Effective pricing in logistics

Playing with prices in the logistics business is a matter of company survival. Miscalculated? Get ready for losses and customers leaving for competitors. Want to stay afloat and earn more? In this article on the LLC «SyncraNova» website, you will find information on what affects the cost of services, what pricing methods are effective, and how not to lose money in the logistics business.

The main categories of costs
Before we move on to pricing strategies, let's look at what logistics costs are made up of:

1. Transport. This item includes fuel, maintenance, drivers' wages and depreciation of transport. The type of transport (sea, road, air) and the route can significantly affect the cost of the service.
2. Warehousing and terminal handling. Here the costs of storage and movement of goods in the warehouse are taken into account, which depend on its location, storage time and the need for reloading. The closer the customer or delivery point is to the warehouse, the lower the transport costs.
3. Customs. For international deliveries, you need to consider the fees and duties that are paid when going through customs.
4. Permit documents. A number of shipments require special certificates or permits, which are also paid for by the customer.

Pricing methods
Prices in logistics can be calculated in different ways, each depending on the company's strategy and the current market situation:

• Free pricing. Companies adjust the cost of services based on supply and demand.
• List prices. Fixed rates are set for different categories of services popular with large clients.
• Discounts and bonuses. Companies can offer discounts for volume or for long-term co-operation. This approach helps to attract clients and retain them.

Recommendations for cost reduction
Reducing costs is one of the top priorities for logistics companies.

Here are a few ways that can help you save money:

• Using combined shipments. It is advantageous to combine shipments from different customers into one vehicle to load it fully and reduce the number of half-empty trips.
• Controlling warehouse costs. It is better to choose warehouses closer to the main routes and try to minimise storage time.

Pricing strategies
Logistics pricing strategies often depend on the target audience and competitors' positions:

• Customer orientation. The price depends on the usefulness of the service to the customer, so customer expectations and needs are taken into account.
• Competition orientation. In this case, companies focus on the average prices in the market to remain competitive.
• Premium strategy. Here the price is higher, which is justified by the quality of services or the prestige of the brand.
• Incentive strategy. Setting prices below the market to attract more clients or at the initial stage of work with a new client.