The Hidden Cost of A Quote (And How to Avoid It)
Whenever you hear an advertisement that invites you to get a “Free Estimate,” or a “No-Obligation Quote,” does that make you smirk? Do you think it’s just marketing jargon to get people to request a quote and then get sucked into a purchase they wouldn’t have made otherwise?
Or perhaps you take a more indignant tone: “It had better be a free quote or estimate. What kind of fool pays to know a price?”
It turns out there is a cost to quoting, and a huge free benefit that buyers get from the quoting process.
First, the benefit: getting a quote is free market intelligence. Even if you have done all your research, read every article possible, and looked at all kinds of public data on pricing, you can’t actually know what something is going to cost you until a vendor quotes you a price. Only then can you have a benchmark that’s specifically relevant to the product/service, quantity, timing and frequency of your purchase.
READ MORE: Keep Your Ocean Freight Vendors Honest
As for the costs, free quoting isn’t “free” at all. For the average seller, the time and effort spent on providing a quote to your business carries an opportunity cost. During that same time, another customer could have been quoted and possibly closed. Or the worker who prepared that quote could have spent time completing an order or other high-value task.
According to a recent study prepared by U.K.’s Drewry Shipping Consultants Ltd., freight forwarding and logistics companies spend more than 24 million man-hours just on managing the rates that are quoted to their customers. That’s not inclusive of typing multiple quotes, emailing them out and engage in arcane back & forth rate negotiations. At an average hourly rate of $20.50 per man-hour spent, this adds up to $500 million annually.
So while you’re right to assume that a quote or estimate ought to be free, your vendor really needs to figure out a way to make the cost of that quoting process as close to free as possible. Otherwise, they’re going to be stuck in the vicious cycle of ever-increasing quote volume driving continuously decreasing yield. This is precisely the dilemma faced by vital business-services vendors such as freight forwarders, NVOCC’s and other logistics business.
There’s all this wastage -- but in the end, for a deal to be reached, there still needs to be a rate request and a quote. The answer lies in facilitating a more efficient exchange of information, and of course, that’s where technology comes in. When forwarders and NVOCC’s centralize all of their quoting activity on a common platform, matches can be generated efficiently, and most of those quoting costs go away.
While quoting is an essential step in the logistics process, it need not be resource intensive. By automating this function on a cloud-based platform, your team can redirect its efforts to growing new business rather than performing the “manual labor” of servicing your existing clients.
Download the free CoLoadX whitepaper, "Logistics as a Service: How it Will Transform Your Ocean Freight Business" and see how LaaS will help your company grow.
By: CoLoadX on Aug. 14, 2017, 3:55 p.m.