Business Insights

Business Insights

Marketing For Home Delivery Services

Brian Hardie leads The Marketing Centre’s team across the Home Counties as Regional Director. His extensive marketing career takes in media, logistics, security, fleet management and outsourcing; based on work experience with LWT, Parcelforce, TNT, Capita and Royal Mail.Brian Hardie, The Marketing Centre

Today he’s talking us through the changes, challenges and opportunities in the home delivery services sector - one that has a particular eye on Brexit, and a particular need to clearly differentiate from rivals.

What's changed in the home delivery service sector?

The key changes are pretty evident to anybody who receives deliveries at home – which is pretty much 90% of the population. Volumes are rising every year thanks to the growth of e-commerce, which is good - but it does come at a price. Retailers and providers are under severe cost pressure as consumers often expect to pay as little as possible for deliveries. The drive to cut costs often mean that delivery drivers are increasingly being paid a piece rate (or per item delivered). The consequence is they they have to work incredibly hard just to earn a living wage - and have been known to cut corners- literally – to make the next delivery!

Recent months have seen extensive media coverage about operators who have attempted to avoid employing staff directly, preferring a sub-contracted arrangement, with Parliamentary debates over whether couriers should be employed or self-employed. Self-employed drivers incur their own costs, responsibilities and tax burdens, although they’re often still treated like employees.

There’s also an environmental and sustainability factor at play too: as consumers become more concerned about congestion and emissions caused by excess traffic, seeing multiple delivery vehicles racing up and down residential streets, occasionally throwing packages through every door can be cause for concern.

What are the key challenges - and what impact is Brexit going to have?

Well - nobody really knows, because Brexit can mean anything to anybody. That said, many self-employed drivers are EU immigrants who appear happy to work pretty hard for relatively low pay. If there’s a hard Brexit and immigration becomes more tricky, it’s possible there’ll be fewer of that type of worker around, and if the supply of drivers willing and able to operate at current margins reduces, operational costs may rise.

Beyond Brexit, there are legacy problems around how courier companies genuinely differentiate from each other. Some operators have been slower to adopt smart technology. Those with electronic proof of delivery (POD) to an acceptable standard are managing customer expectations to a higher standard; if a retailer’s promising “order by ten at night, delivery next day”, they’re going to work with those operators. Quality does cost, though, and I think retailers and consumers have to understand that paying £2 or £3 for a delivery simply isn’t viable, economically speaking. At some point, consumers or retailers will need to pay more to receive that quality of service.

Are there any opportunities business owners in the sector should be excited about?

Consolidation is becoming more of a possibility than before. By way of example, let’s look at last mile delivery. Once a package arrives in the local area, there are two ways to handle the last mile or so of its journey. At the moment we’re seeing one company have the responsibility for the entire delivery chain, and that’s why you may have twenty different delivery vans nipping up and down your road at all hours of the day.

Another way being considered is to give the final mile delivery responsibility to a group of companies so they can consolidate all deliveries together and coordinate more efficient deliveries by location and proximity rather than just by their own schedule. In this case, you might only have one van going down a given street. So, rather than having twenty delivery vans popping between neighbouring postcodes, you might just have a couple serving one area and keep them busy. It’s more sustainable, more efficient and more cost-effective; and we’re starting to see online platforms set up to enable just that.

Also, more and more people - especially in urban locations - are considering different delivery methods. Think about the drop boxes that Amazon and other operators use, where you can pick up your parcel from a locker at a supermarket or garage rather than waiting in (all day) for a delivery. Shipping to work addresses is quite a popular solution too - it’s more efficient for both delivery companies and the consumers, but the consumers’ employers may take exception to it. They shouldn’t - it stops their employees having to be at home - but the point is there’s a balance between different stakeholders and different needs.

And finally, there’s the continued pressure on the traditional high street. While regrettable, it also presents an opportunity for delivery companies; as fewer sales go via conventional retail channels and the online sector continues to grow. Retailers are fighting back with many now offering ’click and collect’ as a vital way to have multi-channel sales and also generate replacement footfall into their (expensive) premises. If retailers are not yet offering this method, they and their customers will miss out.

What are the fundamentals of good marketing for the home delivery sector?

The basis is clear proposition. Of course there will be occasional problems – all reasonable suppliers, retailers and customers know that - but successful delivery companies know their service proposition has to include how you manage exceptions and failures and a promise to deal with your issues to a given standard. If a delivery fails and your systems or your people don’t give a good, reasonable explanation, folks will get annoyed.

Then, it is vital that they need to manage customer expectations. Nobody wants to hang around from eight till eight on the off chance a delivery might turn up. The customer increasingly expects that any delivery suits their schedule - before nine, ten, twelve or teatime - and the best companies issue regular, personal updates that keep them posted, even narrowing delivery down to the quarter hour and giving them a nudge to thank them and ask for feedback after the driver’s gone.

Managing customer expectations around delivery times

The third dimension is delivery flexibility. Consumers’ expectations today are that they can order late and receive early, and if your supply chain can’t support that, you’re at a disadvantage. If a customer is working in Edinburgh today but needs to take a delivery in Reading tomorrow, your supply chain really has to do that. Set clear delivery windows which create customer expectations and that you can actually deliver on - and if that is something you can’t do, don’t promise it.

Functionality is important too, in fact almost a given: you need an intuitive website, one that’s really easy to use. Asking for too many reference numbers or identifiers that the customer doesn’t have to hand isn’t great: if they need to call you they’re already put out about something, so make it easier on them. Don’t let your systems become an irritant to them.

Customer service is tied into all of this. If you’re able to get the service experience to a high level, everyone will be satisfied. If problems are managed well, fantastic. DPD don’t fail often, but when they do, they know about it before you do: they’ll tell you about it (via a text or email alert) and they’ll be very clear about where the package is, if they’ll try again, if you can rebook online. It leads back to managing customer expectations, but this time it’s around delivery, not promise.

What are the marketing pitfalls to be aware of in the sector?

Differentiation is a challenge: it’s a genuinely difficult sector to stand out in except by doing the basics well - consistently. If your customer experience is poor, or reliability is low, or it’s a hassle to deal with you when things go wrong, then differentiation is weak. In that case, the plethora of ‘white van man’ operators is your marketplace .

As volumes rise, the number of customers experiencing poor service increases – even if the actual percentage of issues remains low. Savvy consumers often ask retailers, "which company do you use?”

That’s why you should be selective as an operator, retailer or consumer. if you’re an operator, segment your marketplace and tell retailers and consumers that you can make a specific type of delivery to the right level. TNT broke ground by really evolving same-day delivery; Parcelforce by working with regular, moderate volume shippers, people who needed ten to fifty items shifting every day. Find customers who expect what you can deliver.

Home delivery is a tricky sector to stand out in. Most delivery firms provide comparable service and face the same basic problems: growing demand, pressure on price, debates around employment and sustainability. The way forward is careful segmentation, highlighting the needs of target customers and ensuring the firm can meet them. Develop a clear proposition, manage customer expectations, and make sure your website and service don’t add hassle for the customer or retailer.

To see where you stand in the sector at large, take our Marketing 360 Healthcheck today.

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