|
Suez
uses problem solving,
information to win C&Is
How tough is
it to get customers in Texas?
It’s challenging these
days with most C&I customers using competitive suppliers, JD
Burrows told us.
He’s marketing vice president
of Suez Energy Resources North America with about 1,000 C&I
customers in 13 states and the nation’s capital.
Over 60% are in Texas.
That means you have to win
customers away from a competing marketer rather than the incumbent.
It means too that customers
are bombarded with offers and hear almost every marketer make the
same claims of leading in price and customer service.
Customers want concrete solutions
to their own special energy problems, Burrows reminded, and thus
need to know what a marketer is going to do differently from competitors.
So that’s what Suez tries
to do -- to become a problem solver for them, rather than stressing
price – focusing, say, on how it can fix problems such as
with billing cycles and numbers of meters.
Customers with contracts ending are
the targets.
Suez
builds a relationship with customers by giving them weekly reports
and trends in their power use and the industry.
That
gets customers relying on Suez to help them make decisions.
Customers coming off multi-year
contracts are going to face huge price spikes, Burrows observed.
How do I react to a 70-80%
spike in prices in just a few months, customers ask.
Few experts -- if any -- saw
today’s climate coming in May, Burrows added.
Customers are scratching their
heads and are starved for information, he said.
Suez gives them doses of reality
early, he said, helping them come to grips with market changes well
before the contract ends.
Suez created the Price Watch
program to help customers pick the right plan. Price Watch takes
a customer's unique daily load then prices power under several pricing
options.
Customers give Suez a target
price where they’d like to make the switch from variable pricing
to a fixed price.
Suez then lets them know when
their use hits that level.
The firm lets customers sign
long-term deals immediately when prices reach their target, boosting
their flexibility.
Enrollment in Price Watch has
been big because of customer curiosity about where prices are headed,
Burrows told us.
Thus when prices eased a bit
with milder weather, customers wondered whether it was the right
time to lock-in long term contracts or whether they should wait
a few weeks to get more savings or go for indexed price plans.
Right now customers have been
doing more short-term deals, Burrows added.
They’re nervous about
being locked into above-market prices if prices fall in the near
future.
Suez has been hosting online
seminars and giving customers and prospects a forum to learn about
the market’s view.
Marketers now are selling to all kinds
of customers, Burrows said, because competition is so tough.
Even
customers avoided early in competition because they were seen
as a credit risk are being targeted.
Shopping
interest has been up in Texas with higher fuel prices even relying
on the ABCs -- aggregators, brokers and consultants who match customers
with marketers, he said.
Customers want someone to guide
them through shopping and comparing what various offers really mean.
Suez strategy changes in cycles.
This year they've done a lot
of radio and print ads.
Suez is big on advertising
in targeted, high-draw trade publications too.
This year they've bought direct
outdoor marketing for the first time.
Suez too likes business-to-business
and event promotions and has been to six trade shows this year.
It schedules prospect workshops
plus customer loyalty and retention programs and hosts customers
at sporting events.
They use a fleet of agents,
direct sales and telemarketing to reinforce sales efforts.
But how do you get those affluent
decision makers in the corporate world?
It’s tough to reach them,
Burrows knows, and they’re savvy but you can’t just
wait for them to come to you.
They don’t just make
decisions on brand.
Suez stresses face-to-face,
frank discussions about power needs to win big customers.
You have to make it important
in dollar-to-dollar terms for them, Burrows said.
He’s surprised too we
haven’t seen more consolidation in the Texas market especially
with higher fuel prices squeezing everybody.
Aside from Texas Commerce Energy (RT,
2/4/04), Franklin Energy (RT,
5/23) and Utility Choice Electric (RT,
11/21), we haven’t seen many failures in the Lone Star
State.
Certainly the low-hanging fruit
has been harvested in Texas and only financially sound marketers
remain.
Thus M&A talk may be heating
up.
Behind the scenes, Burrows
sees a lot more talks and feelers between firms than what he saw
in January.
Consolidation is coming.
It’s just taking a bit
longer.
The end of the price-to-beat
method at the end of next year should encourage M&A as big budget
incumbents bring their strength to bear in all customer classes,
he predicted.
But Burrows sees small niche
marketers as a permanent fixture of the market.
Some customers are always going
to want a local agent from the community to trust, Burrows explained.
Where's the Texas market headed?
In four years Burrows sees
the number of brands still around 40 but small marketers will increasingly
be affiliated with or backed by about five big suppliers.
The relationships could range
from being a subsidiary to more informal partnerships designed just
to ease specific challenges such as credit.
Discounts in recent price-to-beat
hikes are a concern for Burrows (RT,
10/31).
He understands the political
games behind the discounts but a price to beat that doesn’t
reflect real market conditions shrinks headroom and discourages
competition.
Headroom is getting better as the
price to beat rises, Burrows told us.
He
expects even greater improvement next year.
Suez
reports doing a good job hedging and closely watches energy prices
daily, so it’s been somewhat shielded from wholesale price
spikes.
For Burrows, the real issue
is how the price to beat is designed.
Under the law PTB can only
be adjusted twice a year and changes -- even on an expedited schedule
-- can take weeks to OK.
That means that the price lags behind
real wholesale prices so that incumbents sometimes are forced to
sell power below their cost as TXU did (RT,
9/13).
Then sometimes price-to-beat
discounts are institutionalized, hurting marketers as headroom shrinks
and is locked in until the next change.
Some states, such as Massachusetts,
do a mandatory default service adjustment every three months, Burrows
noted, and that helps.
The Texas PUC is doing a rulemaking
on improving price to beat (RT,
11/4) but the service is to end after next year.
Will it?
Burrows worries about political
pressure -- especially if fuel prices stay high -- delaying the
end of price to beat.
Yet open markets have a future,
Burrows concluded. In his view if the market can survive this gas
crunch, it can survive anything.
Originally
published in Restructuring
Today on November 28, 2005
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