Nothing sharpens your focus quite like having to tell a customer that you're raising his rates. Let's face it. You're not the U.S. Postal Service. You can't just announce that you're adding two cents to the price of a stamp and know that the masses will just have to go along. This is a competitive business. If you're going to bump up rates, you'd darn well better be able to justify the increase.
Which is why increasing your prices has benefits beyond improving the bottom line. If you're determined to get a fair buck for your service — more than you're getting now — here are some ideas to help you find your way:
-
Do it every year. To justify a rate increase, you have to reexamine what makes you special to each customer and, just as important, how to communicate that message. It's hard work, but a thorough review once a year is a great way to define your value to the customer. There's also a compounding effect to annual rate increases. Over time, it's massive.
-
Don't wait. A lot of people think the best time to implement an annual rate increase is on Jan. 1. I don't think it matters when you do it. Just do it at the same time every 12 months. If you raised rates on July 1, 2008, your annual increase should take effect on July 1 of this year. Don't wait until Jan. 1, 2010, for the sake of convenience unless you're prepared to lose six months of the elevated rate.
-
Don't raise a rate before you've told the customer about it. Make an appointment and explain the increase in person. I know it's easier (and less confrontational) to send a form letter or an email. But this is a business relationship. Your salespeople should let the person they're seeing know exactly what the meeting is about, and they should be ready with specific answers when the customer asks why you need more money to haul his freight. Shippers have a tremendous distrust of carriers that take a one-size-fits-all approach to price increases. They want a rate based on their shipments, not on everyone else's.
-
Pricing is a management function. Don't put your salespeople in a position of having to haggle with customers. Instead, let them focus on explaining why your company is worth the higher rate. That's what they're best at.
-
You don't have to compromise your price to help a customer lower his transportation costs. Explain how you can be more efficient with his freight. Break it down by lane, by zone, by weight break. Can you pick up on Tuesdays instead of Fridays? Does he know the bottleneck at his Pittsburgh yard sucks the margin out of that lane? Be smart enough to help the customer streamline his traffic yet principled enough to stick to your guns on the rate.
-
Don't let third parties off the hook. Load brokers are customers, too. In fact, they're customers who make a lot of money off truckers. They're not exempt from higher rates.
-
Finally, shippers don't want to switch carriers and harm relationships just to save a few bucks, especially when that carrier is an integral and important part of their distribution strategy.
The better your service, the more you're worth and the better your odds. It's that simple.
Mike McCarron is managing partner at the MSM Group of Companies, which specializes in transportation and logistics service between Canada and the United States.
