After 30 years in business, Bill Henry recently developed a new sales strategy – turning his drivers into salesmen. If drivers generate leads that turn into profitable sales, they receive a scalable cash bonus, typically about $100.
“We’ve had sales people pounding the streets,” says Henry, president of Henry Transportation, an 84-truck carrier in Hazelwood, Mo. “But we’ve had the most success through drivers keeping their ears open. They will find people who are not happy with their service in conversations with them. We get in the door that way.”
Henry has developed several sales strategies and market positions through the years. In the 1970s he hauled carpet and tile in lanes from Georgia to the Missouri area. Following deregulation in the 1980s, he became a nationwide carrier and expanded into new freight markets. In the 1990s he created warehousing and logistic services and hired a sales staff. His first sales staff was ineffective, however.
“What happened is they were coming back to me for the answers,” Henry says. “I ended up going out to sales calls with them.” The challenge of having salespeople, Henry learned, is coordinating their efforts with dispatch and operations. Salespeople must have a clear understanding of your company’s operations and strategies and be compensated squarely to be effective.
“Our drivers will explain to an account what we do,” Henry says. “A guy will say he needs some warehouse space or a move from Fort Smith, Ark., to California. Our drivers will say ‘we do that.'”
At smaller companies, operations managers and owners typically handle the sales. As carriers grow, the pressure to increase utilization and limit deadhead miles grows with it. To find more freight, should you hire another dispatcher or bring in a salesman? Or, like Henry, do you try a unique approach? Before unleashing a salesperson to find new traffic, clearly outline your sales strategy and communicate it to everyone. Otherwise, you may end up with a few hits and lots of misses.
Defining a market niche
It’s not enough that your people know that they work for a trucking company. You must define what you do narrowly enough that everyone understands the type of opportunities that are right for you and those that should pass on by. Only then can you develop the combination of people and sales strategies that will land you the freight you want.
Defining your market position isn’t rocket science. In fact, it may be obvious to everyone. But unless you reinforce the strategy, you may find your people heading off in unproductive directions. In general, one or more of the following defines a market position:
Type of customers you serve. Within any market, there are customers that have higher service requirements, and possibly higher rates, than the general market. Fortune Transportation, a 77-truck carrier in Windom, Minn., has the equipment to haul refrigerated goods, but that’s not President Don Olsen’s target market.
“We’re targeting people that are in our area of expertise – people that have special needs,” Olsen says. “We mostly haul deep-frozen goods such as ice cream. We do this rather than say we’re going to haul groceries that require refrigeration. We’re into people who want high service.”
Most of the time, Olsen says, finding new freight is a dispatcher’s responsibility. Rather than search for new customers, his dispatchers ask for more loads and better lanes from existing customers. For this reason, Olsen integrated his full-time salesperson into a dispatcher five years ago.
Geographical areas of specialty. By specializing in certain lanes, employees know automatically where to concentrate their sales. Cox Transportation Services, a 140-truck carrier in Ashland, Va., provides coast-to-coast expedited delivery between Virginia and California using team drivers. Sixty-five percent of its business is within these lanes, says company President John Cox.
Range and scope of your services. Like many carriers, Cox Transportation Services also has a brokering division to broaden its menu.
“We walk into a shipper’s door and offer a complete array of motor carrier services. We can come in and say ‘we’ll take care of all your business,'” Cox says. To become “one-stop shops,” carriers often offer a wide array of logistics, such as local distribution, warehousing and multiple equipment types. On the other hand, some carriers may choose to be highly specialized in one market only. Either way, your salespeople must know the details of your auxiliary services besides point-to-point transportation.
Pricing. Many trucking company owners believe that price too often is the determining factor in getting a load. But a carrier focused on rate cutting as a fundamental sales strategy may soon realize the folly in this approach. Sure you can keep trucks moving, but are you making money?
To use pricing as a profitable sales strategy you need to know your costs and revenues in great detail, such as on a lane-by-lane or tractor-by-tractor basis. If fuel is significantly cheaper in one area or your outbound freight is particularly profitable, you might be able to keep your trucks full – and profitable – by keeping your rate in that market low.
Pricing is also a common source of confusion between sales and operations. Even though you may give your salespeople price guidelines, they might come back with more questions and complaints than loads.
“What happens is a salesman will come back to me and say we’re always too high; the competition is cheaper,” Henry says. “But you have to sell more than just price. You have to sell your service and your systems. If it’s a bunch of loads per week in a lane we’re running empty, maybe we can adjust the price.” Salespeople may not have the experience or authority to negotiate rates, which leaves the sale in the hands of operations.
You may only give a few employees – typically not salespeople – authority to finalize a sale. But even just leads are valuable. Although Henry’s drivers generate leads, Henry pursues the sale himself. As a carrier grows, however, it becomes impractical for the owner or president to handle all sales efforts.
“By going in myself, I can make a decision right on the spot,” Henry says. “A salesperson might make the wrong decision. But as we get bigger, I will not be able to do that forever.” Unlike the principal of a company, some shippers may try to manipulate a salesperson that does not understand your costs.
“What happens is that our rates are far apart from what the customer says he is paying currently,” Henry says. “A salesman wants to drop his pants and give him whatever. I’ve been in this business for 58 years, and I can read a person and tell if what he is telling me is right.”
“We talk to our customer service group during a daily meeting about any commitments we’re about to make,” says Jim Simmons, vice president of sales at Youngblood Transportation in Fletcher, N.C. “I’d rather have our customer service department making the decisions. The first sale is with the customer service group.”
One of the biggest decisions of hiring a sales staff is whether to pay salary or commission. It can make all the difference in whether salespeople sell from a revenue standpoint or from a lane standpoint. Paying your sales staff a flat salary tends to get results in the right lanes, Cox says. A salesman on commission, on the other hand, tends to focus more on getting revenue in the books to increase his pay, he says. Either way, give salespeople clear guidelines on what lanes, prices and freight you’re after.
“We’ve done it both ways,” Henry says. “If you pay commission you have to put parameters up; otherwise they’ll sell anything.”
If you pay salespeople commission for new freight, Olsen says, they run into a battle with the traffic department. Dispatchers want to book freight they’ve been hauling, but the salesman wants to start hauling new freight.
Five years ago, when Olsen had a salesman, he decided a salary would work best. He wanted his salesman to go in and review the lanes with existing customers rather than concentrate on bringing in new freight. Olsen wanted to move or delete some lanes and haul others instead.
“If you are trying to get a bonus or percentage, it’s hard to differentiate what the sales guy brought in new and what you were already working with,” Olsen says. If sales are handled by dispatch, you might also consider some performance incentives. Henry says he is trying to put together a bonus program for dispatchers that raise the revenue per mile with existing customers and decrease empty miles.
“The plan has got to work for both us and them,” Henry says. “The ladder can’t be too steep to climb.”
Sell and keep
Having a separate brokering or logistics division is one way some carriers address the problem of sales bringing in freight that operations won’t touch. Salespeople can bring in new customers, but operations can sell off the freight and lanes that don’t fit the criteria.
Four years ago, Thomas E. Keller Trucking Inc. was strictly a trucking company. The 50-truck carrier has since added warehousing, expedited delivery and a freight brokerage to pull in new customers, says Aaron Keller, sales manager at Keller Logistics in Defiance, Ohio. Keller Logistics employs three full-time salespeople. Selling brokerage services is not a cakewalk, however.
The competition was and still is intense, and so are the headaches from dealing with other carriers at times, but having the logistics company has improved the trucking company’s freight selection. Keller Trucking was hauling freight primarily for General Motors in regional lanes before having the brokerage business. Now with more freight, the carrier runs mostly in a 200-mile radius of its Ohio office and brokers the rest.
A downside to brokering freight is the potential for deterioration in customer service. You lose some control, but there are ways around this problem. One way to allay a shipper’s concerns is to guarantee a company truck should the contracted carrier not follow through. Cox offers this service, but is selective in his promises. He tries to limit such promises to his “bread and butter” accounts.
Although brokering can be a great sales tool, it’s more common, of course, for carriers to use outside brokers as a sales force. Developing a reliable network of brokers can be an integral part of a sales strategy. If the percentage of loads you currently broker is low, and you don’t have a salesperson, brokers may be cheaper than paying an outside salesperson. Recognize, however, that you need to develop a long-term business relationship to get a broker’s best freight. Otherwise, you’ll probably end up with the dregs.
Unfortunately, it’s not practical to develop close relationships with brokers in all markets. There are many ways to find brokers, including online boards and exchanges and word of mouth. Remember, however, that a new broker is just like a new shipper; you need to be careful that they have good credit and pay within a reasonable span of time. Companies like CompuNet Credit Services and Transcredit offer various tools to help you make the right selection.
Agents are another way to find freight in areas where you don’t have a sales presence. Agents are not neutral parties like a freight exchange service or a broker. Just as your salespeople, agents represent your company and charge a commission for selling your services to shippers, typically 3 to 5 percent. Youngblood Transportation uses 12 independent agents, Simmons says.
“We hire independent agents who have a long history and who can provide significant referrals,” Simmons says. “Good guys are hard to find. Our agents don’t dispatch trucks. We give our guys pricing in the lanes we want.” Another criteria Simmons looks for in agents are those working with a limited number of carriers to limit the competition.
Like agents, third-party logistics companies are also non-competing freight handlers. Though some brokerage companies may refer to themselves as 3PLs, there is a significant difference. Most 3PL companies are non-asset based transportation providers for large accounts, Simmons says. They don’t have their own trucks, unlike the brokerage firms that are a separate arm of a carrier. A broker with trucks, on the other hand, is more likely to keep the good freight for himself, Simmons says.
In the trucking business, growth happens two ways: increasing traffic by finding new customers and with existing customers. Either way, growth follows a strategy of opening new doors. Employees, including managers, salespeople and even drivers are your best advertisers, but to turn advertising into sales, it takes training and coordination between both departments, and a clear strategy from top to bottom.
In 2000, Pegasus Transportation in Jeffersonville, Ind., nearly doubled its 1999 revenue. The growth came from having capacity to provide more trucks to Pegasus’s core customers while its competitors could not, says company President Gary Hanke. But having enough equipment is just half the equation.
“To be honest with you, finding new drivers has been our key to growth,” Hanke says. “It’s what held us back. Our limited growth in the past was because of drivers. Our customers have been asking for more and more, but we had to tell them we couldn’t do it with the existing driver force.”
A sales strategy is not just about getting the right lanes, prices and customers for the benefit of your bottom line. With the chronic shortage of good drivers, Cox Transportation Services focuses on getting quality traffic in all lanes mainly to attract and retain drivers, says John Cox, president of the 140-truck carrier based in Ashland, Va.
Generating new revenue is also important, of course, but it might not be that important if you can’t get drivers home for the weekend. A big reason Cox chooses to haul expedited freight with team drivers coast-to-coast from Virginia to California is because it’s an attractive sale to drivers.
“We achieve interest in California to Virginia lanes,” Cox says. “It’s a specialty deal for them. Hardly any other company that can boast a team operation where drivers are home most every week. Their week consists of driving to the West Coast and back.” Many of Cox’s team drivers are couples that joined specifically for that reason.
“It puts a different slant on sales when you own the company,” Cox says. “Our sales department knows that having professional drivers is what our company depends on.”
By using its logistics division as a way to pick and choose freight, Thomas E. Keller Trucking has been able to focus its operation recently in a 200-mile radius of its Ohio office, says Aaron Keller, sales manager for Keller Logistics.
“It’s easier to find drivers that way because they can be home every night,” Keller says. “Having drivers is the biggest issue right now. We have had to become somewhat picky.”