Date: Wed, 22 Dec 1999
To: moving@avatar-moving.com
From: "Chris Noblit" <cnoblit@avatar-moving.com>
Subject: AMS-Forum %5 general rate increase on 1-1-2000...
X-Hosted-By: http://www.avatar-moving.com
[ Return To The Hall of Fame ]Subtitled "And I thought it was a wash!"...
Our industry is set to take a 5% general increase to the 400-M tariff on January 1, 2000. In anticipation of this rate increase I wanted to offer the following analysis, which Mike Dammer originally posted to this forum back in February...
- Use $4,000.00 as the base non-discounted charge.
- If we discount by 55% our net charge to the customer is $1,800.00.
- If we take a general rate increase of 5% the base amount goes up to $4,200.00.
- If we then increase the discount up to 60%, our net charge to the customer is $1,680.00.
- The net result is a $120.00 DECREASE IN DISTRIBUTABLE NET INCOME in which everyone participates; the booker, the van line, the contract packer, the sales rep, and the van operator.
So a one-for-one relationship between a general rate increase and a increased discount is not a wash. Even if the discount was raised to only 57% (2% higher than the base 55%) all you do is break even ($1,806.00).
If you were to abide by most customer requests and give them an additional 5% discount to counter the 5% rate increase you would actually be realizing A NET 3% LOSS TO THE MOVER.
Over a period of time actions like this have gradually eroded away our rates to where we, today, actually charge an amount close to what was charged in the mid '70's. Yet our expenses for fuel, insurance, trucks, equipment, payroll, medical, even the cost of the materials to write the estimate have increased dramatically from that period of time.
You will find a very good analysis of this trend (which was prepared by the American Moving & Storage Association) on Avatar's Web site at the URL...
http://www.avatar-moving.com/kb/doc_amsa.html
One last word on this subject: Customers do not need a lower price - they need higher quality service backed by a more responsible and more profitable industry which can afford to invest in higher quality personnel and quality control systems.
Cheers!
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Christopher Noblit
Director, Sales & Customer Service
Avatar Relocation ~ Long Island, NY
Professional Moving & Logistic Services
Voice 1-800-439-4900 ~ Fax 1-516-244-0321
Visit the moving & Storage Knowledgebase
at http://www.avatar-moving.com
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