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Columbia Strategizes for Small Margin Retail Business

Columbia Strategizes for Small Margin Retail Business

Serving residential and small commercial customers is a small margin business and Columbia Energy is planning its strategy accordingly for its entry into the Georgia market. Columbia won't be sinking large dollars into a statewide brand name advertising campaign as several other retail marketers did prior to the Nov. 1 start-up of the largest retail unbundling in the country. Instead, Columbia plans an aggressive direct marketing program that focuses on attractive pricing and customer service.

"Our price offer is intended to be in the middle [of the range of retail marketer price offers]," said Jim DeLong, Columbia's residential marketing director. "We're not trying to be the price leader. The price leader probably won't be there at the end of the day. Certainly being the most expensive is not a sound strategy. We try to price our products based on what the customers want, and we try to provide additional value." Columbia is offering Atlanta Gas Light (AGL) customers a guaranteed bundled gas delivery price of 39.9 cents per therm ($3.99/MMBtu), a savings on gas costs of 18% for residential customers and 19% for small commercial buyers compared to AGL's charges over the last six months.

"We've just found that especially in a market like Georgia it's best to let some of the dust settle in the first month while there are efforts by Atlanta Gas Light and even some competitors willing to spend and overspend on advertising to help the market understand what is going on," said DeLong,. "Unfortunately, this business does not support an aggressive brand marketing effort. There are very small margins."

Nor does Columbia believe packaging telecommunications, home security and other products with gas and electricity is the way to go. Others in the Georgia market plan to try that, but it has "never been a model that has worked. If someone makes it work, obviously there would be a reason to reconsider it. But sound market strategy revolves around focus. Why would you buy home security from a gas company?"

Columbia's focus on customer service includes quoting a rate that includes all the costs of gas delivery, including transportation, storage, both upstream and on AGL's system. "There are several competitors not doing that. There's some whose price on its face looks low, but you don't know that because it's just the commodity portion," said DeLong. In Atlanta Gas Light's program, a lot of the charges are being based on a customer's peak day usage, which varies greatly from customer to customer.

Columbia believes it gained a big advantage in Georgia by forming an alliance earlier this week with Amway. There are 25,000 loyal Amway distributors in Georgia. Most, if not all, are likely to sign up with Columbia, said DeLong. "It will be a very strong start." (See related Story, this issue)

The company also is offering a "satisfaction guarantee" and a new proprietary software, called EnergyHelp, which shows customers how to save up to 30% on their total gas and electric energy costs. Columbia said EnergyHelp retails for $59.99, but will be free to Georgia residential customers. Columbia will offer the commercial version of the product for $49.95, a $250 savings.

Rocco Canonica

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