Tuesday, April 21, 2009

Customer Programs in Electricity

The majority of postings on this site are related to commodity markets. Why? Because I find them interesting and dynamic, and because my readers feel the same way. Commodity markets are inherently interesting because they change so quickly. Also (and this is kind of a drag), we are exposed to commodity price in our businesses.

So if the majority of postings are on the drivers of commodity prices, would it surprise you to know that I feel that commodity price fundamentals are not the most important thing that this site communicates? It is true...most of my postings are interesting and important (arguably) - but not crucial to business success.

The following post IS crucial to business success. It deals with providing customers choice and certainty. I have posted previously about how developing customer programs like budget billing, fixed price offerings, and not-to-exceed (cap) price offerings - and how these programs are integral to a business's success. Why do I feel this way? They create customer freedom to choose. Customer certainty. Customer flexibility. Customers can be offered program entry points at multiple times during the year and customers have the ability to spread their costs evenly over a number of months are the happiest customers. Per Gallon Price becomes less of a hurdle. Value is added above the delivery of the molecule into the customer tank.

Here is more proof, via Yahoo Finance:
DALLAS (AP) -- At TXU Energy, the biggest electric company in Texas, the fastest-growing billing plan is one that lets customers lock in the price of power for one or two years.

"It's easier to plan that way, and I think you're saving money," says Brian Bell, an advertising salesman who signed a 2-year, fixed-price contract for electricity at the 1,500-square-foot Dallas town house he bought last year.

Other homeowners across the country are locking in prices now on electricity for summer cooling and heating oil for next winter. Heating oil prices are nearly 60 percent lower than they were at this time last year, according to Energy Department figures.

Natural gas prices have fallen as well, which not only affects the price homeowners pay for gas but the price of electricity produced by power plants that run on gas.
Our deregulated competition is beginning to offer flexible payment terms - not selling price but selling value to the consumer. Will our industry be early adopters of this customer service, or will our competitors build a competitive beachhead and some momentum in this regard?

Embracing these programs satisfy a customer need. They allow the local propane company to offer piece of mind to the customer, and make paying the heat bill feel like paying the cell phone bill, or the water bill.

In grad school, I learned that businesses should "make it easy for their customers to give them money." The more flexible our businesses become to our customers' desires, the more customers will embrace us as their supplier - regardless of price.

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