Creating a Value Proposition to Energy Markets

Aug. 1, 2014
The burgeoning energy rental business is obviously a huge driver for the equipment rental market and companies in that business are likely to want to rent just as much as contractors in traditional construction.

During a recent RER webinar on rentals to the growing energy sector, a listener asked if equipment rented to this customer segment might be subject to more wear and tear than in average construction operations. The answer? Yes, that is the case sometimes and that should be part of the consideration when rental companies determine rates to this customer sector.

Another attendee asked if rental companies should charge more for delivery to this segment, especially when making deliveries in the middle of the night. The answer, similarly, was that those delivery rates should be part of the value proposition and charges should reflect that. (And by the way if you didn’t have a chance to listen to this webinar, it is archived and available here. You just need to register.)

The panelists pointed out that many of these oil-and-gas companies are big players. They should not be “nickeled and dimed” constantly over every aspect of the rental service provided to them, noting these companies have high expectations. The oil-and-gas business is the epitome of a 24/7/365 business. These customers usually are working around the clock and, consequently, they expect their rental providers to be doing the same if they want to service them. They expect equipment availability immediately round the clock, and expect service availability quickly and at all times. If you want to serve that type of business, that’s what you need to offer.

You must understand those customers’ needs and be well prepared to meet them. You’re swimming in the deep end now, so you’d best know how to swim. You’re batting in the big leagues now, so you’d best know how to hit a curve ball and a slider as well as a fastball, and you need to expect the pitcher to mix up his repertoire and throw something unexpected. If your performance isn’t professional, you won’t make the grade. It’s that simple.

That said, the reality that the rental industry tends to undervalue its own services is well documented and not a new concept. In the energy rental market, you’re dealing with customers that are accustomed to high stakes and have made big investments to be in the business they are in. They expect the rental companies they deal with to be as professionally committed and prepared for a sophisticated level of business as they are. They are accustomed to charging a lot for their own services, so although they, like any business, want to keep costs down. They do assume a professional service will charge a professional price.

The burgeoning energy rental business is obviously a huge driver for the equipment rental market and companies in that business are likely to want to rent just as much as contractors in traditional construction. Whether it’s building compressor stations, pipelines in remote areas, roads to remote areas or construction of infrastructure to support energy efforts, the work is high pressure and immediate, and the stakes are high. The reasons rental makes sense in every other area of construction are likely to be magnified here. The secular shift towards rental has clearly made its presence felt in the energy rental markets.

So, again the level of performance required of rental companies must rise to a higher level. Be prepared as you consider what it will take to succeed in that market. And be prepared to charge accordingly.

The National Oceanic and Atmospheric Administration, the National Weather Center and other experts have predicted 2014 to be a lower-than-usual year for hurricane frequency, as was 2013. However, these prognoses come with a disclaimer. The number of hurricanes do not determine how many will reach land, or their severity. And as we so recently saw, storms, such as “Superstorm Sandy” can hit in New York City, New England and other places not generally accustomed to such events.

So for those of you who live and do business in or near storm-susceptible zones, or even not so frequently hit areas, I hope you are making or reviewing your storm contingency plans to help your customers through the stormy season. Don’t be lulled to sleep by the “likelihood” of a quiet stormy season. Get those pumps, generators, light towers and chainsaws ready and work together with your customers to be prepared. Your ability to make plans with your customers and help them be prepared will go a long way in creating strong and enduring business partnerships.