Moving Words – Discount
Written by Timothy Brady.
“Do not compromise on the quality and your customers will not negotiate on the price.” –Amit Kalantri
Discount—the word creates fear in any agency operations department, or van operator fleet. Here are a few things to think about concerning discounting:
- If low price is the only selling point, what happens when the next agent quoting a shipment undercuts the last agent’s rate? The downward pricing spiral begins. How far below zero are you willing to go? (Zero is your break-even point.)
- The lower the profit, the lower the wages and compensation paid to employees and van operators, thus creating lower quality of service to customers, meaning less value to the customers. The lower the value to the customers, the easier the agency can be replaced.
- You must create value in your company by creating value in your service.
- The greater value created in a service, the more money it’s worth to the customer. The more it’s worth to the customer, the longer you’ll keep the customer.
- The higher your service values, the higher class customers you’ll attract, and the more respect you’ll receive.
- It is easier to explain—and justify—rate increases when needed to a value-created customer. A discount-created customer will leave for ‘cheaper pastures.’
When the tariff bureaus dissolved over 10 years ago, the moving industry had a great opportunity to change two downward spirals. One spiral started in 1979 with a 5% discount and grew to exceed 70%. The second spiral followed suit around 1981: with discount rates increasing, van operators started leaving the industry because of continuously decreasing take-home revenue. When adjusted for inflation, van operators’ take-home revenue is less today than it was 10, 15 or 20 years ago.
Set your rates based on your quality of service; work on providing your shippers greater value in services so you can charge a fair and equitable fee. It’s not how you beat the price the other mover charges; it’s how you beat the quality and value of his services. Nowadays the largest retailer in the world no longer advertises that they’re a discount store; you don’t hear them touting their falling prices. Even in retail, discounting is ‘so yesterday.’
Do we still need discounting? Well, what do our shippers want? I’ll bet they want top service at a fair and equitable price. Ask yourself what you want when you’re looking to contract for a service. Is it value or price which is most important? Something to consider.
“The emptiness of your pocket is not a recipe for you to discount the value of your passion!” –Israelmore Ayivor
