Automated selling as a way to compete on price
By Stephen Bennett
The will-call business has changed, according to some in the fuel oil industry. For starters, they don’t call it will-call. “On-demand” is the preferred term.
Mark A. Stillman, president of Energy Edge Advisory Group, moderated and participated in a session on E-commerce at the NEFI Visions conference in Worcester, Mass., where he described “a growing on-demand segment which used to be called will call. And it was devalued as kind of junk business.”
Not so anymore, Stillman said in an interview with Fuel Oil News after the conference.
“The heating oil space has evolved a lot in the past ten or fifteen years,” Stillman said, and that is reflected in the trend of modern consumers “buying a lot of things on Amazon and making different choices about how to engage retailers.”
Stillman said “on-demand” business represents nearly half of the volume in the industry in certain markets. “It’s comprised of doctors, lawyers, schoolteachers and firefighters who just aren’t interested in the full-service value proposition,” he said. “They’re more interested in the convenience of control, of doing it online, in a way that they don’t have to be worried about talking to people on the phone. They’re shopping for heating oil the same way that they shop for everything.”
Stillman mentioned the conventional wisdom that “when the weather is warm and prices are low customers just stay put.” But he said they weren’t staying put during the last heating season. “They were shopping online.”
Millennials–in the 25 to 44-year-old age group–“are underwhelmed if not completely uninterested in the traditional full-service value proposition,” Stillman said. “They’re still consumers of heating oil. They’re just typically wanting to buy it online” at their convenience.
“The good news is they’re staying with heating oil,” Stillman said. “The bad news is if you’re a full-service retailer and you don’t have a way of reaching this consumer then you’re essentially ignoring them. You don’t want to ignore them.” Such consumers make up half the market in some areas, he said, including Maine.
The panel at the NEFI Visions session in June discussed the pitfalls of will-call. “If you run will call through your full-service business–answer the phone, take a credit card number, or pick up a check, or give credit terms, and [the customers] are price-sensitive and disruptive–yes they’re margin-killers,” Stillman said. “Always have been.”
The advantage of true e-commerce, he said, is that it allows customers “to find you, learn about you, interact with you, do business with you, pay you, be marketed to–all automated and unattended. Because of that the cost of fulfillment goes down,” and there aren’t so many headaches attached to that segment of business, he said. “You’re just getting the orders.” He added, “They’re good customers. They’re just choosing a different way.”
Still, full-service marketers are often apprehensive about venturing into the will-call or on-demand business, Stillman acknowledged, and the panel at NEFI Visions discussed that.
“The fear is that if you’re a full-service company and you start selling online at a competitive price the full-service customers will get pissed off and leave,” Stillman noted. The panel talked about how to manage that challenge, concluding, Stillman said, that the way to do it is to “make it clear that on demand is self-service. No frills. You don’t get all the bells and whistles of full service. You essentially get fuel, and you get a very convenient online experience. But that’s all you’re getting. It’s another level of service.”
Energy Edge markets a web-based e-commerce platform called Energy Engine that a number of fuel oil dealers are using to sell to on-demand customers.
Robert Spiegel, president of SOS Xtreme Comfort, a full-service dealer in Tuxedo Park, N.Y., uses Energy Engine to run a separate company called Charity Oil, which he founded six years ago and serves as managing member.
“I was losing business to what’s called the on-demand business,” Spiegel said in a phone interview. “I wanted to come up with a way to compete in the on-demand business world but not jeopardize any of my full-service customer base.”
Spiegel hit on a way to use the Energy Engine software to serve on-demand customers through Charity Oil, and support his charitable fundraising as well.
“We’ve always had a charity,” Spiegel said. “I lost my sister to breast cancer, and we had our own foundation for Memorial Sloan-Kettering Hospital in Manhattan.”
Charity Oil is a company where the fuel is delivered by “caring full-service fuel distributors” in specific zip code areas, Spiegel said. So that it won’t erode their full-service customer base, they sell through Charity Oil, which uses a website powered by the Energy Engine software.
Participating dealers follow the charitable sales approach, Spiegel said, “So they’re giving back to the community and also selling on-demand fuel.”
Charity Oil itself has been operating for five years, Spiegel said. “We went from about 104,000 gallons the first year to 800,000 gallons last winter.”
Spiegel said that his full-service company, SOS Xtreme Comfort, did lose some customers to Charity Oil, but he said there were some unexpected gains as well.
“We did notice a tremendous amount of former SOS customers now are buying from Charity,” he said. “We had lost them to other will-call or on-demand companies. We’re actually taking some of them back.”
Spiegel surmised, “They might have been happy with SOS’ deliveries, they might have been happy with SOS’ service, but maybe they weren’t happy with the full-service pricing.”
In addition–“we didn’t expect it to happen as rapidly as it did–it really bolstered our SOS service department. We actually had to take on some more technicians because the Charity Oil customer base is using SOS for air conditioning service, heating service, electrical service.”
Charity Oil’s approach to marketing, Spiegel said, “is letting customers know that the Charity Oil fuel is being delivered by a philanthropic full-service company in your area. So the customers know that it’s being delivered by a full-service company.” That approach also helps participating dealers in marketing their full-service business, Spiegel said.
On the Charity Oil website “everything is zip-code specific,” Spiegel emphasized.
A customer on the Charity Oil homepage is asked for their zip code and once they enter it, the site takes them to the participating distributor who handles that zip code.
Charity Oil and SOS Xtreme Comfort are different companies, Spiegel stressed. He said he wanted to keep the full-service enterprise that is SOS, and the on-demand business that is Charity Oil, apart.