Bioheat® 2.0 – The Next Generation of Home Heating

by Michael Devine, AMERIgreen Energy

With the approval by ASTM International of biodiesel blends of B6 to B20 earlier this year, the oilheat marketer now has a new opportunity to provide a home heating oil energy source to the consumer that contains up to 20 percent of a renewable fuel. BioheatÒ 2.0 represents a paradigm shift in the distribution of home heating oil for both the heating oil marketer and the home heating oil consumer.

Research Takeaways – Bioheat® is a Game Changer for Consumers

The most recent survey conducted by Warm Thoughts communications entitled “2015 Oilheat Consumer Research Study” is illuminating, somewhat alarming, and without a doubt comes to the conclusion that Bioheat® is a potential game changer for the oilheat industry. The study surveyed oilheat consumers in the states of Connecticut, Massachusetts, New Jersey, Maine, New York and Rhode Island. Some of the important takeaways from the study are that younger-aged homeowners are most likely to be interested in converting from oilheat to natural gas in the first five years. However, this demographic is also the most interested in using biodiesel blends. The potential impact of marketing BioheatÒ was staggering: Forty-eight percent of those homeowners interested in converting from oilheat to natural gas indicated that they would be less likely to convert if BioheatÒ was available to them.

These results reaffirm, for many of us, what we have believed all along: Doing nothing and ignoring the benefits of biodiesel marketing will ultimately erode your customer base and weaken your business. BioheatÒ 2.0 is not just a blend level; it is a way of moving forward or what we at AMERIgreen like to call “the Biodiesel Program.” The education and outreach of biodiesel messaging are essential elements in the program. Successful biodiesel distribution is a direct result of the time and capital put into communicating the fuel quality improvements and environmental benefits of using biodiesel-blended fuels. While this may mean expense upfront, it also differentiates your organization and provides some new value-added benefits of being one of your customers.

Distributors Benefitting From B20 Blends

BioheatÒ 2.0 brings the blend levels to a threshold that is significantly more impactful than a B2-to-B5 blend. On more that one occasion, we have received responses from distributors and homeowners that a B5 blend was insignificant or a marketing ruse. Although we can recognize the differences, B20 is a much more significant blend level — a measured increase that allows our industry to move renewable home heating to the next level. Our AMERIgreen distributors who have moved to the B20 blends over the years have experienced reduced oil-related issues. They attribute the solvency and lubricity benefits of biodiesel as the direct contributors to reduced service calls. The service technicians report cleaner nozzles, filters and heat exchangers. If your organization provides service contracts to your customers, these reduced service calls will go right to the profit and loss of your service department. The bottom line in our experience is that B20 blended biodiesel is simply a superior fuel.

With the increase in blend levels of biodiesel there also becomes increased competition within the whole heating oil gallon. The pricing discrepancy between biodiesel and heating oil is very fluid depending on the ebbs and flows of each of the respective markets and the state limits with regard to sulfur content. The fact is that over the past five years biodiesel has traded at discounted pricing differentials, benchmarked against rack sales in many markets. When we evaluate these improved economics over a period of time we ultimately discover blend margins. The blend margins can be nominal or significant at times, but the bottom line is the distributor will only realize these blend margins if they are marketing the program consistently. This is the little secret that distributors don’t share willingly at AREE or NEFI conferences.

Having had the pleasure of presiding over a family retail heating oil business many years ago, I can empathize with my colleagues when they receive a letter from a fellow competitor informing them that they are now taking over the service and supply of one of our cherished customers. Depending on the competitor and the marketing scheme, there may be other letters to follow. Our initial takeaway after the anger has subsided was, “There goes another customer to the bait-and-switch, the sum total of effective oilheat marketing.” What was the marketing call to action? Where is the value-added propositioning that would cause our customers to leave us? It always felt like whichever heating oil company was willing to lose the most margin up front and had the best deal, wins the new consumer. The transitioning of our company to a BioheatÒ marketer in 2004 changed the narrative for our organization: We were able to tap into a new message that made us unique in our marketplace and not just another retail home heating oil company. BioheatÒ 2.0 is a renovation of an old business plan that changes the way your market views your organization and, I would add, in an overwhelming positive way.

Think about the opportunity to reach out to these former customers lost through the years to the bait-and-switches. Our old friends (customers) in many cases, may be in fact disappointed or feel duped with the new energy provider, however they may also feel a little embarrassed to come back on their own without a good reason or call to action. Enter BioheatÒ 2.0.

Bioheat® 2.0 – Forever Changing Customer Relationships

BioheatÒ 2.0 is pretty simple. Consider the profile of the first-time homebuyer in your service area: who they are and how would they most likely evaluate the difference between heating oil and natural gas? Consider the overwhelming process that is a first-time home buying purchase: The experience can be daunting. I think we would agree that a majority of the new homebuyers would prefer to buy a home that has natural gas as its home heating source, but this alone would not be a primary factor of the home purchase decision. The survey indicates that the new homeowner who was extremely or somewhat likely to convert from oilheat to natural gas would be 74 percent likely to convert in the next 5 years. This is our moment, the defining point in our industry when the oilheat marketer needs to make the transition to the BioheatÒ marketer and firmly separate themselves from your grandfather’s heating oil company to a 21stcentury, renewable home energy provider. Retaining 48 percent of these new customers who might become natural gas conversions requires changing the calculus.

Bioheat 2.0 is the game changer, improving the optics of your corporate image, forever changing the customer relationship and most importantly providing a viable future for the BioheatÒ marketer.

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