Developing new freight niches

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This service is another way we’re constantly pushing the envelope for our customers to help them succeed in an increasingly competitive marketplace.” –Lisa Lynn, director, UPS new product development

In recent weeks, I’ve been hearing a lot about how the “niche” is becoming a more and more critical piece of trucking’s future, for both large and small carriers alike. By that I mean that many truckers are looking at ways – or being encouraged to look at ways – to develop more customized freight services to reach specific freight market segments.

That, in the opinion of several noted industry experts, is what’s going to allow fleets not only to survive but thrive in a freight world vastly remade by the ongoing global economic downturn.

"The dynamic forces affecting this [trucking] market must be accepted – they are things we cannot change. So carriers must find a way to live with them or take advantage of them,” noted Duff Swain, president of consulting firm Trincon Group and a veteran observer of this industry. “This means the big carriers are going to get bigger and fewer, while the smaller carriers need to get smarter and more niche-driven.”

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Swain (at right) has long contended that change is essential for truckers. “Some companies learned the lesson early and invested time and money in people and processes which allowed them to identify their markets, utilize technology as a management tool, develop talented management teams, demand greater accountability, and use appropriate strategies to control their markets,” he explained during a presentation at TMW System’s 2009 TransForum user conferences.

“They have learned to operate a capital-intensive business using talented managers and good information management,” Swain noted. “This process has helped them learn how to market themselves where they are most effective – and their actions have allowed them to control the market and competitors have been forced to respond to their moves. We can learn from their example.”

Mark Winkler, vice president of strategic planning & business for Bridgestone Bandag, echoed the same message, noting that both tires produced by his industry and trucking freight services are in danger of becoming commodities – that, at the end of the day, price has become the determining factor of which a tire or transportation service is purchased.

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The reason is simple in trucking’s case, said Winkler (at left), as everyone meets the same basic set of standards: tracking and tracing freight, meeting on-time delivery metrics, etc. The key going forward, he stressed, is how to bring unique offerings to the commodity that is trucking. This approach calls for a "zone of segment focus" instead of the more typical "zone of customer focus" used by the industry today – and thus a greater focus on developing niche-driven services.

"A ‘zone of customer focus’ is a generic strategy, if you will-- you develop products and services to meet the common needs of your entire customer base," Winkler explained. "With a ‘zone of segment focus,’ however, you are meeting needs of specific segments with products and services that may be incompatible and irrelevant across the segments. Developing specific solutions this way can help carriers, especially smaller ones, build more profit."

United Parcel Service is demonstrating how such a niche-driven strategy can be put into play in the freight world, as it is piloting a new service called “UPS Direct to Door” that delivers product samples to residential locations. UPS is initially testing this unusual marketing service in five cities – Chicago, Dallas-Ft. Worth, Miami, Phoenix and Washington, D.C.

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It’s a smart niche offering because its taps into UPS’s established freight network to provide something new and different without adding much extra cost to Big Brown – up to 12 product samples are packaged in a custom-designed UPS Direct to Door Pak and delivered to residents that are ALREADY receiving a small shipment that day.

Casey Chroust, executive vice president of retail operations for the Retail Industry Leaders Association, summed up the benefit of UPS’s service pretty succinctly: “Retail marketers are looking for ways to make their messages stand out. UPS Direct to Door serves as a very unique and targeted marketing approach because messages are personally delivered to the door, which makes the delivery special.”

“As marketing channels evolve and consumer choices increase, we need new touch points to connect with customers,” added Pat Connolly, executive vice president and chief marketing officer for Williams Sonoma. “With a UPS Direct to Door delivery, we’re reaching an active consumer – an important factor for increased response rates.”

And that added business – small to be sure for a while – is going to help UPS stand out from its competitors, demonstrating it can do new and different things with its current delivery network. That should help their bottom line and keep their capital-intensive assets busy, without adding a lot of additional costs. It’s this kind of smart, niche-driven thinking truckers on a larger scale need to tap into.

What's Trucks at Work?

Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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