found out in our group meetings. We discussed different aspects, from getting techs to buy in, to making sure they were using it correctly, to resolving service disputes and communicating its virtues to customers.
One big eye opener was simply looking at the labor rates companies were building in to their flat rate models. In one meeting, seven of the nine companies had switched to flat rate. But their labor components varied from $129/hr to $250/hr, and not because of the economic conditions in their particular markets. In fact, the company charging the most was in one of the most depressed places.
What ensued was a vibrant discussion about what was possible, necessary and fair. It definitely changed minds. Though no one else was jumping up to $250/hr right away, several companies were planning to raise rates immediately. There is something powerful about testing your “sacred cow” beliefs with other companies you trust, who are in similar situations and who are not trying to show you up, but only to help.
As more homeowners opt for discount oil, the question has started to move from whether or not full service companies should do it, to how to do it best. The range of approaches was broad. Most ran COD operations as completely separate entities. One intrepid company was experimenting with offering it as a “good, better, best” option under their regular brand. We were able to dig into the relative costs and benefits of different approaches, discuss what marketing angles were working best, and also target margins and price elasticity of these buyers. One company shared that the smartest thing they did was use email alerts to spur orders when they were going into an area. Another explained three different ways it had reduced overhead, including making it virtually impossible to get a live person, and the impact of each.
We invited Tracy and Larry Richmond of Avatas Payment Solutions (formerly CoCard) as guests for part of a Breakthrough Group meeting, and they let members in on an impressive analysis of the relative impact of different payment methodologies to companies’ bottom lines. They had done pretty comprehensive case studies that took into account the true costs of accepting paper checks, various credit cards, etc. It was an eye-opening experience to see the data laid out.
Of course, this is counter-intuitive. For years, we were trained to see credit card payment as a necessary evil. But now, with MasterCard rates, anyway, it can actually be an advantage that saves money, especially if it’s an automatic payment.
During this meeting, the Breakthrough Group members started sharing ideas about what can/should be done to steer more people toward MasterCard and auto pay, and away from Visa, Amex and Discover. We also dug into getting EFT and AFT enrollments, which trump all. One member now makes his early pay discount contingent on auto pay by credit card or AFT. Others send email, with links to credit card enrollment page on their web site. Still others had the option pop up prominently whenever customers went to their home page. But the most basic, and probably most important solution was to train customer service reps to ask customers if they’d like to be set up on auto pay right at the outset. Rather than saying, “We take Visa or MasterCard”, your CSR’s could say ”We’re happy to set you up on auto pay with MasterCard, and we’ll even give you X cents off to start.” And while this may not be a major game-changer for you, 4 cents on your margin is nothing to sneeze at, especially when you get your money right away with auto pay instead of waiting 30 days or sometimes, much longer.
Of course, there’s so much more than can be covered in a single article. From time to time, I’ll try to share some more ideas. These are challenging times, and it doesn’t look like they’ll get easier any time soon. But that shouldn’t stop you from strengthening your company. With the right focus, you can find ways to expand your range of possibilities, learn from other successes and failures, and accelerate your evolution, whether it’s by joining something like our Breakthrough Group or through other means.
The current energy landscape is going to create winners and losers. Be one of the winners.
Warm Thoughts has been an invaluable partner, creating a fully integrated web and social media presence, and handling our brand design, print and email marketing, merger communications and overall growth strategy. I can’t say enough good things.”
– John Tolan, Sail Energy
I have been a Warm Thoughts Client for 20 years. They handle every aspect of our company’s marketing strategy – print, web, social media, vehicle design, advertising, direct mail. They have an unmatched knowledge of our business. They have a great team, and do a terrific job of bringing new ideas to our company, and executing for us. I would highly recommend Warm Thoughts to anyone in the heating oil, propane or HVAC business.”
– David O’Connell, Wilson Oil & Propane
Despite your great reputation, I still don’t think most people realize all the ways you can help them move their business forward. Your team has been a great asset to us.”
– Eric Schmider, Carroll Home Services
After we passed a state check off program, we needed a plan that would use the money wisely to grow gallons in the state. We interviewed several agencies, both national and local, before deciding on Warm Thoughts. We’ve been exceptionally impressed with their strategy, creative work, and client service, across a wide range of projects. In fact, I’d put it up against anything I’ve seen in this industry. The hardest thing to do when you spend money on marketing is to prove it made a difference. Warm Thoughts has made a difference for the dealers of North Carolina.”
– John Jessup, North Carolina Propane Gas Association
I think people look at your extensive experience, and mistakenly think it comes at the cost of being innovative and creative. Nothing could be further from the truth. You constantly bring new ideas and fresh creative promotion, and you understand the intersection between our customers, employees and our limited resources. Whenever I face a tough challenge, I feel much better knowing you are on my team.”
– Marty Romanelli, Burt’s Reliable
Let’s face it- there are cheaper options than working with Warm Thoughts. And the same is true for our fuel customers when it comes to working with our company. I never understood why fuel companies would think they deserve a premium, but then use cheap, cookie-cutter marketing that accomplishes very little. You guys make it easy for me to focus on growing my business. You give great service, good ideas, look out for my interests, and deliver the goods (ie: sales and increased profit) so I can deliver the gallons.”
– Bill Overbaugh, Ehrhart Energy