Don't Cut Your Rates!
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Choice of Athertising Media in the Search for New Business: When Cheaper Rates Can Legitimately be Quoted Without Incurring Accusations ofRate-Cutting 1 N my two previous articles 1 dealt with various ways in which the newcomer to the industry could search for traffics. These referred to personal canvass, by correspondence and by small advertisements in the local Press. I have warned against spending money indifferently and 1 have indicated the method of assessing the monetary value of the various advertising media open to the haulier, remembering always that, in the first place at least, his interests are purely local.
The value of an advertisement, assuming equality in the direct sense, is measured by the circulation. .tin advertiser who is in a trade which can be of interest lo only a proportion of the readers of the paper must take that into consideration in his assessment of the value of the paper to him as an advertising medium.
It might be, for example, that only 10 readers out of a total of 100,000 would be interested in the service which the haulier offers. The value of such a journal for advertising purposes to that particular haulier would be practically nil.
The Established Haulier The case of the man who is already established and is well known in his locality is rather different from that of a newcomer. He is likely to be desirous of increasing his turnover and is considering how best to set about doing so. There are two lines of attack and the individual haulier may want to follow either or both, according to the prevailing conditions. For instance, he may wish to adapt his procedures so, as to secure a greater share of that kind of business in which he is already engaged and which, maybe, is in the hands of his competitors. On the other hand, he may think it possible to create new business by suggesting the use of mechanical road transport to potential customers who have hitherto not considered it likely to be of service to them.
• In an earlier article in this series I said that there could he no sale if the prospective customers had no knowledge of the availability of the service which the haulier was prepared to give. One of the first uses of an advertisement, then, is to make the advertiser known to his potential customers.
In the former case, in which the haulier is desirous of expanding business of the type in which he is principally c24
engaged, he may best begin his search by reviewing his present position. He may, by reorganization, which would possibly ,include a reshuffling of customers and the work he does for them, cut out lost time and waste mileage.
In so doing he may find that the best way of achieving that end would be to do a little more for certain customers and perhaps obtain work from other potential customers located in a given district.
Were he successful in this reshuffling of his organization, and if he could obtain the additional custom which that reshuffling showed to be advisable, he would probably discover that his weekly mileage would be increased. In that case, of course, his cost per mile would diminish and he would be able, while still increasing his weekly profit, slightly to reduce his rates. In other words, he would share the benefits resulting from that reorganization with his customers.
In that event, a carefully thought-out letter to his existing customers and another, equally well considered, to his potential customers, would draw attention to the fact that he was increasing his business and, as an outcome, hoped to offer special terms for a firm contract. It is more than possible that new business would result. In all cases, however, such letters should be followed up by a personal call.
When Rates Can be Cut must stress at this point that I am not advocating the cutting of rates in the iniquitous sense of that term. Ratecutting amongst hauliers, as I see it, becomes folly only when it involves the loss of legitimate and reasonable profits.
If it be the outcome of reorganization and the application of more efficient business methods then it is justified. Indeed, it is more than justified and is sound policy because it increases the popularity of road transport and demonstrates its superiority as compared with other forms of transport with which it is in competition. The aim is always to supply efficient transport at the lowest rate compatible with the earning of a reasonable profit.
There is, too, an overriding condition which should be given full weight in considering this matter of offering a lower rate and that is that the haulier would not, in this or any other way, break any agreement on rates into which he has entered with his local association. The foregoing procedure is not, of course, open to every operator. There are many cases in which it would not he a practicable proposition. The man whose business is more or less covered by the term " jobbing," that is day-to-day work according to the amount of business that he can find, must adopt different methods. His system of searching for new business is almost exclusively that of personal canvass.
It should be supplemented—perhaps helped is a more appropriate word—by keeping a careful watch on local trade, so that the haulier can be instantly aware of any possible haulage needs and be first in the canvass for any work that may be going. The larger operator, of course, will have his travellers who will attend to that part of his work for him.
If the haulier concerned is predominantly interested in long-distance traffic he should be on the qui vive for similar news in the towns to which he is in the habit of making deliveries.
Having dealt with the problem of getting business, or extra business, by legitimate means, let me discuss .ways which are not so legitimate, ways which are not to be recommended, either to the newcomer or to the established operator. I refer, of course, to the time-honoured trick of underquoting the rates at which the traffic is being carried, usually called ratecutting.
There are plenty of hauliers in the business today who are apt to take the line of making easy money by cutting rates, and it is up to. the rest of us to plug the lesson in order to show the evil that comes of such a practice.
Some of the arguments put forward in support of ratecutting are difficult to disprove. Here is a case of that kind. Quite recently, while discussing rates with such a man, I was told that, whilst LI per ton was the regular rate for a certain traffic, he was about to lower his to 15s. Asked why he proposed to take that suicidal step—for the rate of LI was barely sufficient to show a profit--he said that some other haulier in the same neighbourhood was carrying the traffic at the lower rate. He said he had to get into line or all the traffic would leave him.
On the face of it his argument seemed difficult to refute. I showed him that at 15s. per ton he was a little short of covering his costs. In response, he pointed out that he was driving the vehicle and was in that way saving a driver's wages. Of the folly of that conception I have written so much at one time or another that, for the moment, at least, I do not propose to discuss it further.
By Way of Example It seems as though the only way to answer those men who take that attitude is to point out examples of operators in the same line of business who would scorn to accept such rates and who will not put their vehicles my the road unless the work which was offered seemed to show a reasonable profit when all outgoings had been paid. 'Such outgoings would include a fair wage to whoever may drive.
One such haulier with whom I am closely acquainted, steadfastly refused .to accept loads at cut rates. rates' which are freely accepted by his competitors. Before nationalization, he was mainly concerned with long-distance haulage and no doubt his enthusiasm for his work will be responsible for him trying his hand at it again. .Before longdistance haulage was taken over by the State hehad built up a reputation for quality of service which ensured him regular work at good rates and he had no fear of losing it to rate-cutting competitors.
Here are some of the ways in which he acquired his reputation. I set them out here so that newcomers may be made aware of them, and help them to appreciate that, with such service, work comes in almost automatically.
First, his vehicles were almost always in first-class condition and of good appearance. Any expert transport man seeing one of his vehicles on the road, would be likely to observe that it was a credit not only to its owner but to the haulage industry as a whole. I would add to this that it is equally obvious that the concern which runs these vehicles maintains its rates at a proper level.
Actually, the concern is exceptionally careful of its machines and it can be said to carry all the merchandise entrusted to it in well-kept vehicles. Every load is fully insured, as 1 have recommended in previous articles.
In case of accident every effort is made to ensure that a minimum of time is lost and that ultimate delivery of the goods is not unduly delayed. Customers appreciate this sort of service and are willing to pay for it.
Discussing rates and cost of operation with me, this operator gratified me by saying that the figures in "'The Commercial Motor' Tables of Operating Costs" were, in his experience, accurate, and he adhered to that statement although he qualified it by stating that his own costs for a given type and size of vehicle were slighty less than the figures in the Tables.
was not in the least perturbed by that. It simply bears out what I have written many times, that the costs quoted in the Tables can always be improved upon by users who choose to take care of their vehicles. He said he had noticed that difference particularly in respect of the cost of maintenance and of tyres.
The reason why his maintenance costs were less than those given in the Tables, he added was in all probability 'due to his being prepared to spend a little extra on maintenance. What he meant was, that by spending his money little and often on maintenance, and keeping his vehicles always in tip-top condition he found that he actually saved on total expenditure.
Maintenance—Little and Often
There at least is a bull point for the beginner—maintenance on the little-and-often basis, Additionally, the vehicles should always be in such condition as to attract the better class of customer who is willing to pay higher rates for the superior service which the appearance of the vehicles suggests.
The question of accidents and their ultimate cost came up for consideration, as having some bearing on the all-in costs of operation. A simple case was quoted. Pursuant. to his normal practice of giving first consideration to the customer and the goods he was delivering for that customer. he was impelled to arrange for the immediate dispatch of two lorries to take off the urgent consignments carried by a disabled vehicle. Added to this was the use of a tractor and the employment of a breakdown gang for a couple of days, and the expense of repairing sundry damage to the vehicle, which included a twisted frame.
The direct cost was about E150, but the ultimate cost, he felt sure, could not be calculated because, however carefully a twisted frame might be straightened, there was no knowing what other troubles might develop as a result of misalignment.
He advoCates that stern measures should be taken ir dealing with drivers who are prone to accident, notwith standing that the causes may not be due to carelessness.
In the course of his long experience, this operator had found that the expenditure on contingencies and particularh that part of it arising from road accidents, was becoming excessive. He thereupon made it clear to his drivers that in future every accident was going to be thoroughly investigated. A solitary event of this kind would be recorded against the driver concerned: a second one would involve dismissal, unless it was perfectly clear that the fault lay elsewhere. Any driver who was shown to be prone to accident would, in any case, be dismissed.
It might be true that the man was unlucky: the concern was, nevertheless, unable to afford his misfortunes. However adequately one may be insured it is almost inevitable that extra expenses arise in connection with the rectification of the effects of a mishap. There are many points which even the most comprehensive policy does not cover.
It seems to be the case that the ways to success in the haulage business arc, first, to eschew cut rates, secondly. to give good service and take care that the vehicles concerned are in good condition and of good appearance, and thirdly to create a goodwill which will build up a business with a clientele prepared to pay profit-earning rates for the services offered and rendered. Or maybe the best way is to be an owner-driver and work for no wages. S.T.R