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International freight forwarding pricing and charging strategies

Basenton Logistics’ pricing strategy

When determining the freight rate to be charged to the shipper, the carrier can adopt a certain strategy or a combination of two strategies. Although a single strategy can be used, the combined method allows the two strategies to be alternately used between the small service cost issued by the carrier and the value of the service provided to the shipper.

Basenton Logistics' pricing strategy

(1) Service cost strategy
The service cost strategy is a “cumulative” method. The carrier determines the transportation rate based on the cost of providing this type of service plus the gross profit. For example, if the cost of providing a certain transportation service is US$200, then the carrier will charge the shipper a shipping fee of US$220. This service cost method represents the lowest transportation charge from the blood, and is a kind of pricing used for low-value goods or in a highly competitive situation.

(2) Service value strategy
Service value is an alternative strategy. It charges freight based on the service price felt by the shipper over the actual cost of providing this service at the old location. For example, the shipper feels that the transportation of 1,000 pounds of 1 resistance/equipment is more important or more valuable than the transportation of 1,000 pounds of coal, because the value of the equipment greatly exceeds the plant coal, and the shipper may be willing to pay more for the equipment Transportation costs. Obviously, when high-value goods or competition conditions are restricted, carriers tend to use service value pricing. Service value pricing can be based on the example of the overnight service market in which carriers provide premium prices. When Federal Express first introduces overnight delivery services, there is little competition to provide such services, so it breaks the shipper’s view. A high-value delivery program, for which they are willing to pay 225 US dollars per package to support this express shipping service. Once competitors such as UPS and U.S. Postal Service enter the small area, the transportation rate of the door-to-door service has dropped to the current discount level of 5-10 US dollars per package, and this rate has been reduced. It is getting closer and closer to the actual cost of providing this service.

(3) Combination strategy
This combination strategy is to determine the freight rate between the lowest service cost and the greatest service value. Most transportation companies use this intermediate value of freight, which is regarded as a standard practice. The logistics manager must understand the scope of freight rate fluctuations and alternative strategies so that they can negotiate.

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