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Pricing they can believe in.

Tags: Information   Pricing   Shipper

Oliver Evans on Wednesday, September 11, 2013 3:30 PM


Once upon a time, I expected to pay a lot of money for a printer, and very little for the paper and ink needed to make actual prints. As you and I have meanwhile learned, nowadays things have been turned upside down: printers are ridiculously cheap, but the proprietary ink cartridges you need to make them work are horrendously expensive. Which got me thinking…

Airfreight is (unfortunately only from the customer’s perspective!) darned expensive. And the price tag depends on how much freight, in terms of volume and weight, is to be shipped to where, at what speed, and including which special processes. Put very simply, we get paid for delivering physical objects to their destination.

But is this physical movement of goods really what gets our customers’ blood racing?
An average shipper never sees us doing our job. Nor does she see her goods leaving her yard, or arriving on time and in the right condition at the consignee’s yard. And really, there´s no need for her to see it all in person: she pays her money, and – rightfully - expects the job to get done.

Yet, does she not appreciate the confirmation that we send via messaging that her goods are on their way, or indeed have arrived? Isn’t this information precious and vital for our customer’s other processes?

Information is the only touch point our customer has with her consignments.
Information is what she needs to keep her business processes flowing.
Information is what she appreciates, when it is available, and forcefully demands - when absent.
Information – yes, we are in the Age of Information.

What does all this have to do with pricing? Well, as I contemplate the complexity of our own various pricing mechanisms and components around the world, as I think about the bewildering jungle of different prices and surcharges that our customer must assess in making her choice of who will handle her next shipments, I suggest:

Let´s stop charging our customer for what she already takes for granted, the physical transportation of goods.
Let´s charge her for something she really longs for: Information.
And in so doing, maybe we as an industry will focus better on improving the area of service in which we collectively deliver the least quality today, namely information.

Charging for information will not be much stranger than printer manufacturers giving their printers away for next to nothing and then charging us the moon for the ink.

And this might just be the pricing, our customer can believe in.

Thank you for tuning in.

Oliver


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Published by Oliver Evans on Tuesday, September 17, 2013 5:17 PM
Dear Dirk, we seem to agree on the diagnosis (the majority of legacy carriers are unable to deliver true information value), but not on the cure: my guess is that if revenue for information delivered was the only source of income for carriers, many would shape up pretty quickly, and any others would go to the wall, both of which outcomes, I guess, would be good for the industry.
Published by Dirk Steiger on Thursday, September 12, 2013 8:49 AM
Oliver, You made a good point. Yes, and you are right that information has turned into a strategic weapon in almost anything in our life. But with a growing amount of consolidated shipments, how many shippers even don’t know that e.g. Swiss and not someone else is flying their goods? That’s the big difference to the integrated carriers that are dealing directly with shippers and consignees and legacy carriers, dealing primarily with forwarders and consolidators. From a research project we understood that information is most critical to the mid- and long-term success of our entire industry. Guess how many hours are wasted every day just within Europe as interfacing between road and air at airports doesn’t work as smooth as it should? How much shipments are being delivered late without a proper notification given to waiting party? How much does it cost the airfreight community every day to deal with such deficiencies – every day and around the globe? Last but not least, how can we manage future growth if infrastructure at important airports will remain limited with very little, if any chances to expand? At least in Western Europe this is a concern already. So let me kindly suggest remaining with the current pricing for the time being unless the majority of legacy carriers are able to deliver true information value. And this does not end with the men in the middle rather than the end-users. It’s another industry challenge however as the number of those capable to invest into new technologies, is already limited because of the too low ROIs.

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