Propane delivery: How to push into the commercial market

February 13, 2014 By and    

Knowledge, relationships cited as key to growing retail, hospitality, restaurant and educational segments for the propane industry.

Residential delivery of propane has been the bread and butter for the industry and most of its marketers.

PERC

Decision makers must understand: Propane is an option. Photo courtesy of the Propane Education & Research Council

However, as sales continue to lag, industry leaders looking for ways to increase the number of gallons sold are turning to what they say is a largely untapped and misunderstood commercial market that presents significant opportunities for retailers.

Seizing those opportunities will take some work on the part of marketers, who are in a unique position to develop relationships with people in their communities and position themselves as resources.

Bridget Kidd, director of residential and commercial markets for the Propane Education & Research Council (PERC), says new tools are ready to equip marketers with everything they need to approach builders, developers, land brokers, engineers and other decision makers.

“The commercial decision makers may not be familiar with propane,” Kidd says. “Anecdotally, we hear people say if they can’t use natural gas, they’ll just use electricity. We need to educate those people that propane is a viable option, that their tenants or employees are going to reap the benefit of having gas without being on the gas main, and it’s not going to cost an exorbitant amount of money.”

ICF study
PERC commissioned the team from ICF International and Harris Interactive to examine commercial market opportunities, looking in particular at who are the key decision makers, what factors influence their energy choices and how propane might serve their needs.

In the resulting report, released in 2011, study authors note the general disconnect between most propane marketers and their potential commercial customers.

“Based on our research into the commercial markets, it is clear that none of the participants in the market have a broad-based understanding and comfort level with using, or choosing to use, propane in commercial sector applications,” the study says.

Not only did commercial customers misunderstand how propane might complement their businesses, propane marketers interviewed for the study lacked a good understanding of their existing commercial customers, the study adds.

It’s not surprising, given the diversity of the commercial market – ranging from locally based operations to big-box stores and national chains with a central headquarters that makes all decisions. Some commercial accounts would be inclined to lean on propane for cooking while others look for space heating and still others might only consider it for a standby generator. Energy efficiency is an important factor for some – and return on investment is critical.

Even with such confusion on all sides, and little formal outreach into the segment, commercial sales account for 19 percent of the propane gallons sold, the study says. And that number could grow: Commercial energy use accounts for nearly 20 percent of total energy consumption in the country, and is the fastest-growing segment of the U.S. economy, increasing from 15.8 percent of total energy consumption in 1990, to 17.4 percent in 2000 and then to 19.2 percent in 2009. Propane accounts for an estimated 0.8 percent of that commercial energy consumption, the study says.

That means retailers need to get serious about convincing more customers to turn to propane and encourage them to use the fuel for all of their energy needs, not just space heating.

“If you want to grow gallons, you’ve got to grow the number of burner tips,” says Randy Doyle, CFO of Blossman Gas in Ocean Springs, Miss. “The gallons don’t just magically pop out of the sky; you’ve got to have a burner tip before you can burn a gallon.”

Tools available
Armed with this knowledge, PERC has developed tools to help marketers and builders better understand one another. The council has allocated $900,000 a year for the last two years to dig deeper into the commercial market with the following resources:

The 26-page “Build with Propane Guide: Commercial Edition” is billed as a handbook for potential commercial users of propane systems, technology and products. It introduces the fuel, explains storage systems and efficiency benefits, and details how it can be used in restaurants, stores, schools, hotels, warehouses and more. Colorful graphics and charts draw attention to tankless water heaters and portable generators, and school, hotel and warehouse configurations offer examples of where tanks can be positioned so they are out of the way.

The guide is complemented by the buildwithpropane.com website, which showcases four virtual commercial building configurations noting all of the ways propane can be used.

“We want to make sure people aren’t just thinking space heating,” Kidd says.

It also highlights stories of builders who have found savings using the Propane Energy Pod, and explains incentives available to those who build with propane.

The website links to the Propane Training Academy, where those in the construction industry can earn continuing education credits vital to their professional certifications. “Propane Gas Systems: Considerations for Commercial Construction” was added in November, and Kidd says she’d like to see 10 or 15 more commercial courses added to complement the 30 or so residential ones offered last year.

“We encourage marketers to also take the course so they are aware,” Kidd says.

The Propane Technical Pocket Guide, the handbook on which the industry relies, has been updated to include, for the first time, commercial-grade information.

“Before, it was all residential,” Kidd explains. The guide “went live” in January to rave reviews. “It’s the No. 1 thing at industry trade shows. Our marketers love it.”

PERC also is creating a new toolkit, set to debut in the coming weeks, that explains the commercial market for marketers and who are the key decision makers, with suggestions on how to target them. The toolkit explains the resources available, including a copy of the ICF study and a perception survey that is underway. The toolkit is available on the MaRC online site, where a printed copy and thumb drive may be ordered for a fee, but the PDF can be downloaded for free.

PERC’s Marketer Technology and Sales Training (MTST) courses include a module on promoting customers’ use of commercial mowers. A new commercial MTST program will debut at the NPGA Southeastern Convention & International Propane Expo in April in Atlanta.

Other tips
Marketers can do many other things to build their commercial business, Kidd says.

Keep an eye on developments proposed in the community, and watch for news of expansion plans at the municipal and county government level. Become friendly with local real estate agents and land brokers.

“Look at what land is being developed and purchased,” she says. “Land acquisition data and permits are public information. Marketers should be on top of [knowing] when big pieces of land are changing hands. That’s a good indication something is happening.”

She suggests marketers hold a “lunch and learn” event with architectural and engineering firms in their area: Call firms and ask if you could bring lunch (she suggests pizza) and speak for 20 minutes about your company, the benefits of propane and what products or services are available. Bring case studies that show how propane has helped a specific company in the area.

“Firms are always looking for people like that,” says Kidd, noting that PERC can assist with materials and data.

The key is to launch a relationship that positions the marketer as a knowledgeable, local resource on which firms can rely for advice and assistance. That might require marketers to step outside their comfort zones, but doing so can pay big dividends.

“What we know is that building professionals rely on local experts. That’s the local marketer. There’s no one better to talk about propane to a decision maker than the propane marketer himself or herself,” Kidd says. “It takes a lot of work to go out and create those relationships and provide that training. For a lot of marketers, it’s going to be a change in the way they think, but a good one and a necessary one. There may be missed opportunities by not having those conversations.”

Doyle argues that marketers and others in the industry need to better promote the use of propane across both residential and commercial platforms. Along with Rinnai’s Mike Peacock, Doyle has organized a loose gathering of marketers, manufacturers and distributors that has met a few times a year for the last two years to discuss ways to reverse the decline in the residential and commercial markets.

Doyle says marketers seem more reluctant than in decades past to sell appliances to their existing customers, especially as big-box stores have increasingly taken over as a major source for washers, dryers, water heaters and more. Corporate decision makers at these stores lean toward natural gas and electric appliances because they lack familiarity with propane, making it imperative that the local marketer become more assertive, he says.

“When as an industry we’re focused on hauling gas only, we’re not in a position to sell the benefits of propane and know the benefits of propane. Most employees should be able to speak to customers about the benefits of propane over electricity for space heating and water heating. As long as we’re not selling the burner tips, that knowledge eventually dies away,” Doyle says.

PERC and the National Propane Gas Association can help, but ultimately marketers must be responsible for connecting with their builder networks, he explains.

“It’s a more complex way of doing business, but … it’s a question of, is it a vital part of our industry’s future?” Doyle concludes. “I think the answer is yes.”

ICF International, “Strategic Market Assessment for Commercial Sector Propane Sales,” 2011

ICF International, “Strategic Market Assessment for Commercial Sector Propane Sales,” 2011

ICF International

ICF International, “Strategic Market Assessment for Commercial Sector Propane Sales,” 2011

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