Logistics and freight companies are currently confronting an era of unprecedented change, which is bringing both risk and opportunity for the sector.
While digitalization and more collaborative operating models are enabling greater efficiency, the dynamic customer expectations, newer technologies, changing regulations, and threats from tech-savvy start-ups or the industry’s customers and suppliers are shaking up the industry.
And, with an estimated projection of the global freight forwarding market to reach $285.15 billion by 2031 and grow at a CAGR of 4.1% from 2022 to 2031, you can’t afford to sit back and watch. You need to adapt to the changing market dynamics proactively.
However, to get the maximum share, you’ll need to develop the right strategy to help you achieve your competitive advantage. Without a distinguished and competitive advantage, you will have harder time maintaining your relevance in the market as a logistics and freight forwarding company.
The famous biologist Charles Darwin proposed a theory on the Survival of the Fittest, and this theory is applicable in every field. Today’s logistics and freight industry are driven by challenges like rising fuel prices, labour costs, security, technological disruptions, trade regulations, container shortages, and customer expectations. But being adaptive and flexible is the key mantra to staying relevant amidst all these challenges.
So, How Do You Tackle Competition and stay Competitive?
1. Differentiation in service
While your business model may be similar to others, how you set yourself apart from your competitors in service offerings can help you create a loyal clientele. The pre-sales and post-sales services are the silent but the most significant factor that can build or break your reputation. Make it easy for your customers to find you easily. Even though it sounds like something very simple and basic, but if your customers need to search your entire website or need to fill out the contact form for just a phone number; how frustrating is that?
In today’s time, convenience and ease of doing business with a company is something that every customer is looking for, so being accessible and making it easy for the customer to deal with you is the key to success.
Learn more from our experts how you can digitalize your freight forwarding & logistics business.
2. Provide Unique Process Experience
Have a different approach to your client’s problem and show the unique benefits of working with you. Make sure you strategize well to promote your USP (Unique selling proposition) and combine traditional methods with modern technology to serve the needs of today. Differentiate yourself by offering an unique approach which is different and not offer by your competitors. For example, a Mobile app or Customer Portal can provide real-time updates of the shipments to your customers from anywhere and anytime. Or a 24-hour access point for any port/customs/transport queries.
Moreover, take care that your unique offerings should not be extravagant but something that makes their business processes easy and add value at a minimum cost. It is also true nowadays; customers are ready to pay more for products or services with value.
So find your niche and offer the best value for service to customers.
Having the right personnel to handle your customers is crucial in serving your valued customers. Nominate the right person for the right job to show that you take their business seriously. This helps to create a big impact on your business reputation and gives you uniqueness when the right person handles your customers efficiently.
So training your employees is not only important in terms of your service offering but also in terms of solving the customer’s problems and meeting their requirements.
3. Differentiation based on the relationship
Survival of most businesses depends on maintaining the excellent relationships they create with their suppliers and customers. For a sustainable business development, nothing can beat a good relationship with your sellers, buyers, customers, and service providers. Building a good relationship with your clients is quite simple when you understand their pain areas and provide the best suggestions with the honest intentions of helping and not only for making profits. When you imbibe this strategy in building your relationship with your customers, you win a loyal set of customers who trust you for their business.
It may take years to cultivate this kind of relationship where the customer gives you the business without asking about the costs because you have created that implicit trust in you and your service. But it’s possible with a consistent and genuine effort from your side. Even though convenience provided by digitalization is overpowering, businesses based on relationships tend to hold their glory to a large extent when it comes to retention of customers.
4. Compete and differentiate through Innovation
Technology is changing every aspect how logistics companies operate, and ‘Digital fitness’ is the prerequisite to gaining a competitive advantage.
You can win the maximum share if you know how to exploit a whole range of new technologies, from data analytics to automation and digital platforms, that help improve performance and serve customers better. The potential to be different by utilizing the latest technology is huge, but the industry has thus far been slow to seize it.
A recent Industry study by PWC shows the percentage of transport and logistics companies that rated themselves as ‘advanced’ on digitalization was just 28%. So in the scenario of lack of a ‘digital culture’ by far, if you can provide the right technological advantages to your customer you have vast opportunities to differentiate yourself. As a logistics and freight forwarder, you must continue to differentiate with an innovative solution, which is crucial for running an efficient and productive business, and serving your customers.
5. Compete on price
The pricing strategy can often be the decisive factor in your business’s success. Your customer wants the shipping rates to be as cheap as possible, but you also want to keep your business running. So you must derive a pricing structure taking into consideration the order quantity, location, risks, taxes, costs and margins. Sometimes compromising on price also causes a compromise on quality, however, keeping up with the quality protocols should be of utmost importance as your customers want value-for-money services. Again in research by Mckinsey, it is found that the logistics companies that transform their pricing strategy can typically expect a revenue boost of 2 to 4 per cent which translates to roughly a 30 to 60 per cent EBIT margin improvement. To reap the maximum benefit from a pricing transformation, you can evaluate the entire pricing cycle considering both logical and operational aspects. Some initiatives like investing in digital solutions, optimizing contract mix and price, spot price, reducing margin leakages, and changing company-wide mindset, will enable you to differentiate in pricing.
Despite all the above, the best way of competing would be to choose and combine all the options available to you to differentiate and apply them strategically as per your business objectives and goals.
Well, you can consider yourself a differentiator if your services you provide benefits your customers create an emotional bond. When your services are tangible, recognizable and visible, you can claim you gain a competitive advantage. Finally, you can claim you have an added competitive advantage over your competitors when the customers are willing to pay the extra to get that niche extra service only from you.