This article was originally published in our monthly LPG Storage e-Newsletter on February 29, 2016. In the article, you can read about a growth strategy one successful propane business owner uses. The business owner we featured was our very own Mike Svoboda – managing partner at Axmen Propane and partner here at Alliance Truck and Tank. We received a very favorable response to the article from our subscribers so decided to post the information here as well. We hope that you find it useful and if you’re interested in subscribing to our monthly newsletter, email me email@example.com or call our toll free number 800-632-2038 and we’ll be happy to add you to the list.
In this special edition of the newsletter we want to share a recent conversation with Mike Svoboda, managing partner of Axmen Propane in Missoula, Montana about his plans for growing his business this year.
Mike explains that, “It’s March and if you haven’t already done so, it’s time to start thinking about your growth plans for the 2016-2017 winter season.” Mike suggests asking yourself a question, “Do you have excess summer labor? If so, put them to work knocking on doors.”
For years, Mike did what many other propane marketers have traditionally done and that’s send out mailers to targeted areas. Those mailers typically generated about a 2-3% response rate of which roughly 10% result in switchouts. Now when things start to get slow, Mike has service and delivery personnel knocking on doors.
This is not a random exercise, but rather a well thought out strategy to develop increased customer density. Mike says, “Starting in April and going through August, our service and delivery people are assigned specific routes based on proximity to the nearest bulk tank. They are given instructions to knock on doors on both sides of existing customers. This is the key to increasing density and enables profitable growth with minimal additional cost.”
Again, this is not a random exercise to just keep staff busy. The idea is to achieve profitable growth by increasing customer density in existing routes that are nearest to your bulk tank. Mike says, “Don’t make the mistake of trying to go too far outside your territory. Delivery costs to the outskirts of your territory can be as much as 3X greater than those within your territory.” Mike adds, “You need to be specific about which doors to knock on. Ideally, you want competitors rooftops that are on either side of existing customers.”
Mike says make sure your employees are prepared with some leave behind material. Mike likes to use a door hanger which has a business card tear-off at the bottom. If the resident is home, the door hanger can be handed off, but if they’re not home it’s left on the door handle where it’s easily seen when someone comes home. Another favorite of Mike’s is a business card magnet. Most people see value in a magnet and will leave it on the refrigerator or other highly visible location for years at a time.
To improve customer retention rates, Mike started having his service and delivery people leave a thank you note. On one note is a promotional offer for back-up propane powered generators. Mike said, “Soon after we started leaving the notes, we had a spike in generator sales and that in turn has led to more propane sales.”
Whether it’s a door hanger, business card or thank you note, Mike says you want to make sure the material clearly spells out the products and services you’re promoting and has easy to read contact information. And make sure you order plenty. Mike’s team has gone through 5,000 door hangers in just the last three months.
And what about the results? Remember the 2-3% response rate Mike was seeing from mailers? Mike says the response rate using his “knocking on doors” method is about 10% of which about 17% result in switchouts. So for every 1000 doors they knock on, Axmen Propane gets 100 phone calls on average and picks up 17 new customers while their competitors lose 17 customers.
One other note, Mike says, “If you’re looking to add a new bulk plant, make sure you have a solid plan for growth around that plant.” He suggests asking yourself these questions; Do you already have a customer base in the area? Is there opportunity for many switchouts? How many rooftops are within a 30-mile radius of the proposed new plant? Is there new construction or residential housing growth in the area that requires propane service?