For many years – decades in fact – the courier sector of the freight industry has operated on a premise that now no longer adequately ‘fits the bill’.
The existing ‘first-try’ delivery model shaped our rates, our courier cycle times (how often we called on a customer daily), the number of drivers in our fleet, and the size of their vans. Servicing residential, outer areas and rural customers was a relatively small part of our business.
Traditionally, the courier business was predicated on a b-to-b service. That is, they picked up from one business or organisation and delivered to another. Pricing for this model was straightforward, as business-dense suburbs and CBDs enabled efficiencies.
The rise of c-to-c
So, what has changed? Quite a few things, actually. Apart from issues like traffic congestion in the major centres, which has affected all freight companies, the biggest elephant in the room (or ‘disrupter’) is the rise and rise of online shopping and online trading. We are now seeing massive volumes of freight from b to c (business to consumer), and c to c.
More people are working from home now. Why does telecommuting and online trading affect our old business models? Because with suburbs spread far and wide, we often have to drive much further to collect or deliver a single package. There may also be long driveways to navigate when we get there, and no one home.
In addition to often collecting multiple parcels from one CBD business, we now often need to collect a single parcel from a residential street, with no other pickups or deliveries in the immediate vicinity. Time is money, as Benjamin Franklin wisely observed, so maintaining our stringent service standards and preventing margin slippage has become problematic for us.
The proliferation of inner city apartments presents another challenge. Getting access for a delivery and signature (when the addressee may not even be there during the day) slows us down considerably.
New pricing options
Having carefully examined these issues, Post Haste and our associate companies are proposing to introduce ‘Effort Pricing’. This simply means moving to a more customised pricing system, so that a customer pays fairly for the type of service they require. An analogy is the airline industry, where you can choose what level of service you require, and even how long you’re prepared to take to get there.
Our new pricing options will reflect the time it takes and the distance required to travel to areas where there is a lower concentration of customers. If more effort is needed to pick up or deliver a parcel, the customer using that service will likely pay a little more than a business customer in a commercial or industrial area.
While to some extent Effort Pricing is already in place (e.g. Saturday deliveries and rural ticketing), we will be bringing in greater differentiation or choice to our pricing models.
A fairer balance
These changes will help us to ensure fairer compensation for our drivers, who are paid per successful delivery. It will also help us to build out a more comprehensive and reliable home delivery service, one that is aligned with the range of expectations of our customers.
It is important that our company adapts to evolving 21st century marketplace realities. We believe that Effort Pricing will more equitably serve the needs of our diverse customers.