REvolutionary Way to Market Home he ating fuels advertising costs, sales commissions or sales performance incentive funds (spiffs) and tank inspections, among other expenses, estimates indicate that it costs somewhere between $500–$900 to replace a customer, depending on the particular market. While all this sounds ominous, improving the dynamic doesn’t require a massive change. In their groundbreaking book, Leading on the Edge of Chaos, authors Emmet and Mark Murphy show how a 5% reduction in customer defection rate can increase profitability by 25–125% over time. A 2% increase in customer retention has the same effect as decreasing costs by 10%. If things go according to plan, Paygo is targeting a 20% increase in their clients’ customer retention, and a 15% increase in attracting new customers. That’s a very potent combination. How Paygo changes the game On the retention side, the Paygo effect is twofold, according to Phil Baratz, Paygo’s CEO. “First, if a customer doesn’t have to pay for fuel that just sits in their tank, and it’s often hundreds of dollars’ worth, why would they want to go back to giving up their money faster?” asked Baratz. The second aspect is even more significant. At any point in time, a customer has fuel sitting in their tank that they’ve bought but haven’t paid for yet, because they haven’t yet used it. If that customer wants to leave for another dealer, they must first pay that obligation. It’s the same sort of “barrier to exit” that makes propane retention so much greater than oil when the company owns the tank. “It’s not that they can’t leave,” said Baratz. “It’s that the hassle and cost take the How Paygo works: Paygo is designed to fit seamlessly into its clients’ existing business framework. • A customer enrolls by signing an enrollment agreement with you • On their next delivery, their billing switches to the Paygo method • Customer continues to get a delivery ticket, just as they do now • Customer pays monthly for the fuel used that month at the price for which it was originally delivered • Customer gets your regular monthly statement, which will now include their usage charges and a running account of the fuel that’s been delivered, but not yet billed • Customer continues to pay you according to your regular billing terms, but instead of paying from date of delivery, they pay from date of statement • After each delivery, the Paygo system automatically does a true up, like when the utility company reads the meter, and adjusts the bill up or down on as needed to stay on track • Paygo integrates seamlessly with popular software systems (ADD, AWE, Cargas, Blue Cow) with more on the way • You set prices, credit terms, etc., just as you do now • Paygo reimburses you for the cost of the fuel you supplied to the customer within 10 days of your delivery. You reimburse Paygo as you bill the customer for that fuel when they use it 12 ICM/March/April 2015
ICM September-October 2014
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