Freight rates have expiry dates
In a commoditized industry like trucking, getting a price increase can seem impossible. Every day, truckers tell me that loyalty is fleeting, with many customers willing to switch for pennies. There seems to be an odd assumption by truckers and shippers alike that freight rates never expire. How many suppliers do you use that charge the same price they did five years ago? My guess is few and far between. The problem runs deeper than the idea that our industry can’t get its fair share of rate increases. It’s the fact that many fleets don’t bother to try. The costs of equipment and compliance are on the rise and no one can afford to leave coin on the table. Even a measly 2% cost of living like increase, compounded annually, can have a profound impact on your bottom line. With the looming Electronic Logging Device mandate expected to create a capacity crunch, now is as good a time as any to stop waving the white flag. Here are some things you can do to boost the odds of a bump in rates.
No service, no increase
If you’re consistently able to keep your promises to customers, then you have a fighting chance of getting some form of annual increase. Customers will be afraid to replace you because of your importance to their supply chain. When you don’t keep promises you’ll be considered a commodity and be treated like one. If you want a raise, keeping promises is the first place to start.
Our industry is its own worst enemy when it comes to pricing. Time and time again the shipping community tells me that the third word out of every sales rep’s mouth is “price”. Instead of asking what the customer is paying, why not ask for a tour of their plant? It might seem like an old school strategy, but actually learning about a prospect and their business will give you a chance to uncover what they truly need. You’ll be surprised how often the needs are not in the form of cheaper rates. You’ll also help attract the type of customers who will understand and appreciate your need for a price increase.
Live by the sword
Cutting rates is the best way to attract the worst type of customers. If a customer will switch carriers for a song, I guarantee they will do the same for the next trucker who bangs on their door. You have zero chance of ever getting an increase.
Oddly enough, I used to get excited calling on a shipper who had been loyal to the same carrier for years. Sure, I knew it would take longer to secure their freight, but I was confident that if I had enough quality prospects in my sales funnel, the ones I did close would be winners.
Every rate quote should expire after one year or less. At MSM Transportation we made the date of the first quote the customer’s anniversary date. If we quoted a customer on April 1 then every quote – regardless of when it was given – expired on that date every year. This strategy sent a strong message to the customer that we were serious about our craft. Customers will always take the path of least resistance and are more likely to look for savings from those who are perceived as the weakest suppliers. Expiring rates
also set the table for a yearly checkup to discuss the health of your relationship. Rate increase discipline is a culture that starts with the very first quote. There’s no better time to start than now.