Logistics – Parcel delivery market study

Logistics particularly as it relates to the consumer delivery business is a two horse race. FedEx and UPS have long duked it out, in effect, having a duopoly over an entire category. One might argue that the US Postal Service should be included in this group as well, but FedEx is one of the USPS’s biggest customers, co-opting its last mile delivery.

However, the industry is in a state of flux and all players, regardless of size, should take note.

The state of FedEx and UPS, the leaders of logistics

UPS Logo - LogisticsFedEx LogoBy all measurements, both FedEx and UPS continue to strengthen their market dominance. FedEx accounts for about $50 billion in revenue with UPS doing about $10 billion more. There are an ample number of customers to keep FedEx and UPS fat and happy for a while, with more and more consumers turning to online retail.

With that being said, what are these two saying about themselves to both preserve and attract new customers? First take a look at FedEx:


FedEx’s two main divisions, FedEx Express and FedEx Ground, are each on display here. FedEx is huge sponsor of the PGA and, during golf season, there are many ads like the first one. The ad touts the technology of FedEx Express with its app that can reroute packages to a local FedEx store, as if that is more convenient.

The second touts the price savings FedEx Ground customers could have over UPS Ground. While price is a sensitive issue for most businesses that ship a lot of products, it’s difficult to believe that the price differences between FedEx and UPS are all that significant, if they really exist at all. Each is going to do what it can to keep or get new business.

For UPS, it’s much of the same, ads trumpeting technology and cost savings. UPS played around with the idea of “What can Brown do for you,” which was a good segue into the idea of owning logistics. After all, isn’t what these delivery companies do, logistics?

What is lacking is any real reason to choose. Like many categories, the major players try to outmaneuver each other by claiming the very attributes that all players in the industry, regardless of size, possess. In fact, they are the bare minimum that any player must have. How can you be in the shipping business if you are not price competitive or have the technology deliver packages.

More over, both FedEx and UPS (especially UPS) try very hard to tell their stories from the perspective of the consumers who are receiving the package. Do consumers have much of a choice as to who actually ships the packages? That decision is often based upon price and when the consumer actually wants the item delivered.

Most typically, customers don’t have a choice between FedEx and UPS. The entity shipping the package makes that choice.

Being basically a duopoly affords both carriers the luxury of building larger and more sophisticated networks capable of delivering more shipments with each trying to outmaneuver the other. All the while each tries to woo more businesses to choose it over the other.

The FedEx and UPS brands both accomplish the same thing – getting stuff from one place to another. The FedEx brand feels a bit more sophisticated and harkens back to one of its old messages. “When it absolutely, positively has to be there overnight” is ultimately about piece of mind.

UPS feels more like the hard-working blue-collar challenger even though it actually ships more often than FedEx and has greater revenues.

Neither brand has proven over time to be superior to the other. They both work well and neither has really given customers a compelling and unique reason to choose one over the other.

Regional players are becoming more sophisticated and integrated

OnTrac LogoLaserShip LogoWhile FedEx and UPS continue to grow and optimize their networks, regional courier and LTL shippers are doing the same. Regional comDicom Logopanies like Dicom (Eastern Connection), LaserShip, GSO, OnTrac and even Pitt Ohio whois more of a LTL (less than truckload) once exclusively dealt with their own geographies. Now, those regional players are transporting parcels and freight that originated with another carrier. This model is not completely unlike the US Postal service delivering some packages the final mile for FedEx or UPS.

Regional players can ship most things quicker and less expensive than UPS and FedEx. The caveat is that, in most cases, the package must originate and arrive in the same coverage area in order to get these savings.

While these regional players present an alternative to the major players, they have a much more difficult climb. First, while they are known in certain circles and industries, what little awareness they have is limited to these niches. Their awareness pales in comparison to FedEx and UPS. Secondly, they all regurgitate FedEx and UPS sales messages – innovative technology and cost savings. Because of that, they have to prove some of the table stakes, such as timely delivery and size of delivery network.

When these regional players and their associated national networks act like FedEx and UPS, the best they can hope for is to be viewed as an equal. All their messaging does is reinforce the position of the market leaders. A company can’t gain share against a market leader by merely copying what the market leader says.

There is a unique advantage the regional players are not effectively exploiting. Each of these regional players should possess innate knowledge of their regional customers that is unique to the region in which they operate. The brand should always be from the perspective of the customer not the company itself and no regional player has positioned itself as that.

Local disruptors in the market

Uber Rush LogoMore companies are getting into the delivery business. Some with familiar names like Uber and others with not yet familiar names like Roadie. Using the same blueprint as Uber, these companies take a preexisting work force, drivers going from point a to point b, and pay them to move packages across town. (Or across the Roadie Logocountry, in the case of Roadie.)

None of these are being taken seriously as a competitor for traditional shoppers because they have not reached the needed critical mass. But the major players should take note, and they are.

While players like FedEx and UPS have an extensive driver and delivery network, they lack the driver density of the likes of Uber. Uber has the ability to pickup and deliver (on a local level) in real time, on-demand. Even the traditional bicycle courier can’t do that to the degree Uber or even Lyft can do it. FedEx and UPS can promise same-day delivery but Uber could be as close to instant as possible until we develop the coveted transporter.

A Major Development

Amazon has quickly ramped up its own delivery network, recently unveiling its new 767 plane with the words “Prime Air” written across the side.  Amazon claims having its own delivery network only augments its existing relationships with its current partners. But can Amazon be trusted?

TAmazon Logohe reality is that Amazon wants to own the entire supply chain. You don’t have to look much further than its expansion into private label products and cloud-based computing services to understand that. Amazon’s business is about getting stuff from one place to the other. Amazon doesn’t really make anything at all. Doesn’t that sound familiar?

The actual shipping part of delivering that stuff is expensive. It is good business for Amazon to want to control the costs of that. After all, it is by far the largest e-retailer in the US and is second in the world only to China’s massive Alibaba.

Ultimately, Amazon does not want to augment anything with its current delivery partners. It wants to replace them. And quickly and quietly, it is developing its own network to be able to do so. Its grocery delivery and same day Amazon Prime deliveries are prime examples of this. Amazon trucks deliver products ordered through Amazon.

What’s more is that the Amazon brand gives it permission to go down this road. In fact, its brand dictates the necessity for it to do so. But there is are two problems. First, severing the important relationships Amazon has with FedEx and particularly UPS could be problematic. Secondly, and more importantly, Amazon must convince other retailers to use it over FedEx or UPS.

The first issue is pretty cut and dried. Amazon will reach a point where it does not need FedEx or UPS but only for special circumstances. At this point, Amazon will be all in with its delivery model and there will be no turning back. It would be doubtful that either FedEx or UPS would welcome Amazon back anyway.

The second is much more difficult. Once Amazon gets really good at delivering its own stuff, it will reach out to other retailers who need delivery services. This will be a tough nut to crack because retailers will likely be hesitant to partner with a competitor that could use the delivery information as a competitive advantage. Amazon has become successful in part because it knows what to do with data and any additional data it can get on its competitors could hurt those competitors.

The opportunity

There still is real brand opportunity in this space. The natural default for most shippers is either FedEx or UPS and you can throw in USPS in there too. The reason those choices are always the default choice is simple. No one in the space has given anyone any reason to care. Reliability and price are really the only two things that matter at the end of the day and most, if not all of the players regardless of size, are reliable and are cost competitive. Cheaper options might take a bit longer but packages will still get there. Next day delivery will get there too but will be more expensive. In short, they all work.

The different world of John Hancock

Readers of this blog, visitors to our site and all our clients know that Stealing Share develops brands that are a reflection of the audience. That’s how you build preference.

The shocking thing to us is how few brands actually practice that. Most brand messaging – or just messaging in general – is either identical to the competition or about the brand itself, or both. That’s the single biggest reason why there is stagnation in most markets.

Therefore, there’s always a bit of elation when a brand actually practices the art of having a brand face, who customers believes they are when they use the brand.

Even though it doesn’t go far enough (more on that later), the new ad campaign for John Hancock does it right. The campaign, with the heading of “Different World, Different Approach,” actually considers who the target audience has become.

One of the spots features a variety of couples getting married, including interracial and same-sex couples. That ad is nice, but the one tilted “CEO” is the winner.

It works because the hallway of past CEOs represents the old way of doing business. In an indirect way, it positions John Hancock against the competition. When the young Hispanic woman walks past the row of profiles, we know it is a different world – a direct reflection of the world we live in today.

The brand of John Hancock needs to make the next step.

Kudos to John Hancock and its ad agency, Hill Holiday, for this campaign. The campaign is terrific, but here’s the problem. The brand is still the same. This is just an advertising campaign. It does not signify a radical shift with the brand. It may be a different world, but it’s the same old John Hancock.

So, this campaign will air over the next few months, then John Hancock will switch to another ad campaign and what the brand of John Hancock means will remain unchanged.

To prompt a true change in the market, one that creates preference, John Hancock needs its brand to reflect the target audience. It’s all well and good that it has a campaign that does, but long-term preference comes from the brand.

Why we don’t switch to alternative energy

We like to think we live in a world of alternative energy. There’s solar power and many of us drive hybrid cars that use electricity to increase gas mileage. There’s even a Hillary Clinton ad airing in my area, North Carolina, which showcases her promise to increase the number of solar panels in our country.

But you wouldn’t know that we are moving to an alternative energy world Saturday night in the South. A pipeline near Birmingham, Alabama, broke, starting a gas shortage, thus creating empty pumps, long lines and high gas prices.

What year is this? 1979?

Alternative energy
Switching to alternative energy is not easy, even during a crisis.

Many gas stations have that dreaded plastic bag over the pump handles, while increasing gas prices. We’re not in panic mode by any means, but it is still startling.

Fully switching to alternative energy will take more than concern over the environment.

It got me thinking that switching to anything is such difficult work. Most of us, including myself, talk a good game when it comes to the environment and alternative energy, but I do little about it. Oh, I have an energy efficient air conditioner, but honestly I have it because it reduces my energy costs. Not because I’m doing something for the greater world.

Think about this. Remember when the metric system was supposed to take over our highways? We were going to join the rest of the world in adopting the system. It only seemed logical.

But that effort failed.

I bring this up not to berate anyone. But to point out that getting people to switch to anything is enormously arduous.

That is the biggest reason why I do berate brands that believe the same old approach will get consumers to switch brands, even though there is little differentiation among each market’s players.

Each car ad looks and sounds the same. Each beer ad is a copy of another. Car insurance, which spends untold amounts on advertising, offers little reason to switch.

To actually prompt a change in any market you have to be different and better, and often that means being so different that you actually offer a true choice. The definition of a switching trigger is switching to something you don’t have. Otherwise, you stay put.

I don’t think we’ll be switching to the metric system anytime soon. To fully adopt alternative energy we’ll need a stronger and more emotional reason than saving the environment. When a gas shortage directly affects us, then we consider switching.

Sometimes it’s in the crisis where the greatest leap forward takes place. But there are better ways to prompt a switch.

The new Truth anti-smoking ad fails.

The new Truth anti-smoking ad has taken a new approach to curbing teen smoking. It represents a move from the grotesque ads of removing skin and teeth to talking about the salary differences between smokers and non-smokers. I find the ad interesting, but it illustrates two problems all to common with many brands today.

Research does not always tell the whole truth

The ad claims that young smokers could earn up to $10,000 less than non-smokers. It backs up that claim by citing the Usual Weekly Earnings of Wage and Salary Workers Bureau for the second quarter of 2016 report by the Bureau of Labor and Statistics.  The problem is that particular report says nothing about smokers vs non-smokers. The question of whether or not a respondent smokes isn’t even asked as part of that report. In fact, the words “smoke” or “smoking” are mentioned zero times in the report.

This ad also has a screen shot of an article written in 2013 by two economists from the Federal Reserve of Atlanta who found smokers earn 20% less than non-smokers. However, that finding is a correlation not causation because it does not factor differences between age, race, or socio-economic status. Its like saying people who drive to work tend to have a glass of water before they go to bed.Truth anti-smoking

If Truth wanted to cite real research, it should have cited a recent study by the Stanford University School of Medicine that shows that people who smoke have a harder time getting a job and, yes, they actually do earn less. But the mean age in this study was 48.

I don’t feel like what thetruth.com is citing here matches up with the facts they are citing, even if I personally suspect there is something to this idea. This, unfortunately, is the problem with a lot of research claims. Companies tend to make some pretty big decisions based on what they consider research.

We see brands do it all the time. They ask people about what characteristics they prefer in products or services, and then ask how the brand stacks up in those characteristics versus the competition. They take that data and immediately set forth an action plan to improve their areas of deficiency relative to the competition. Based on that, those brands expect people to switch.

The problem isn’t the research but the interpretation. The best thing a company can usually hope for is being equal to its competition in those values. Companies often cite research that they are not up to snuff compared to the competition on those values, so they work to improve them. That is fine, but those values then become table stakes. They are not what are most important.

This is not to say that all research is misleading or using research to substantiate a claim is bad. Brands just need to be very careful of what they are citing and how they are interpreting it.

Understanding your target market is keyYour market is unique

The Truth anti-smoking ad is also completely meaningless because it isn’t an accurate reflection of the target audiences – kids and young adults.

There are a number of sources that show the vast majority of smokers start before they turn 18. The ad is completely ineffective in getting them to not smoke. The argument that the ad presents is far to rational for them. Kids have been trained since birth to believe they can do and accomplish anything. They base their relationships with others on how many likes their social media posts receive. Few kids in high school are thinking about how much they are going to earn relative to their peers.

Kids at this age are earning minimum wage. When they graduate, if they don’t go to college or trade school, they will likely start at minimum wage. These kids see those around them as earning the same as they do. The non-smoker will not start at $5 more per hour than their smoking counterparts.

Smoking is irrational

The choice to start or quit smoking for kids is certainly not about money. The fear of losing money because of smoking is a rational fear. Smoking in and of itself is not a rational act to begin with. So how do you convince them to quit with a rational argument? You can’t.

The decision to smoke is highly emotional. In today’s world, I don’t think there is anyone who would actually agree that smoking was a good idea. The days of doctors promoting the health benefits of smoking are thankfully long gone.

Today, everything is about instant gratification, especially for this target audience. Human beings by their very nature are irrational and smoking is irrational. Getting kids to quit smoking or avoid it altogether requires a gut punch, an immediate and shockingly painful jolt that completely knocks the air out of you. The message has to be so arresting that it stops kids in their tracks and becomes an insidious voice in their heads every time they are tempted to have a cigarette. It’s not a rational message. It’s an emotional one that actually is reflective of them and affects them instantly.

Telling kids to stop smoking because of something that may or may not happen in the future is spitting in the wind.

Insurance branding to create preference

The purpose of insurance branding.

Any process of insurance branding includes questions about creating preference. How do we gain preference for our products when, basically, they are identical to that of the competition? How can we convince target audiences to buy insurance when, if I’m being honest with myself, they don’t really want insurance? How can I assure our message is getting through when we go through a middleman, such as a broker or an independent agent, to sell it?

The insurance industry is one of the most heavily regulated of all, right there next to pharmaceuticals. It must respond to changing laws, reimbursement issues, market forces and, especially, health care requirements.

Insurance brandingIts other hurdles, however, are not that unique to its industry. Most markets are mature ones, meaning that products and offerings are similar, and true innovation is rare. Most of the products consumers buy they don’t really need (c’mon, who really needs an iPad?). And most brands don’t sell directly, meaning they depend on a retailer or distributor for sales.

Does that mean the answers to those questions posted above are the same for any industry? Yes and no.

Facing the belief about insurance branding

The reason they are not all the same is that insurance brands have an image problem few have. They are seen as a scam. We’ve done research for various insurance companies and respondents are very wary of insurance companies that make promises on which they don’t deliver. Any number of the general public can tell you a dreadful story about filing a claim and having to hire an attorney to goad the company into complying.

You could retort that all industries have failures and breakdowns, but the anger is stronger with insurance brands because the issues seem to be embedded into the process itself.

You pay your premiums without filing a claim for years, then you are denied when you actually do file. As it’s said in a Liberty Mutual commercial, “Why have insurance when you have to pay more to use it?”

In some ways, this anger is similar to what consumers felt about banks. In the face of the 2008 recession, anger at banks was at an all-time high.

Why do so few take action?

But few financial institutions, such as credit unions, aligned themselves with that anger to steal market share. Our studies showed that about 15% of customers seriously consider switching banks at any given time, but few actually do it because switching seems complicated and no one has a message that gets them over that hurdle.

In the insurance industry, switching is certainly one of the end games of insurance branding. But another is adding to the policies you already have with that customer. In that situation, customers are usually reluctant to add policies because of the negative feelings they have about insurance companies.

The Liberty Mutual ad campaign has been successful largely because of the belief among consumers that insurance companies scheme their way to take your money. It works as a message, but it would be more effective if the emotional pain of that the audience was embedded in the Liberty Mutual brand. Then Liberty Mutual could be preferred, rather than just considered.

hamster wheelSure, Liberty Mutual says “Liberty stands with you,” but that’s just marketing garble and identical to “Nationwide is on your side.” (We liked the question it asked years ago, “What’s your policy?”) To really make an impact, and provide preference, its theme should not be so forgettable and easily overlooked. It should hit the heart of how prospective customers feel and how they should see themselves in the Liberty Mutual brand.

Brand answers the questions

Therein lines the answer to all the hurdles discussed. Your products are basically the same as those of your competitors? They will become more important to target audiences if they are given emotional reasons why they exist beyond the tired of messaging of protection against the future. How to open up more policies for customers? If the brand fulfills an emotional promise, then those customers will be more open to listen to you.

That’s what insurance branding should do.

Want better control of the message? Then have a brand message that is unique because most agents, according to our research, are bored stiff repeating the same message over and over, regardless of carrier. That is why most of them compete on price. They have nothing else to say.

Let’s consider Liberty Mutual’s “Liberty stands with you” theme one more time to get at the root of the insurance industry’s problem. Intellectually, you might think that theme would be the answer. Here’s the problem. Like most insurance companies, Liberty Mutual truly doesn’t understand the power of brand.

The brand theme here is about Liberty Mutual, not about the prospective customer. Nike’s “Just Do It” and Apple’s “Think Different” are powerful because they are about target audience, not the company.

If there’s a larger problem in insurance branding than what we’ve listed before, this is it. Insurance brands spend millions of dollars in advertising to sell a message that simply will not resonate. That is insanity.