Pricing For Profit in the Container Shipping Industry

Container shipping companies are becoming interested in the use of pricing as a profit lever.

Traditional cost-plus pricing approaches, so deeply rooted in the industry, are ineffective in a volatile shipping market that’s plagued by a lackluster world economy and severe capacity-demand imbalance.

The market continues to grow, but there is little capitalization on this growth by industry players.

Freight rates remain stubbornly stagnant, as fleet capacity growth outstrips demand. Ineffective and inflexible pricing strategies render shipping companies unable to adjust their rates in response to market fluctuations or quickly introduce innovativelypriced offers into their portfolio of services.

To cope, many shipping companies are aggressively cutting costs. Unfortunately, the financial gains obtained from cost-cutting are becoming smaller and smaller with every round of cuts. Once they hit the proverbial wall, they will realize that additional cuts will stop consistently benefiting their bottom lines.

Shipping companies need to shift their focus away from cost-cutting towards growth. Growth isn’t a topic often broached, particularly in a time of market uncertainty, but it’s where the opportunities lie.

There’s an increasing urgency to focus on growing the business and generating revenues well in excess of incurred costs. To grow the business, companies need to rethink how they price their services. In an industry with complex pricing strategies and susceptibility to market forces beyond their control, pricing is one of the most powerful profit levers available, but only when it’s done right.

Despite the rewards that effective pricing promises, many shipping companies have yet to fully explore its hidden opportunities. There are several reasons for this: They have little visibility into their operations and little insight into the profitability of their channels, assets and customers. Their continued reliance on gut instincts and traditional approaches simply result in more of the same - missed opportunities, unnecessary risks and falling margins.

It’s time to rethink pricing processes and technologies to maximize revenue, increase margins and return your company back to profit.

In this paper, we look at:

• Why effective pricing is important now morethan ever
• The role technology plays and the benefits it brings
• What to look for in a price optimization solution