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PRICING THRESHOLD: HOW LOW CAN YOU GO TO KEEP A BUSINESS RELATIONSHIP FROM DROWNING?

Being competitive in a corporate organisation or business partly thrives on the pricing of goods and services. Largely, the combined effects of intense industry competition and rising transportation costs underscore the importance of profitable freight and logistics pricing strategies. However, it is safe to say that most businesses have variations of a dynamic pricing structure and are among the best options for developing pricing strategies. This, they achieve with optimum flexibility to meet the needs of individual customers and differing cost-based situations.

Essentially, pricing for most freighting companies as posited by a 2012 global pricing strategy study conducted by the Strategy and Marketing Consulting Company, revealed that successful freight and logistics businesses share similar pricing-strategy characteristics. In effect, a greater number of successful businesses charge prices that reflect the value of their products and services. It further suggested that logistics companies with reflective pricing strategies achieve profit margins about 17 percent higher than competing businesses. Additionally, it maintained that successful logistics businesses commit to creating effective pricing strategies while also implementing strict guidelines that ensure sales people can’t adjust prices to meet sales quotas.

Volatility. The only thing constant when it comes to pricing for any business undertaking is CHANGE. With that said, the pricing strategy tells the frequent story of how prices change overtime. Changes which most often occur reflect differences in the delivery area or location, the product, increasing or decreasing demand and changing economic conditions. Also, it remains true that the dimension of dynamic pricing, a number of strategy modifications allow freight and logistics businesses to tailor pricing to align with profitability goals. Although the most appropriate strategy varies between businesses, revenue management, yield management and geographical pricing are among the most common.

The pandemic, like others before it has disrupted the culture of life and performing activities. However, demand for container shipping has grown during the pandemic has bounced back quickly from an initial slowdown. The impact on freight rates has been greatest on trade routes to developing regions, where consumers and businesses can least afford it.

Currently, rates to South America and western Africa are higher than to any other major trade region. By early 2021, for example, freight rates from China to South America had jumped 443% compared with 63% on the route between Asia and North America’s eastern coast.

In a bid to alleviate the woes of the importer, the World Trade Organization’s Trade Facilitation Agreement makes provision for that by urging policymakers on the need to implement reforms to make trade easier and less costly. According to WTO, by reducing physical contact between workers in the shipping industry, such reforms, which rely on modernizing trade procedures, would also make supply chains more resilient and protect employees better. More importantly, being more empathetic towards the concerns of clients is what will engender communal trust and ensure comeback clients and referral. For all it’s worth, clients love it when CEOs and businesses drop their guard down just enough to make a good buy or get a great service!

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