Retail Energy Blog

How Consumers Are Reshaping the Propane Industry and Why It Presents a Great Opportunity

5/6/2019 - Tim Cole

"They want high quality service at low prices, they want to be catered to"

These days, it seems like you cannot pick up a trade magazine or read a blog post without finding a story about declining volume within the propane industry. A lot of smart experienced people are ringing the alarm bell and, without piling on, they are not entirely wrong to do so. The situation is real. By most accounts, volumes are down about 25% since the turn of the Millenia from 12 billion to somewhere near 8.5 billion. If there is a thin silver lining, it’s that volumes got nearer to 7 billion at one point and, thankfully, we have clawed a chunk of that back.

Pundits and dealers are aware of the systemic challenges driving down demand for propane; higher and more volatile prices, natural gas, electricity, and lack of consumer awareness. While there is no need to rehash all the debate over these, a couple stand out as noteworthy.

First, while volumes have dropped, margins in most regions have nearly doubled in the same period. While that might sound like a good thing, it is likely more reflective of an effort to offset profit hits caused by volume erosion. This only exacerbates the price issue for customers. Second, the push to electrify everything possible is accelerating and has the backing of many state governments (often wrapped into carbon tax advocacy). This poses a risk to every form of energy, especially propane and heating oil.

In fairness to dealers, it is probably more the shock of what has happened than the facts themselves that has them most unnerved. After decades of immovable profits, strong customer retention, and an unshakable demand the industry is now facing challenges on all fronts, some never seen before. The valuable lessons of the past and the way we’ve always done business somehow seem powerless to stop the downward trends.

The current generation of propane operators and the vendors that serve them are facing a pivotal moment. Lucky for us, a lot of them have some very good ideas. And they are all empowered by the belief that the propane business is not dying, it may actually be an emerging growth market. All industries mature but many adapt and thrive when bold changes are made. Old school "mail order" led to Amazon after all.

The first change gaining traction is simply a mindset shift. Customers are more important than a reliance upon operations. Trucks, storage, appliance repair, safety and training make propane dealers smile. And while these are all obviously important, nothing is nearly as important as smiling customers. When you over focus on operations, you typically fall short on the consumer side. And if we are honest with ourselves, this is a problem for the industry.

New consumers (and we all fit this category) are brutal. They want high quality service at low prices, they want to be catered to, and they want to be in control. They demand ease of doing business and would rather engage online than use a telephone. Self service is an expectation not an option while snail mail is becoming nostalgic. In short, they have precious little patience for businesses that have not modernized to deliver the same buying experience they get elsewhere.

This poses a unique challenge for the propane dealer community. Not because they are unable to fulfill the needs of this new customer, it’s more that what is being demanded flies in the face of the historical value proposition. Propane is an industry with a proud history of serving customers the "traditional" way. Lots of human contact, phone calls, postal mail, and inviting visits to your office. There is also a strong sense of community in the propane world. So, all this talk of new consumer behavior, Amazon, and digital engagement seems, in some ways to conflict with the values we hold dear. But they don’t. Learning why is the key to success.

 

Here are a few things you can do to improve your ability to adjust to a new breed of propane customer.

Implement a Customer Experience Strategy: Take a look at the entire journey a customer takes with you, from the moment they learn of your name to the many years as a loyal patron. Assess how you do in each phase of that journey and always keep the Voice of Customer in mind. Are you doing things they expect? Are you missing certain things? Is your team trained to represent your brand the way you want? Become a student and learn to understand these new behaviors (it is a science and not gut feel). Do surveys, involve customers in your decision making. Put them first. Delivering the best Customer Experience in your market will lead to loyalty and growth.

Embrace an "omni channel" business model. There is no doubt many customers, especially of certain generations, still like the traditional business model. You obviously cannot abandon it. But you can improve it with things like better billing documents and integrated marketing. But acknowledge that many more are demanding to communicate with you online and after hours…and want to perform as much via self-service as they can. It’s almost like having a second business or, at the very least, a virtual CSR team. Research the best solutions to provide this internet-based customer with the tools they want. Consumer focused technology is your best investment in today’s complex business environment. And know that a simple payment portal is not enough.

You have to be online and it cannot be a billboard. Over 70% of fuel customers go online to check out a new company before they switch. If they find a site built by your 15-year-old nephew, they will likely skim right by. Invest in a professional web site and make sure it can answer all the questions customers want answered before choosing you as their provider. Make it fun and educational but always be selling the things that make you better than the competition.

Online portals are now essential. And again, we aren’t talking just payments. A new generation of portals has hit the market that can do everything a CSR can do and more. And do it where your customers want, online. New customer sign ups with all safety compliance, fully automated Budget and Price Plan enrollment, text alerts for deliveries and service…even text-to-pay to speed up receivables. Cross selling for equipment and appliances along with embedded marketing. Even take orders from will call and unpredictable customers and get paid before your truck rolls. No phone calls, no disruptions, and happy customers. Important to note that online fulfillment can cut your cost by as much as 12 cents per gallon.

Keep an eye on the customer owned tank trend. This is still a controversial topic in many industry circles but, regardless, consumers are accelerating this trend. They want control and the propane business is not immune to their determination to get it. Dealers in the Northeast are finding that many of these customers prefer an online ordering process once they have established a relationship and gone through the safety protocol. This is another reason that portals are an essential tool in your Customer Experience arsenal.

Optimism should start to replace the doomsday prophets. Propane has an amazing story to tell and it checks all the right boxes for today’s consumer. It is versatile, efficient, plentiful, and "green". The potential exists for it to become a significant player in the auto fuel market which could make it ubiquitous, enhancing awareness. Above all, it is delivered by dedicated caring dealers who know how to deliver value and security. The only thing missing is our collective ability to get in sync with modern customers. Perhaps a good place to start is making a commitment to spend as much time obsessing about Customer Experience as you do about operations. It is your best foot forward.

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