Will Price Protection Resurge in 2014

Resurge

By Richard Rutigliano, PriMedia Inc.

The intense winter of 2013-14 has set the stage for a revival of price protection programs. The industry may have mixed feelings about fixed-price and capped-price programs, but they could be an excellent draw in 2014 for companies who execute them well.

Having absorbed the double whammy of increased usage and higher fuel costs, customers are likely to seek the shelter of a price protection program in greater numbers than they have in recent years. Companies that target those customers could get a nice uptick in new business, particularly if they differentiate themselves effectively.

To outshine the competition in price protection, marketers need to offer customers and prospects online enrollment via a portal where they can execute a contract quickly while getting all the supporting information they want.

 

Offer Contracts Online

 

The first step is to deploy an online price protection application like PriMedia’s PricePoint™ that enables a company to execute contracts online in minutes. The online environment is particularly powerful for price protection, creating three important opportunities.
• Customer Service Improvements: Rapid contract execution is good customer service, because consumers would rather get the deal done the same day online than wait on the mail.
• Process Improvements: An online contract system that can exchange data with a back-office system reduces data entry and other administrative chores, reducing the cost and hassle of offering price protection.
• Timely Pricing: An online contract system enables a company to update its program prices as needed and limit its exposure on contract offers.

 

Think Like a Customer

 

As you design your online price protection portal, think like a buyer and try to anticipate the questions that they will be on their minds. For some customers and prospects, one question might be whether it is safe to enter into a price protection program at all. While the vast majority of dealers run their programs seamlessly, each new heating season seems to bring one or two defaults that cast a shadow over the entire industry.

The best way to address the “trust” issue is head-on. Consumers today expect companies to anticipate their questions and make answers readily available. By fulfilling that expectation, you’ll send strong, positive signals about the company and build confidence.

Post a positive piece about your company’s track record in the community and its financial stability, and state assertively that you have honored every commitment you have made to your customers. If you are a member of Angie’s List or the Better Business Bureau, point that out to boost confidence further.

 

Explain the Contracts

 

The next set of questions you should address is about the price protection contracts themselves. Assume that customers know nothing at all about price protection and proceed not only to educate them but also to answer their questions so thoroughly that they can secure the contract with little or no time on the phone.

Explain what price protection is and how the different types of contracts work. Reference the different pricing outcomes that could occur and explain the worst-case scenarios, such as a repeat of 2007-08, when customers locked in prices in the $4 range only to see the bottom drop out on price within a month or two.

You can also post the information in FAQ format, so customers can absorb the information as answers to questions. Don’t worry about scaring them off. We used to worry that cautionary information would cause customers to hesitate, but these days they are more likely to be scared off by a shortage of information.

To avoid having either too little information or too much, consider posting both a simple answer and a complex answer to every question. You can display the simple explanation on the page as the default response next to a button the visitor can click to read the complex explanation.

 

Touch on Fuel Conversion

 

The price protection portal is also a great place to address the fuel conversion question. Buyers who are seeking price protection might also be fuel conversion candidates, either in 2014 or in the future, so it makes sense to bring them up to date on the latest news about natural gas.

For the first time in years, our industry is catching some breaks from the media – at least in some states. Not that anyone is saying nice things about heating oil itself, but at least natural gas is taking its share of knocks in New York and New England. There is also a new high-level report that compares diesel favorably to natural gas.

When building a price protection portal, install some information and links regarding fuel choice, and give the latest developments the positive spin they deserve. Oilheat is in the midst of a transition to cleaner fuel, and it’s important to point this out whenever possible and dislodge the notion that natural gas has a cleanliness advantage. New York State has already switched to ultra low sulfur heating oil, and most other states will complete the switch by 2018 at the latest.

 

Positive News

 

If the media ever catches on to the news about diesel and natural gas contained in the recent report “Methane Leakage from North American Natural Gas Systems,” the environmental argument could be settled once and for all – with heating oil coming out on top. The report could not be more credible – authors include professors from Harvard, MIT and Stanford – and it contains one real gem for our industry: Diesel is better than natural gas, when it comes to climate change.

Here is how Francis O’Sullivan, Director of Research and Analytics at the MIT Energy Initiative, put it in an interview with MIT Press: “While a good move within the power sector, the shift to natural gas may not be positive for other sectors, like transportation. Substituting natural gas for gasoline appears to yield no appreciable climate benefits. In the case of diesel fuel, switching to natural gas would actually be a negative change for climate efforts. That’s quite an important implication.”

On the issue that has tilted the playing field in recent years – the price disparity between heating oil and natural gas – there have been signs of hope in recent months. Cold weather exposed the natural gas supply issues affecting New York and New England and caused spot market prices to skyrocket, which will result in some $400/month natural gas heating bills, according to a recent report by the Washington Post.

The combination of cold weather and natural gas supply constraints has also caused an increase in supply interruptions in which natural gas customers who agree to interruptible service have been forced to stop using natural gas.

Getting this information into your price protection portal will work to your benefit. Prospects will find it easier to trust you when they find you being informative and transparent about your price protection programs. They’ll also be less likely to assume that natural gas will maintain its price advantage, and they’ll more likely to understand that natural gas not as different from oil as they have been told.

Price protection can be a daunting operational challenge, but it is also an opportunity to give customers what they want and differentiate yourself from the competition in the process. If you’d like help building or improving an online price protection portal, please give me a call at 800-796-3342.

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