Just about every freight forwarder has been perplexed by the idea of customer acquisition and retention. How do customers come to select a certain freight forwarder? Why do they select this freight forwarder? And above all else – after working with a particular freight forwarder for a while, why do they choose to switch?
Research: The Search for Answers
We decided it was time to get to the bottom of this mystery. Rather than speculating reasons for customer behavior and acting on our own internal assumptions, we employed a team of market researchers to get to the bottom of these hard-to-find answers.
The project consisted of multiple full-time workers contacting decision makers at companies with international freight to ask them questions regarding their freight forwarder selection behavior. Questions along the lines of:
- How many transportation providers do you currently use?
- What have been your largest frustrations with transportation providers?
- When did you last switch providers?
- Why did you last switch providers?
- What are the weakest links of freight forwarder communication practices?
To our surprise, many companies who seem to be ripe for a fresh start with a new provider continue to put up with their current freight forwarder’s shortcomings. We were absolutely floored by this discovery and decided that it’s time the public be made aware of these reasons. While a short summary will not do full justice to the answers we received from this research project, this is our best attempt to educate the field on why companies don’t switch their transportation provider despite frustrations:
Why You Aren’t Switching Transportation Vendors
Nearly every business with international freight has been burned in the past by a freight forwarder. This indirectly puts the decision maker(s) who selected this freight forwarder in the hot seat at their company.
“Why did you select this forwarder?”
Often times, the belief is that toughing out the mishaps will lead to a better long-term outcome with their current forwarder. Soon, these mistakes will become assumed of the shipping process. No one gets blamed for issues because “that’s just how these things go.” As their forwarder makes more mistakes, it becomes the norm at the company and accountability is dissolved.
In essence, the purpose for avoiding switching is the fear that these issues will be replicated in the new forwarder they switch to. This leaves decision makers biting their nails in a nervous sweat during the switching process – “if the new guy is the same or worse in any way, I will be held accountable.”
Thus, out of fear of being held accountable for a bad decision, many decision makers decide that they are safer to bite their tongue and deal with their current forwarder’s shortcomings than searching the market for a better solution at the risk of selecting someone worse.
2. Labor to Switch
No one wants to admit they’re lazy, but the whole purpose of this research project was to stop sugar coating things and get to the bottom of why and how businesses make decisions.
Many companies who are experiencing frustrations with their current freight forwarder still refuse to switch because they are intimidated by their assumptions of how much work it will take to change vendors.
In other words, the fear to switch is contingent on their assumptions of how much work it will take rather than facts on what’s actually required to make the transition.
For those who are working with a frustrating freight forwarder – How many times have you given another forwarder the time of day to entertain you on why they are different and how they believe they can fix your solutions? Most people choose to hang up the phone and disregard emails from other forwarders because embarking on the task of switching just seems like too much work. This ends up shutting down the conversation before anyone is informed of how much work it will actually take.
This isn’t inherently bad. Everyone knows that time is valuable and we’ll do anything we can to avoid wasting it. But it’s important to weigh the potential costs of sticking with forwarders that are frustrating. In the grand scheme, do you know precisely how much time it takes to switch forwarders? Do you know the cumulative hours you’ll spend picking up the pieces your current forwarder dropped?
3. Time vs. Savings
This was perhaps the most surprising (and unfortunately popular) reason many companies don’t switch. A company will ask for a quote from a proposed freight forwarder, the forwarder will issue the quote, the quote is lower than what they are currently paying for shipping, but the company doesn’t switch forwarders because the savings aren’t large enough.
Here’s a case example from our company:
We once proposed a shipping solution to a large midwestern company that was going to save the company $750,000 annually. After walking through all details, proving no hidden costs were associated, and finishing the quote, the company returned with the answer, “We appreciate your diligence in issuing a quote. At this time we are not accepting any offers that do not save us a minimum of $1 million per year.”
Despite the fact that the company would save a significant amount of money under the new quote, they decided against switching.
Our research indicated 3 purposes for the above behavior:
- Lack of Cross-Departmental Connection: The shipping and accounting departments were completely dissociated from each other. This lack of congruency leads the logistics department to strive for ease of business as opposed to any concern over cost savings. Since the idea of switching forwarders proposes any degree of work, it’s “easier” for them to stick with their current vendor (despite the $750,000 annual savings of switching.)
- Laziness: We hate to say it, but sometimes these rejections come down to laziness. For any employee that doesn’t hold equity in a company, the annual savings of the business doesn’t change their job. In other words, going through the work of saving the company money only changes their job for the worse with the extra work of switching (or so they think.) Thus, they decide to shut down the quoting process and stick with their current guy out of fear they will bite off more than they can chew.
While our research goes far deeper than a short article can do justice to, these are some of the highlights. There are a surprising amount of businesses that won’t switch freight forwarders even though they are frustrated with their current vendor(s). Our research indicated that 35% of people claimed they happy with their current freight forwarder, while 65% complained about having one or more critical issues with their transportation vendor. In other words, 2 out of 3 companies have issues with their freight forwarder, and many of them choose not to switch out of fear of the work load, accountability for possible future issues, and whether the savings are worth the time it will take.
While we can’t guarantee that every switch is a good idea, we can 100% guarantee you that current issues will not be resolved by continuing to do the same thing.
If you are interested in hearing more about this research project, what the data told us about consumers, and how this affects you, please give one of our team members a call! We would love to share this with you, hear your opinions, and be of help to you and your team in any way we can!