To say that the pandemic has had an impact on international import/export would be a gross understatement.
Indeed, from its effect on international shipping to that on consumer behaviours, it arguably poses one of the most notable challenges in the industry’s modern history. In this context, quality service in logistics can serve as a differentiator and an asset toward growth. Let us explore the subject to establish how it may allow your import/export business to thrive in hard times.
The resilient logistics industry
Throughout its history, logistics has facilitated the efficient transportation of goods from one location to another. It has continuously evolved from the time of the ancient Greeks and Romans to the Middle Ages, finally beginning its transformation toward its current form during the Industrial Revolution.
Now, in the digital age, the logistics industry ushers in groundbreaking technological innovations and thrives like never before. Despite the hardships COVID-19 yielded for imports/exports at large, logistics specifically continue to boom. Indeed, Allied Market Research finds that “the global logistics market is projected to reach $12,975.64 billion by 2027, registering a compound annual growth rate (CAGR) of 6.5% from 2020 to 2027”.
That is not to say, however, that the future is necessarily bright. From major disruptions to COVID-fueled partial port shutdowns, import/export business owners should rightfully remain cautious and prudent. As regards logistics, in particular, quality service remains a factor well within control and deserves due attention.
The importance of quality service in logistics
Why is that, then? If we consolidate the importance of quality service in logistics down to 3 fundamentals for the sake of text economy, those would be its effects on brand image, customer satisfaction, and customer retention. Thus, let us briefly explore all 3, examining relevant research and citing examples of application where appropriate.
#1 Brand image
Initially, it’s no secret that quality service affects customer perceptions as regards your brand. Perceptions of service quality and expected satisfaction spearhead marketing endeavours across industries, and logistics is no exception. That’s why it pays to let your clients know that hiring a cheap logistics company is not always the best option and can come with many risks.
While the correlation between quality service and brand image may be easy to hypothesize, it may be harder to quantify. In this regard, research suggests a very stark correlation indeed, noting that “Service Quality has a positive and significant effect on Brand Image”, especially in tandem with customer satisfaction. Together, it quantifies “the total value of direct and indirect influence of service quality and customer satisfaction to brand image at 69.5%”.
#2 Customer satisfaction
There is a second component to the above equation, however, and that is customer satisfaction. As an import/export business owner, you’re likely well aware of this factor. You may have won over a long-term strategic partner through quality service or severed a business partnership on similar grounds. Should you have had such experiences, they should best exemplify how crucial customer satisfaction can truly be.
In this regard as well, research finds that “the five constructs of logistics service quality” all positively affect customer satisfaction. For clarity, it defines said five constructs as the following:
- Personnel contact quality
- Timeliness
- Order condition
- Order discrepancy handling
- Operational information sharing
These findings should further illustrate the importance of quality service in logistics, as it directly affects customer satisfaction. Where an impeccable brand image may lure prospects and reveal opportunities, satisfaction will crown such endeavours with long-term success.
#3 Customer retention
Finally, arguably as with all industries, quality service in logistics directly informs customer retention. Understandably, both customers and business partners will opt out of perceivably underperforming relationships, with service quality directly informing their evaluation. Especially when global shipping costs may continue to rise, maintaining strategic, long-term partnerships is likely more crucial than ever.
Practical benefits to revenue aside, customer retention is also an extremely substantive marketing metric. To illustrate its significance, consider the following findings:
- “82% of companies agree that retention is cheaper than acquisition”. Research corroborates this view, quantifying customer acquisition costs as 5-7 times higher than retention costs.
- “A 5% increase in customer retention can boost profits by 25% to 95%”.
- “Almost 65% of a company’s business comes from repeat customers”.
Having highlighted the importance of quality service in logistics regarding brand image and customer satisfaction, we may safely argue that the two converge into enhanced customer retention – with all the benefits it yields in turn.
Conclusion
In conclusion, quality service in logistics is arguably more significant than it has ever been. As research shows, it directly correlates with brand image and customer satisfaction, which in turn informs customer retention. Thus, it may well be the differentiating factor that lets your import/export business edge ahead of the competition. In an age of uncertainty, when effective resource allocation is as imperative as it is, it likely warrants due attention.
IoSCM provides ports and shipping management courses that develop international shipping and logistics management knowledge. Our shipping courses are regulated by Ofqual, designed by industry experts and help you build the skills and confidence you need to succeed in the industry.