Shippers want to do business with regional carriers, but most don’t. In fact, less than 10 percent of shippers with billion dollar parcel spends say that they make significant use of regional carriers.
That’s according to Rob Martinez, DLP, CMDSS, President and CEO, Shipware LLC. This industry expert, columnist and frequent presenter surveys shippers about their needs. He is often struck by the disconnect between what shippers want to hear from regional delivery companies and what those very same delivery companies want to say to them.
“When I’m speaking at industry conferences for shippers I’ll survey them about their familiarity with regional parcel carriers. I’m always surprised at how little these shippers with enormous annual parcel spends know about regional carriers. In fact, our research says that two out of three of these shippers are extremely interested or interested in exploring the option of shipping with regional delivery companies but only one- third use them.”
Why the disconnect? Martinez says the two sectors don’t speak the same language.
“Shippers say that they are interested in exploring the idea of working with regional delivery companies for six reasons: cost savings, fewer surcharges, better one or two day delivery footprint; more favorable DIM thresholds; flexibility and simplified billing,” he says.
Shippers frequently look to regionals for cost savings. “We asked shippers what they plan to do to keep costs in check over the next 12 months,” says Martinez. “Fifty-four percent answered that they were planning to increase their use of regionals and USPS.”
Shippers are frustrated by the accessorial charges piled on by the Big Two delivery companies. “These surcharges frustrate the shippers more than discounts on published rates. In fact, they’d rather see fewer surcharges than better discount rates and they know the regionals offer this advantage.”
The simplicity of the contracts offered by regionals is attractive to big shippers. “Many of them are fed up with the kinds of contracts involved with the Big Two. They like that regional carriers have much simpler contracts. We recently negotiated a contract for one of our clients with one of the large carriers and it was 75 pages,” he says. “There were so many conditions and a lot of ‘gotchas.’ These included revenue-based incentives that changed week to week. Regional contracts just don’t look like that. They are straight-forward with no revenue-based charges and firm commitments to rates and services.”
Big shippers also value the flexibility that regionals delivery. “Ten percent of the large shippers who use regionals say they don’t realize a cost savings from them, but they use them because the service is so much better. They love the wider Zone 2 footprint that regionals provide for expedited delivery, their same- day service options, and their later pickups and earlier delivery times,” he says.
Yet, with all these competitive advantage why is it that one-third of shippers say they are unfamiliar or not very familiar with the benefits offered by the regionals? A good part of that, according to Martinez, is that regionals aren’t listening to what shippers value about them.
“There’s a disconnect between what the carriers think is important to the shippers and what the shippers think. That means that when regionals approach big shippers they aren’t emphasizing what the shippers want to hear. We did a survey of regional carriers themselves. We asked them to tell us what benefits they offer that they believe would be most interesting to customers. The answers were surprising and indicated a lack of understanding of just what these shippers want.”
While both shippers and regionals understood their competitive cost advantage, regionals didn’t understand just how critical it was in making that choice. “Cost savings was the number one reason that shippers chose regionals,” says Martinez. “In fact, 97 percent said they use regionals specifically for this reason. And, while the regionals understood that, they didn’t get the importance of it. Only 67 percent of regionals said cost was important and 33 percent said it wasn’t important at all to Shippers.”
And, while convenience and service enhancements were something both agreed on, shippers put these factors much farther down their list of priorities than the delivery companies did. Thirty-two percent of shippers said it doesn’t factor in at all in their decision to use a regional carrier.
“There’s no question that shippers value the customized pick-up and delivery options offered by regionals, but these are much farther down on the shipper’s list of importance. Yet many regionals lead with this benefit in their marketing to shippers. To give you an idea of the disconnect here: only 12 percent of shippers thought this was very important but 67 percent of carriers said it was.”
Both shippers and carriers were aligned when came to quality of service as a competitive advantage for the regional carrier. It was number two on the shippers’ list and number one on the carriers’ list. Both said the quality of service is very important or extremely important. Here’s one place they agree. That tells us that the regionals have to be laser-like in their dedication to and promotion of the quality of their service,” comments Martinez.
So what’s the bottom line for delivery companies that want a piece of these shippers’ big parcel spends? Martinez offers this advice:
Emphasize what matters to shippers in your marketing and sales process
“Be mindful of what shippers need to hear to make the decision to use you. Give the people what they want and then talk about what they want to hear – cost savings, simplified contracts and flexibility,” he says.
Be mindful of the downside of using regionals and shore up these deficiencies
“There are disadvantages to shippers in using regionals and you need to demonstrate that you’re aware of them, address how you’ll overcome them and showcase the importance of what you’ll do to compensate for them,” cautions Martinez. Among those deficiencies he lists are:
o Limited delivery areas
o Lack of single source convenience
o Tracking that some shippers view as not being on par
o Concerns about lost discounts from the Big Two
o Vehicles and the drivers that are less than professional
o Worries about inconsistent service
o Fears that customer service won’t be up to their standards
o Issues with billing and reporting.
Avoid going overboard when offering savings
While cost-savings is a critical factor in this choice, Martinez advises that delivery companies may be going too far. “We asked shippers what percentage of savings they would you need to encourage them to explore regionals. Most said a 15 percent savings would be enough to get their attention. We know many regionals are giving 30 percent savings over the Big Two and our research says they don’t need to do that. You don’t have to cut your margins that dramatically to get a good shot at the business,” he counsels.
Martinez sums up his advice to regionals this way: “Shippers want to do business with regional carriers. I know they are open to it. Regionals just need to listen to their needs, make the most of their own advantages and stay mindful of what stops these shippers from doing business with them. Two out of three shippers say they are open to doing more business with regionals. That’s an open door to success that regionals just have to step through.”
Article written by Andrea Obston, CLDA Director of Public Relations (April 2015)