Broadly speaking the target market for a logistics company is made up of individuals or businesses who need to get their products from Point A to Point B.
To be successful, any logistics company needs to know who these people or businesses are, what they want and need, and how best to reach them.
If you’re in a logistics company and are looking to grow your customer base, your knowledge of your target market will determine everything from your marketing strategy to the products and services you offer.
In this article, we will review the different segments of the target market for a logistics company and discuss what factors affect their decision when they select a logistics company for their shipping needs.
What Do Logistics Companies Do?
Logistics companies coordinate the transportation of goods from one location to another.
They are responsible for making sure that the products arrive at their destination safely, on time, and without any damage.
To do this, logistics companies use a variety of transportation methods including air freight, ocean freight, rail freight, and trucking.
In addition to coordinating the transportation of goods, logistics companies also provide other services such as warehousing, packaging, and order fulfillment.
All together, logistics companies provide the following key services:
- Transportation management
- Warehousing and storage
- Inventory management
- Order fulfillment
- Freight forwarding
Each of these services can be further broken down into sub-services.
For example, transportation management includes things like route planning, load consolidation, carrier selection, and more.
Inventory management includes activities such as stock control, order tracking, back-ordering, and reordering.
Order fulfillment includes picking and packing orders, shipping orders, and returns management.
Freight forwarding is where the logistics company handles the entire process of coordinating the shipment of goods from one location to another and includes things like customs clearance, documentation, and insurance.
To understand the target market for a logistics company, it’s important to first understand what services they provide.
Now that we’ve reviewed these services, let’s take a look at the different segments of this market.
Who is the Target Market for a Logistics Company?
The target market for a logistics company can be divided into two broad segments: businesses and individuals.
Business Customers
Businesses make up the first and largest segment of the target market.
These are companies that need to ship their products from one location to another, either within their country or internationally.
Some examples of businesses that would use the services of a logistics company include manufacturers, retailers, and e-commerce businesses.
Individual Customers
Individuals make up the second segment of the target market.
Individuals need logistics companies to ship products that are too large or too heavy for them to transport by themselves.
Some examples of individuals who could use the services of a logistics company include customers who have bought furniture online, people who are moving homes, and businesses that are relocating.
Business Customers Vs Individual Customers
There are three key differences between business customers and individual customers of a logistics company:
- Frequency of Use
- Services needed
- Pricing options
Business customers of a logistics company tend to ship products on a regular basis while individuals only ship products occasionally.
Business customers also tend to ship larger and heavier products than individuals do. This is because businesses usually need to transport large quantities of goods at once, whereas individuals only need to transport a few items.
Secondly, businesses often require the entire suite of services that a logistics company has to offer, while individuals only need shipping and maybe storage.
For example, businesses that manufacture products can need logistics companies to coordinate the transportation of raw materials to their factories, ship finished products to warehouses, and then arrange for those products to be delivered to retailers.
On the other hand, an individual who is moving home will only need transportation and storage services.
Finally, the pricing for business customers and individual customers is also different. Businesses usually negotiate long-term contracts with logistics companies that offer discounts based on volume, frequency of use, and other factors.
On the other hand, individuals usually pay per shipment and don’t receive any discounts.
Business Customers of Logistics Companies
In the previous section, we looked at the two main segments of the target market for a logistics company: businesses and individuals.
In this section, we will study the four main types of business customers of logistics companies.
These are:
- Businesses that need to ship raw materials to their factories or their customers
- Businesses that need to ship finished products to other businesses
- Businesses that need to ship finished products to retailer warehouses or stores
- Retailers that need to ship products to their stores or to end consumers
Manufacturing companies rely on logistics companies to ship raw materials to their factories which can often be located in different parts of the country or the world.
These logistics companies will often have a team of experts who are familiar with their client’s manufacturing processes and can help to coordinate the transportation of raw materials in the most efficient way possible.
Sometimes, raw material companies like Mining companies will need to ship the raw material directly to their customers’ factories.
Brick-and-mortar retailers also use logistics companies to ship finished products to their stores. In some cases, retailers will have their own logistics departments but in other cases, they will outsource this function to a third-party logistics company.
Online retailers need logistics companies not just for shipping but also for storing inventory in warehouses. They also need logistics companies to help them with returns and exchanges as well as managing their supply chain.
How do Customers Select a Logistics Company?
There are four main factors that affect the decision of businesses as well as individuals when they select a logistics company:
- Price
- Reliability
- Speed and
- Service.
Price
Price is the first factor that affects the decision of businesses when they select a logistics company.
Businesses and individuals want to find a company that can provide them with the services they need at a price that fits their budget.
Reliability
Reliability refers to the shipment being picked and delivered on time and in perfect condition. Customers want to make sure that their products will be transported safely and without any damage.
They will hire a logistics company only if it has experience shipping the type of products they need to be shipped and to the destination where they want them shipped.
Speed
Speed while important is generally secondary to reliability and sometimes even secondary to price.
Customers would like to receive speed but not if it comes at the expense of reliability. And they may want more speed but not if the increase in price makes the transaction untenable.
And when it comes to logistics, speed is one variable where customers are willing to compromise because if they want something sent extremely quickly, they will often turn to a courier service rather than a logistics company.
Service
All customers expect good quality from a logistics company. Specifically, they expect the following:
- Ease of making a booking
- Accuracy of quote
- Quality interaction with customer service
- Ability to track the shipment
- Flexibility in terms of routes and schedules
- Easy claims process if needed
Summary
Both businesses and individuals form the target market for a logistics company. But they each use logistics companies very differently.
Businesses use logistics companies to transport raw materials to factories and finished products to distributors, retailers, warehouses, and stores. Individuals tend to use them when they are moving homes or shipping a large package.
Businesses tend to need the entire range of services offered by logistics companies while individuals tend to need only shipping and storage.
Both businesses and individuals tend to use the same set of criteria for evaluating a logistics company. These are price, reliability, speed, and service.