Comprehensive customer retention programs strengthen your business

May 1, 2009 By and    

Today’s propane customers have an expanding variety of energy choices tempting them to try something different.

It goes far beyond the bait-and-switch tactics with which your propane competitors may be assaulting them. Consumers see renewable energy and related products in the news all of the time. Expensive, but tempting, energy alternatives to propane include biomass, solar, wind, geothermal and air-sourced heat pumps.

If you aren’t communicating with your customers about the benefits of propane and your company, you could have an expanding customer loss column. Propane retailers need to include a comprehensive and measurable customer-retention program as part of their marketing plans.

You already have your customer base divided into different types of business, such as residential, commercial and agriculture. This makes it easy to further define the value of customers in those segments. You should rank your customers in terms of profit and value so you know where to direct your retention efforts, and you need to measure customer-retention effectiveness in each segment of your business. You can create your own value formula. Things to consider include assets invested, propane usage, gross margin, delivery cost and payment record for each customer.

The more mature your propane business is, the more aggressive you need to be with your retention efforts. If you have been in business for three years or more with no retention program, you will start to lose customers you didn’t want to lose. Every propane marketer claims it gives great customer service. Consistently executing good customer service and measuring the effectiveness is important, but it won’t differentiate you from your competitors.

I reached out to a number of propane marketers across the country recently to find what kind of retention tactics work for them. Here are a dozen tactics, some obvious ones that many of them shared, and others more exclusive.

1. New customer welcome kit – Duty to warn and company policy materials are a necessary start of your new customer relationship, but they should be delivered separately from a welcome kit that can include special offers throughout the year.

2. Statement insert communication – Don’t waste a portion of that stamp by not including useful information and special offers for your customers.

3. Customer appreciation events – Plan an event around a cookout, appliance sales event, special program sign-up, product demonstrations, charity and other things of interest to your customers. You can target specific customers for each event, such as builders.

4. Communicate with at-risk customers – Track at-risk customers and use direct mail, outbound phone calls and even personal visits to communicate with them. At-risk customers may be those who haven’t had a delivery in several months or have switched from forecast delivery to will-call.

5. No run-out promise – Give free gallons or credit if a forecast customer runs out of propane. This offer can give the impression that propane service may be undependable, but some customers who already have that perception appreciate the reassurance. It should be backed with a brief overview of how sophisticated and effective your forecasting system is.

6. Customer satisfaction surveys – Periodic tracking of overall customer satisfaction, and intention to stay with your company and recommend it to others, can allow you to reach at-risk customers before defection.

7. Price protection programs – Guaranteed price, pre-buy, lock-in and cap are programs you may want to market to your top-value customers who could become at-risk because of similar tactics from other energy suppliers. Do not offer these programs if you don’t back up those prices and gallons with your suppliers.

8. Budget payment plan – Figure out how to make this type of plan work for your high-value customers, particularly the residential users. Customers on a level payment plan typically feel more loyal to their supplier, are not as price sensitive and rarely end up in your overdue receivables column. Check out the payment guarantees that some of the car companies are advertising. In today’s economy, an offer to make some budget payments for those customers who lose their jobs may pay off in increased customer loyalty. If auto companies can make it work to their advantage, you can too.

9. Customer referral programs – Offer a credit or gallons for referring prospects that turn into new propane customers. Have a similar plan for all of your customer segments.

10. Promote gas appliances – Selling, installing and servicing gas appliances is one way to stabilize and even increase your gas load, but it is not the only way you can promote appliances. Working with a plumber or HVAC contractor as a trade ally can give you the gallons you are seeking without complicating your business plan. Don’t forget about the federal tax credits and state rebates and other incentives that are available for the efficiency upgrades that many of your customers will be seeking. You are in prime time for switching all of those electric water heaters to propane tankless models.

11. Key account programs – Pick the top-valued customers in each business segment and assign yourself and other key personnel to establish and build one-on-one relationships and stay in touch with them on a regular basis. You will know what your retention exposure is, what potential new applications may exist and what value-added items you may be able to deliver.

12. Interactive Web site – A growing percentage of your customers are already dealing with other companies, like their electric utilities, which offer interactive Web sites where they can check their account standing, pay bills, input customer referrals, etc. It is no longer a question of whether you need a Web site. The answer is “yes,” and you need to make it interactive at some level to better serve your customers.

A comprehensive customer-retention program dulls the attractiveness of competitive-energy offers to your customers and makes bait-and-switch programs a less important part of your own marketing plan. Isn’t it time to solidify your business by evaluating and upgrading your customer-retention program?

The book on my nightstand this month is “Apollo’s Fire” by U.S. Rep. Jay Inslee and Bracken Hendricks. It calls for a revolution in how we produce and consume energy and mentions propane as part of the solution. Imagine that!

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