Rate Negotiation Considerations
Rate negotiation is an important thing for customers to understand. Customers ask, "What's the difference between the different types of negotiations?" And there is one specific term that we like to use sometimes and that's a rate negotiation. When you take a look at a rate negotiation it can take many different forms. When you look at specific rates you want to look at the factors that impact shipping a package. That is the rate. Also, there are all the other pieces of it which are the surcharges and accessorials.
So what's the impact of a large packet surcharge? What's the impact of an over max? What's the impact of extra handling? Those are all parts of the rate and definitely some of the things that you want to keep in mind. There's a whole slew of them, close to 50 to a hundred other charges and rates that go into a rate negotiation. You want to be mindful of all these when you're negotiating. This ensures that you are paying a fair price for getting that package from point A to point B.
Typical Oversights Reviewed
Customers ask, "What are some of the oversights that I could have when I'm negotiating a rate for a parcel?" The biggest ones usually are different surcharges that might impact your package. So you might be looking at your ground rate. What is my ground rate? You might look at a specific weight to match the average weight for your package. For example, a discount for a certain weight package for a particular zone could look great.
But customers don't always see the surcharge when moving a certain package to a particular zone. Is it going to residential? Is it oversize? Will it assess a large package fee or extra handling fee? All those other charges are things you want to make sure you keep in mind. That's some of the things that customers can overlook when they look at their contract. There's also looking at the particular rate that they're paying for a package.
Do Customers Need Help?
Customers ask, "Can I handle the rate negotiation on my own?" They may think they could grab close to what they could get with help. Then they won't have to pay a third party to help with the negotiation. My answer is, "absolutely!" Anybody can negotiate a rate. What you want to be mindful of though is the experience that someone like Lojistic has. Also, the analytics that runs behind it. We've got a whole analytics team that runs analytics on rate negotiations.
We understand the ins and outs of contracts. We understand the data that's behind the analytics. That is how we understand the impact of every discount that's moved along. We understand which levers to pull and which buttons to push. What one lever does in one area might be something for another one. A button pushed over here what button do you need to push on over there can make it an even or fair trade.
Experience Matters with Rate Negotiation
Customers may lack experience when they negotiate a contract or a rate negotiation. They may not understand the two key components of a negotiation. This includes the scientific or analytical side along with the emotional side. The analytical side is taking a look at your rates. This means looking at what you're paying now and analyzing any proposals. And you need to be mindful that you have different rates. This comes along with surcharges that impact that rate.
To garner the best results you also want to understand the emotional side of a negotiation. What keeps that account manager up at night? What keeps them motivated to win or convert some new business? It's being able to jump from side to side and use the right tactics to support a specific strategy. This is what you need to be mindful of when you're going through a rate negotiation.
Bryan Van Suchtelen
Bryan Van Suchtelen
Corporate Director of Parcel Rate Services
Prior to joining Lojistic in 2015, Bryan enjoyed a 26-year career with UPS where his roles included Pricing, Field Sales and Director-level Sales Management of some of UPS’s largest customers.
At Lojistic, Bryan leverages his wealth of experience/expertise to identify and execute supply chain cost management solutions for parcel shippers of all sizes. Bryan has helped his customers reduce their shipping spend by tens of millions of dollars.