Pricing Strategies for Freight Brokers

Pricing Strategies for Freight Brokers

Freight 360 By Freight 360

Is a rate just a rate?  Is your shipper only looking for the lowest rate in every situation?  What can you do to add value to your customer without just being the cheapest.  In this blog we’ll cover strategies you can use to help your customer look good and earn more money for your brokerage.  

One of the pain points for a shipper whether they admit it or not, is the constant fluctuations in trucking spot rates.  That is the rate they will pay for a short term need.  A load that is either picking up today or in the next day or two.  These are defined by shippers as a breakdown in their routing guides.  And what is a routing guide?  It’s just a fancy term for their lanes and predictable freight.  These are lanes that are usually awarded directly to asset carriers at a lower than market rate.  And why are some assets willing to run them for less than the very top of the market rates?  Because in return for providing a fair rate, they are receiving predictable loads, at predictable rates high enough to cover their expenses and profit requirements.  And as a bonus, they have predictable loading and unloading times.  Since they’ll be going to the same facilities often.  

This is often why when you’re just beginning to quote a prospect, they are telling you that you’re way above what they’re currently paying.   The shipper isn’t comparing apples to apples.  You are looking at what it would cost you to procure a truck in a much shorter time window than the pricing provided by the local asset company.  This is why it’s much more difficult to win your first few loads.  The shipper also wants a discount from you the broker below what they are used to paying.  Why?  Because the shipper is taking a gamble with you, the new broker with no track record with them personally.  For that risk, they want a discount.

Now, let’s skip ahead a few months, and you’ve moved a handful of loads.  But, you still haven’t turned this shipper into a daily or weekly customer.  This is where our strategy can be utilized.  Have you ever heard the term horse trading?  It’s defined as a negotiation accompanied by shrewd bargaining and reciprocal concessions.  It means that you are going to give something in return for something else.  For instance, maybe your customer is asking you to move a load today for $200 less than you’ve quoted it.  Maybe, your margin was only $250 to begin with.  What can you do?  

This is where you will offer to move the load at a discounted rate, if your customer is willing to provide you with another load that you can also move this week with a little better rate.  Something like this, “I’ll take a hair cut on this load, Sally.  But, I really need to make that loss up later this week.  Would you be willing to send over another couple loads for me to make up this loss today?”  Or, “do you happen to have something a little easier for me to work on later this week?  Something with a little more miles possibly?”  

You’d be amazed at what you’ll get in return.  Most shippers know exactly which  loads are coveted and which are the hardest to cover with the lowest margins.  They typically hold on to these for the brokers with the longest and most trusted relationships.  The ones that have gotten them out of a difficult situation in the past.   This is the group we’re working to be included in.  

There’s also another reason why the strategy of horse trading is beneficial.  Shipper’s don’t just want trucks when they need them, they also want predictable rates.  And often your point of contact has a kpi or key performance indicator for how much they spend above the predicted budget on each lane.  Meaning, for every dollar they spend above budget on a lane, they get a slap on the wrist or a blemish on their record.  Their job is also to keep each lane within budget.  So, when we take a “loss” on a load, it’s very possible they can give you the margin you were looking for in another load.  Now, maybe you moved the first load for loss.  But, for the week, the next 2 loads make up for it.  And from the shipper’s point of view, they get rewarded by keeping each shipping lane in budget.

So, the next time you’re quoting a lane for your customer, take them time to pickup the phone and ask a few more questions.  Don’t be afraid to ask about additional loads they may have for today or later in the week.  More often than not, you can get another load or two in return for making your shipper’s budget work on the lane they really need help on.

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