The ability to raise prices due to any crisis, real or imagined, will eventually abate. Many companies are hurt by Covid while a great many are making great hay right now. At some point, companies will return to a familiar spot – striving to justify increases.
One industry that is now a major contributor to price increases is the trucking industry. Good old Economics 101 supply and demand principles is on full display for those companies. The truck driver shortage is being attributed to many increases, regardless of product. But how is it that a driver shortage which has been ongoing for more than a decade can suddenly command price increases where it hadn’t been able to for many years prior? Clearly like so many industries general manpower issues have been exacerbated but driver shortage, per se, has long been an issue.
Over the years, major trucking companies have taken several actions to mitigate wage increases brought on by the driver shortage. Many of them aren’t always obvious to their customers, such as new technologies that have greatly improved forecasting and accuracy, software for efficient routings, new trucks/trailers, and greatly improved safety.
When buyers of trucking services were able to secure capacity, few trucking companies were able to leverage their internal investments for higher fees. They struggled to maintain decent margins. They could identify their improvements, but often failed to monetize them for their messaging to customers. One company we worked with who transported perishable goods tracked their on-time arrival for deliveries to wholesale warehouses, and frequently said they arrived before their scheduled time. The problem was, they arrived before the warehouse staff was not available to accept their loads, so being early provided no customer benefit. From the customer’s perspective, touting an early arrival didn’t merit a price increase.
However, messages such as these might well justify a price increase:
- Less than one claim for every 5,000 deliveries
- Total damage less than 0.1% of freight value
- Our EMR has been at least 40% below the industry average for the last 8 years
- No customer has experienced a financial loss due to our safety issue – since 2010
One of Smart Advantage’s mantras is “if you don’t value what you do for your customer, they won’t either.” Many companies have these kinds of differentiators but fail to communicate them to build their value proposition. We have seen organizations successfully raise prices when they uncover and deliver such messages even in down times.
What outcomes, results, or performance do you provide that you’re not now touting that could help you justify increases? Whether Covid has helped or hindered your business, this should be top of the list for both strategic planning, operations and marketing/sales messaging.