When shipping volumes drop, parcel and freight carriers worldwide face tough decisions. How can you keep your network profitable during a downturn? The right pricing strategy can turn a challenging situation into an opportunity to improve performance and customer focus.

In this article, we explore actionable pricing strategies for logistics providers—from parcel delivery networks to freight carriers—when volumes decrease.

1. Assess the scope and magnitude of the decrease

Start with data. Use analytics to evaluate:

  • Which industries, lanes, or customer segments are affected?
  • Are the declines seasonal, regional, or structural?
  • How do your current shipping rates compare with market benchmarks?

Understanding the depth and location of volume losses is key to making informed decisions.

2. Identify the root cause

Ascertain whether the decline is attributed to broader industry challenges or specific issues affecting your customers. Do your service offerings align with evolving customer needs, or did customers shift to competitors. If so, what are the reasons behind this shift?

This analysis helps distinguish between external market trends and internal service or pricing issues.

3. Estimate how long the downturn will last

Understand if the decrease is a structural, long-term trend. If so, that situation would demand strategic adjustments in pricing and sales realignment. To the opposite, short-term, transient downturns would require more surgical and temporary measures (e.g. limited time offers). Forecasting the duration helps you apply the right level of response.

4. Align Pricing and Sales Strategy

Craft a joint sales and pricing plan tailored to the situation, addressing pricing actions on the existing customer base, as well as targeted customer acquisition programs (not necessarily involving pricing incentives).

Maintain prices selectively:

  • For transient volume drops limited to certain underperforming customers who already pay market prices and have excellent service quality, and brand loyalty.

Consider reasonable prices increases, if:

  • Volumes fall significantly below initially agreed commitments during contracting;
  • Dedicated resources with fixed costs strain economics due to decreased volumes;
  • The value of goods is high in comparison to shipping costs;
  • Some lanes remain highly utilized and sought after, in order to manage capacity and improve profits on those lanes.

5. Use smart incentives to recover lost volumes

Offer targeted and conditional incentives in scenarios such as:

  • If the volume loss results from customers shifting to competitors and a price gap exists compared to market rates;
  • If the value of commodities shipped is relatively low compared to shipping costs;
  • Develop conditional rebate programs to grow non-exclusive customers’ share of business;
  • Implement targeted promotions to foster new business growth, where more volume is required: from specific origins, on specific lanes, for a predefined time frame, and limited in quantity.

All the above responses can be combined and implemented tactically on a lane by lane, direction of trade, customer group and customer level, in order to maximize your profit in times of economic turmoil.

Leveraging Pricing & Revenue Management Technology

By analyzing market dynamics, understanding customer needs, and leveraging technology, carriers can optimize pricing, maximizing profits, even during economic turmoil. In such scenarios, leveraging pricing technology like the Open Pricer platform can be a game-changer for carriers:

  • Enhanced Agility: Adapt pricing strategies promptly, enabling agile decisions that balance volume and profit effectively;
  • Identification of Opportunities: Identify revenue opportunities and prevent revenue leakage with granular insights.

Contact us to explore how our solutions can elevate your profitability during challenging times.

Delve into Costing for Pricing in the parcel and postal industry.

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