04 September 2014

[040914.EN.SEA] Carrier Sales Teams Lose Out On Price Because That's All They Focus On: Study

CARRIER and forwarder sales teams too often bargain on price rather than value and end up not achieving a decent rate of return, according to the new Ocean Freight Mystery Shopping Study 2014.

Most carriers and forwarders rely on high discounts, not on value-driving sales activities, to make sales, said the study. "Fewer price battles would do the industry good," said the report from Simon-Kucher & Partners consultancy of Bonn and Boston.

"Many providers differentiate too little from one another. It would be relatively easy for them to improve their sales and boost their expertise," said consultancy partner Philip Biermann.

If sales are to play a bigger role by more effectively selling value, carriers and forwarders could achieve their target prices more frequently and enhance profitability, the study said.

The survey checked eight of the world's leading carriers and forwarders in China and the US by posing test questions, asking each for offers for weekly ocean freight shipments of 20 TEU.

The Chinese offers were nearly always lacking important clarifying elements such as a glossary or general terms and conditions, said the study.

"In some of our inquiries to China we received only a very brief e-mail with price information. We couldn't tell which surcharges were covered in the offer," said Fan Chen, head of the consultancy's Beijing office.

"It was nearly impossible to compare the offer with others," said Sven Wengler, study leader.

"Chinese providers and subsidiaries need to improve performance regarding service level, standardisation, and operation efficiency to counter the fierce global competition," he said.

Sales processes need serious improvement. Six of the eight tested providers do not deploy value-boosting measures that emphasize product advantages or up-sell.

Often, carriers are willing to grant discounts. "In seven of the eleven quotations received, the mystery shopper was promised a discount on the initially offered price without giving details about the cargo owner," the study said.

"Almost all were willing to grant a discount on the initial price," said Dr Biermann "Many salespeople are given incentives to sell higher volume, not higher prices. And so the phrase goes, 'better to grant a discount than to lose business'."

"In three other cases, the providers were prepared to lower the price as soon as the cargo owner was revealed. The discount on the end price was very high in most cases - averaging between 10 and 30 per cent.

"Many providers see customer talks as a means of gathering further order information. Global forwarders are particularly strong in this. Unfortunately, the sales talk typically ends at this point.

"While nearly all of the providers communicate on a highly professional level, only a few try to shift the talk away from price and towards product value through more comprehensive product descriptions and a discussion of product advantages," said the study.

"This is how they can set themselves apart from competitors and even achieve a price premium," said study leader Sven Wengler, a Simon-Kucher director.

"Almost all US subsidiaries provided quotations with good to very good information. The quotations from the same companies in China, however, often lacked professionalism in terms of layout and more precise information about price components and surcharges," the study said. 

Source : HKSG.

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