Common concerns and issues in the cargo transport industry, when applying an LCC model addressed:
For how long is a quote valid? Freight quotes have instant validity due to the fact that market conditions -which are the assumptions for the current quote- may be changing. The customer is presented with a freight quote and need to confirm his booking right away, if to accept the quote. If the customer doesn't accept the freight quote by booking cargo, price for the same transport may be quoted differently the next time the customer ask, due to changed demand or supply of space.
How can I give space guarantee? You can give space guarantee in return for your customer's cargo guarantee! If the customer doesn't show up with the cargo prior to departure service point closing, you still get paid, as it is the customer's responsibility to bring the cargo on time -or to have the cargo available for warehouse loading, if you offer door-door services. It is only reasonable, that in response to the customer's cargo guarantee, you give space guarantee!
How are exceptions managed? Exceptions are either not supported, or only supported against an extra fee. The extra fee reflects additional effort on the transport provider's side, or additional value created to the customer. Rather than spreading the costs across all cargo, you request an extra fee from the customer who require/benefit from the exception. In the airline industry, exceptions like flexible tickets, meals, priority boarding, extra leg space hardly ever comes for free. Why should no-show, early cargo pick-up or similar exceptions be provided for free in the transport industry?
Can't the customer call me? The clean LLC model entails full self-service, even there are examples of human customer service offerings, like e-mails, online chat or centralized call centers. It is commonly accepted that agreessive pricing comes at the 'price' of less personalized service. You can consider a centralized end-customer service center only supporting a single or a few languages, rather than an 'expensive' distributed and highly localized customer service function.
Can I still work with commercial intermediaries (like forwarders or NVOs)? Yes. Intermediaries are also customers, and all customers are equal. According to the LCC model, no commission or kick-back are offered to intermediaries. All customers have access to the same quotes and are treated the same way, under the same circumstances. This means that the intermediary no longer can charge for access to the transport provider -as the transport provider already offer his transport service to all end-customers directly- and the intermediary will need to charge for other values added to the transport; we all know there are many to offer!
How do I give special customer rates? All customers get same quote under the same conditions. The benefit of large volumes from the customer's perspective are harvested by the customer by a combination of getting the needed space many times -on popular departures- and an agressive price many times -on less popular departures.
How come I can book without login? As all customers anyhow are treated the same way under the same circumstances, and as payment is done as part of the booking process, there is no point in asking for login prior to giving quotes and accepting bookings. Administration of login's are against the principle of simplicity and of self-service, which benefits both the customer and yourself. After a booking is accepted, it is the customer -not you-, who has the responsibility for showing up with the cargo prior to closing -or to have the cargo available for warehouse loading, if you offer door-door services-. Before the booking, all information provided by you can be considered public knowledge.
Can I still offer extra services to my customer? Yes you can, as long as these services can be managed efficiently and can be valued and paid for seperately. Imagine f.ex. that you charge the customer for early availability of cargo at destination -say 4 hours prior to regular availability. This entails additionals value for the customer, as he f.ex. can meet a retail store sales campain. It also entails additional costs on your side, as you have to plan for priority unloading at cargo destination. So it is only reasonable that the customer pays an extra fee for this value-add service.
Will my customers be satisfied even they get less service? Your customers will be satisfied if you deliver what you promise. It is all about setting expectations and meeting expectations. If you set your customers' expectation high and deliver low, you will have a mismatch and dissatisfied customers. If your transport and customer service is crystal clear to the customer up front, and you deliver exactly that, your customers will be satisfied. Let us use an example: Say the cargo availability at destination is Thursday at 16.00 hours. Your customer has specifically de-selected a Euro 50 value-add offer for early availability at 12.30. Will your customer be disappointed that he can't pick up his cargo when his truck arrives at 13.45? You know the answer: He will be perfectly happy as expectations and reality are visible and aligned.
How will my utilization be more balanced by using flexible pricing? Assume you have a Saturday and a Monday departure from the same service point offering a certain transport at the same price. The Monday departure is always full because it is a working day for the customer. The Saturday departure is never full because it is weekend. Imagine that you introduce diffentiated pricing depending on market forecast and actual booking volume/ utilization; Monday is higher, Saturday is lower priced. This will motivate some customers with price sensitive transports, to book on Saturday instead of Monday. You will have even (=balanced) utilization across popular and less popular departures if the price diffentiation is correct. If cargo volumes in the market is definate, you might be able to operate the same service with the same total amount of cargo with less capacity transport vehicles than before; you might be able to free up transport assets to enter new markets without any further investments!
How do I pre-allocate to my VIP customers? You don't. The space guarantee (allocation) is related to the customer accepting the quote at the specific time of giving you his cargo commitment. A long term volume commitment is not sufficient for a space guarantee on popular departures. You can, however, choose to only offer part of your available capacity via the LCC model, and reserve the remaining capacity for contract customers. If your contract customers have downfalls, you can increase the LLC capacity, which will instantly be reflected in the pricing (price will be reduced if capacity is increased/ current utilization decreased).
How can yield be higher, if price is lower? First of all price is only lower under specific market conditions; under certain market conditions -high demand- the price might be higher than the traditional market. If you offer space guarantee (and traditional market doesn't offer space guarantee) a higher price is fine. Secondly the yield is related to a combination of price AND utilization. If you have high utilization, your unit costs are low due to the nature of -high-fixed versus low-variable costs. Thirdly, by operating an LCC model, you are expected to operate efficiently and with a high degree of self-service entailing lower costs at your end, equal to higher yield!
