The road to success

Prior to deregulation in 1980, marketing was considered the stepchild of the transportation industry. You bought your rights to deliver goods from Point A to Point B. Rates were immaterial. Reliable transportation--that's all customers looked for. Today, people still want the basics. But they want faster service, lower rates, and statistical data to hack up transit time. They want electronic data interchange of real-time information. The sophistication needed to market transportation services is probably tenfold over what it was ten years ago."


Those words, from Guy Denniston, senior vice president of sales and marketing with Daylight Transport, a Los Angeles-based motor carrier, neatly sum up the predicament faced by transportation companies. Twelve years ago, marketing - and especially marketing research - was virtually unnecessary and commonly nonexistent. Today, with profit margins shrinking and competition expanding, marketing research is a necessary weapon in the fight for survival.

So how are transportation companies coping with this need for marketing research? Surprisingly well. Transportation firms use a wide range of formal and informal market research techniques, from face-to-face information exchange to the most sophisticated uses of computer databases.

Actively engaged

While the larger firms now have a wealth of market research tools at their disposal, their smaller counterparts are making do with smaller budgets and less sophisticated market research activities. Still, even these middle-market and smaller firms are actively engaged in research activities.

Right-O-Way Transportation, Inc. is a $75 million dollar global freight forwarder based in Tustin, California. Right-O-Way offers everything from same-day domestic delivery to five- to seven-day service around the globe, by air and surface.

"Since deregulation, we are free to go after any opportunity that exists to move shipments from Point A to Point B," says Rick Rowland, director of quality. "Second, third and fourth day delivery is our domestic niche, but we can get as creative with our services as we want to be."

And developing new and innovative transportation services is a primary goal of Right-O-Way's marketing research effort.

When the firm sought to explore customer surveys, a relatively new marketing research technique for the firm, Right-O-Way hired Just Marketing, a Scotts Valley, California-based firm that specializes in serving the transportation industry. They developed a written questionnaire, which was mailed to all current Right-O-Way customers.

The questionnaire asked Right-O-Way customers to list the types and quantities of products they had shipped in the past and the types and quantities of products they had shipped in the past and the types and quantities of goods they planned to move in the future. The questionnaire also asked customers to comment on the quality of service they received from Right-O-Way.

The name and address of the customer was printed on each questionnaire. This way, Right-O-Way makes sure that a sales rep follows up with each respondent.

"From a quality standpoint, we meet with customers to find out how we can improve our service," says Rowland. "And if the survey shows that a customer's transportation needs are expanding or changing, our sales rep will try to gain that new business."

In addition, Right-O-Way uses a compilation of the survey information to develop its overall marketing plans. It analyzes overall trends in its customer base and identifies customer needs by geographic region and city. Right-O-Way then develops packages of transportation services to meet those needs.

"We have a broad menu of services to offer," says Rowland. "Marketing research enables us to home in on what specific customer groups need today and tomorrow."

Transborder business

Right-O-Way is heavily committed to international shipping, especially transborder business with Canada. Therefore, much of its marketing research effort reaches outside U.S. borders.

Rowland was manager of Right-O-Way's transborder services in 1985 when the U.S.-Canada Free Trade Agreement (FTA) was passed. Basically, the FTA specifies three schedules for phasing out tariffs and duties over a ten year period starting in 1989. By studying the FTA and communicating directly with Canadian and U.S. government officials, Rowland and his staff found out which industries and product markets would open up first.

"We identified what types of products would be moving across the border and determined how best to tap those markets," says Rowland. "Our FTA research showed that, initially, there would be a great deal of movement of electronics and computers from the Midwest into the Toronto area. So we identified which companies on both sides of the border were most likely to engage in this trade. We went aggressively after those accounts, developing transportation services to match their needs."

Rowland admits that Right-O-Way had a distinct advantage when tapping the transborder market. "Our sister company, Right-O-Way Canada, has offices in every major Canadian airport city. We've been able to coordinate marketing research on both ends and come up with programs that take advantage of everything we know north of the border."

Domestically, Right-O-Way taps a wealth of external sources for research and sales purposes. The company purchases manufacturing guides on computer disk from Database Publishing Company in Newport Beach, California. "From these disks, we can identify companies in a particular ZIP code or group of ZIP codes by SIC code and find out what they ship and where they ship. So if we want, for example, to go after freight lines between Los Angeles and New York, we can identify which companies to target. The disks give us direct leads."

Mail and telephone

Jean McClymonds, president of Just Marketing, also serves as the research chairperson for the Sales and Marketing Council of the American Trucking Association. When transportation firms are looking for basic trends in customers' shipping preferences, they will more than likely use mail surveys or telephone interviewing as their research tools, McClymonds says.

"One of my larger clients sends out an annual survey to approximately 20,000 businesses, customers and non-customers alike. It asks respondents to rate the major carriers on a number of service criteria and to indicate the importance of various transportation factors such as price, dependability, on-time performance and so on.

"It's a blind survey in the sense that they don't tell respondents who's conducting the survey. The survey goes out under the name of a market research company, but they collect the data and do the analysis."

Transportation firms find such surveys very revealing, McClymonds says. "They learn a lot about their reputation as well as the perceived value of current services and prospective new services."

For smaller, more specific research efforts, the firms often switch from the mail to the telephone. "Generally speaking, these telephone interviews can be completed in a matter of minutes," McClymonds says. "And companies can discover some very valuable information about specific aspects of their market and/or services."

In-house databases

To obtain names for their mail and telephone surveys, most transportation firms use their own in- house databases, augmenting them with subscriber lists from major trade publications or list brokers with an emphasis on the transportation and purchasing industries. They generally select names from across various standard industrial classifications (SIC), sorting by size of company, number of employees, or geographically, depending upon the survey's objectives.

In addition, today many of the transportation companies conduct smaller surveys of their current customers, both by phone and mail. In some cases, these surveys will be very sophisticated. In others, they're much more informal.

Sometimes, a customer survey will serve as one part of a larger market research project, McClymonds says. Several years ago, for example, a client conducted a survey regarding the strengths and weaknesses of its customer service department. It surveyed both customers and employees, and held focus group sessions at its shipping terminals.

In addition to surveying current customers, transportation firms will survey departing accounts to determine why they lost their business. "Many companies will conduct a telephone survey of lost business. Basically they'll ask, 'Why did you leave us?' In many cases, the customer might have had a decline in business due to the recession, or they went out of business altogether. And in others, it may have been due to unsatisfactory service. We believe it's the latter that clients should pay particular attention to."

The competition

When researching the competition, some companies obtain the publicly published financial records of other major transportation carriers. However, most firms agree that the best source of competitive information is their own sales force.

"Salespeople talk to customers everyday," says McClymonds. "They hear things and they feed it back. Companies can synthesize that data and get a sense of what's going on. But you have to be careful, because there are laws that limit what kind of contacts you can have with customers and what type of information you can get from them."

One client takes its competitive information gathering very seriously, keeping extensive files on its major rivals, McClymonds says. Each of those files is assigned to an account manager, who becomes the in-house specialist on that particular carrier.

"Everyone gathers information and forwards it to the appropriate specialist," says McClymonds. "The file is updated every six months. Those files are condensed into competitor fact sheets, which are put into a three-ring binder and made available to anyone in the marketing or sales departments."

At some companies, market researchers are free to examine the wealth of operational data kept in internal databases. "This data can help a company identify its major customers or major shipping lanes. Through computer overlay programs, they are able to access shipment activity and spot trends that are very telling."

New markets

Transportation firms also use their databases to help identify new markets. By tapping external and internal databases, they can look at the demographics and business activity of territories they're not serving and make an accurate determination of whether it makes sense to open a terminal in that locale. "When a company is considering a new territory, it should look at trends in population, retail sales, and number of businesses over a six-, nine-, and twelve-month period."

One major transportation firm uses its own "interline activity reports" to gauge whether new markets should be entered. "When a transportation firm handles a shipment and the final destination is outside its own service area, it will hand the shipment off to another carrier. If you track this activity closely and see that you're turning a lot of business over to another carrier in a particular area, you should consider moving in."

McClymonds says that many larger firms now subscribe to general commercial databases such as Trinet, which covers various industries by SIC codes. It helps them profile communities and subsequently provides actual leads for their salespeople.

Others are using more transportation specific databases such as TranSearch, a freight flow database. It models movement between various points throughout the U.S., estimating tonnage by SIC code for commodities moving within certain lanes.

"Let's say you want to examine shipping activity between Salt Lake City and Portland. TranSearch will give you the major commodities, listed in descending order. And, it gives you names of companies involved in those industries."

Well-defined niche

Daylight Transport, a $40 million a year less-than-truckload (LTL) carrier of motor freight, has carved itself a well-defined niche in the transportation industry. Daylight specializes in expedited over-the-road delivery, coast-to-coast and Texas. It delivers faster than most surface carriers with a rate structure that is less expensive than air freight.

"Most of our competitors take six or seven days to the East Coast, we do it in four," says Daylight's Guy Denniston. "That's our little niche, so the markets we go after are the ones where we can shave off coast- to-coast transit time."

To date, Daylight's marketing research techniques are best described as informal, but Denniston is planning to incorporate more formal research techniques in the immediate future. "We're in the process of developing a detailed mail survey that we hope to introduce in the second quarter of '92. We're also planing quarterly focus groups and roundtable discussions with key customers. We'll tell them where we're heading and ask them what they need and how we can better serve them."

The task of Daylight's current marketing research effort is to cost-effectively identify industries and companies that can take advantage of its unique services. "We're not a hundred million dollar company that has a lot of money to spend on outside market research and fancy databases. Ours is a roll-up- your sleeves-and-do-the-basics kind of company," says Denniston.

Thus, Daylight's primary method of market research is talking face-to-face with customers. Denniston and the rest of the firm's sales and marketing management team spend substantial time in the field with sales reps, talking to customers and gathering information. "Our customers see our concern for their welfare, but I don't think they realize that we're using this information for marketing planning purposes."

Another source of information is the company's Customer Satisfaction Group, a centralized customer service department. It averages 800 to 1000 calls a day from customers and potential customers, handling requests, answering questions and resolving complaints. Once a week, the group meets with marketing representatives to share information. "They tell us what type of calls they're getting, what problems are coming up, and what customers are asking for. They keep us tuned to the problems and service requests they receive," Denniston says.

The firm pays close attention to the service requests from prospective clients. "We may discover that something we aren't offering is keeping us from getting more accounts. Recently, one prospect asked if we had electronic billing, something akin to money transfer. We're not quite set up to do that yet, so we lost that account. That's a hurdle we have to overcome, something to look at in the future."

In addition to gathering marketing research on customers, Daylight gathers competitive information. Denniston feels its important to see what the competition is doing and to determine how Daylight can do it better. Again, the sales force is the primary source of information.

"Customers are open with that type of information. If a competitor comes out with a new product or service, they'll tell us. Then we'll try to take that idea a step further, refine it, and offer something better."

Denniston is also an avid reader of transportation industry trade journals, as well as specific customer trade journals. "I'm looking for trends. I'll analyze the shoe industry or maybe the textile industry, looking for changes in their distribution patterns or transportation needs. Then we'll move to fill that new niche, staying ahead of the competition. We have a lot of flexibility because of our small size and flat organizational structure."

Looking forward

The transportation industry's continuing investment in marketing research is testament to the importance the leading transportation companies place on such information gathering techniques. And although smaller carriers might not have the extensive resources to devote to this activity, they nevertheless recognize its importance.

Rick Rowland feels that Right-O-Way has gone a long way to improving its marketing research function since the industry was deregulated. However, he says that increased competition and a growing emphasis on global trade requires him to be on the lookout for new sources of marketing information.

"In the freight forwarding industry, you have to be flexible or you're not going to exist. Marketing research is critical to gathering information about political and geopolitical developments in the United States, Canada, and Europe. We've grown dramatically internationally and the bulk of our growth in the next two to five years will be in international business."

Daylight's Guy Denniston also has no misconceptions about the competitive nature of the transportation industry and Daylight's need to keep up in the area of marketing research. "We're a small fish in big pond. To survive, we can't just meet the customer's expectations, we have to exceed them. Through marketing research, we have to find the little angle or niche where we can exceed the expectations of the customer. And we have to differentiate ourselves from the competition."