In the world of logistics and shipping, managing a decline in volumes can be a puzzling challenge for carriers. Implementing the right pricing strategy can significantly mitigate the impact of reduced volumes. Here are a few pricing strategies for carriers when volumes decrease:
1. Assess the scope and magnitude of the decrease
Delve into detailed analyses to understand the extent and patterns of volume reduction. Are they specific to certain industries, customer segments, and/or traffic lanes? Additionally, benchmarking customer rates against market prices provides valuable insights into the dynamics at play.
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?
3. Estimate the duration of the downturn
Understand if the decrease is a structural, long-term trend. If so, that situation would demand strategic adjustments in pricing and sales. To the opposite, short-term, transient downturns would require more surgical and temporary measures.
4. Formulate a unified sales and pricing plan
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.
It may also be wise to perform smart prices incentives:
- If the volume loss results from customers shifting to competitors and a price gap exists compared to market rates;
- If the value of goods 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.
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