The benefits of implementing a level-pay program

Performance-minded propane marketers continuously pursue solutions that improve customer service and productivity, in order to make their company and propane the preferred energy source.

Few solutions offer more advantages than the level-pay program for the residential customer. The level-pay program, which is also called budget pay, spreads the customer’s payment over multiple months instead of requiring the customer to pay the propane invoice within 30 days. Level-pay programs are common with utilities.

Yet, in spite of the level-pay program advantages to the customer and propane marketer, many propane marketers who offer it struggle to convince customers to sign up and then remain on the program.

The struggle is evidenced by the low percentage of customers who are level pay. Generally, only 25 percent of a propane marketer’s residential customers are level pay. An Ohio marketer with 50 percent of its customers on level pay is the highest percentage I’ve heard.

Level-pay benefits

The benefits a level-pay program creates are listed within this column. It’s clear from these benefits that a win-win situation is created for both the customer and the propane marketer.

For starters, the negative perception of propane as being too expensive is muted. According to the Propane Education & Research Council, consumers rank a perceived high cost of propane compared to other energy sources as the top negative for the fuel. While propane’s price spike during the 2013-14 winter hurt its price perception, the $500-plus invoice due in 30 days hurts as well. This burden, placed on the consumer, makes the propane-buying experience negative.

• Customer conversion from will call to scheduled delivery – The most important aspect of effective gas delivery service and bobtail productivity is the understanding between the customer and propane marketer on when the tank will be filled. The goal of the propane marketer is to convert the unmanaged will-call customer to the marketer’s scheduled delivery system, whereby the marketer decides when and how much gas to deliver. The scheduled delivery service (i.e., worry free or never out) is an important feature of the level-pay program.
• Improved cash flow for the marketer – Level pay means improved cash flow, especially during the summer when liquidity for the propane marketer can be tight.
• Price protection for the customer – One of the customer’s fears about propane is the threat of a price spike. The level-pay program that also includes a price cap assuages this customer fear.
• Competitive advantage – Many propane customers live paycheck to paycheck and desire a level and predictable monthly expense for propane in order to manage their home budget. Propane marketers who offer a level-pay program have an advantage over their competitor because of the benefits for the customer.

Effective level-pay practices

When establishing a level-pay program, the propane marketer should follow these practices:

• Keep it simple – A level-pay program must be simply designed and simply explained to the customer. Otherwise, employees will not want to promote a program they cannot explain, and the customer will not commit their money to a program they do not understand.
• Be vigilant – The level-pay solution should be an ongoing priority; it should be a natural part of the daily conversation with the customer. Employees should be incented to promote a level-pay program to customers, and customers should be incented to join and stay on the program. The level-pay program should be one of management’s success factors.
• Fix level-pay problems with priority – Problems that cause customers to leave the program should be identified and fixed. Do not allow employee and system problems that hurt your level-pay program to go unchecked.

Randy Doyle is CFO for Blossman Gas in Ocean Springs, Miss. He can be reached at rdoyle@blossmangas.com.