[041211.EN.SEA] Liner Marketing Strategy And How It Stacks Up With The Wider Supply Chain (part 2 and conclusion)

LAST week in The Container Shipping Manager we began looking at the marketing strategies of the various links in the ocean transportation supply chain to look for clues as to why shipping lines are the only ones losing serious money this year.

We began by looking at the first of 4P’s as defined by marketing guru, Michael Porter, which was product or services.

For this first area of marketing, carriers proved to be limited to only one product—ocean transportation—even though they have two different customer bases, shippers and forwarders. Meanwhile, other links in the supply chain such as terminal operators, port authorities, freight forwarders all offer a variety of services, which might explain how they are able to produce better financial results.

Today we will look at the remainder of the 4ps, which includes pricing, place and promotion, and we will see how the shipping lines stack up in these areas.

The above  illustration provides us with an overview of how each supply chain link charges their individual customers.

For port operators or port authorities, we can see that they have two pricing mechanisms, based on the fact that they have two different customer segments—terminal operators and shipping lines.

Terminal operators’ source of revenue come from one source only and that is the shipping lines, which in turn have essentially one source of revenue despite having two customer segments, and that is ocean freight rates.

According to the above illustration it may appear that the carriers have more than one due to the phrasing used, but it all boils down to freight rates in the end for shipment of products from port A to port B. This is why it has been argued that container shipping has become a highly commoditised market.

Unlike the shipping lines, freight forwarders have only one customer type, shippers or beneficial cargo owners (BCOs), they are able to charge for several different services, including ocean freight, which they compete with the shipping lines on, but they can also offer value-added services, including door-to-door operations, which includes not just ocean transportation but land transportation as well. They can also assist with documentation, customs clearance and much more. And all of these services come at a price.

Source : CSM, 18.11.11.

Note : Part 1/2, please refer previous edition [281111.EN.SEA] Liner Marketing Strategy etc.