Dhl Essay - Pricing Strategy

DHL Case

1. Using the EVC framework (i.e., differentiation value), what opportunities exist for price customization at DHL? (In other words, where is there value that is not priced out?).

Based on the differentiation value, the following price customization opportunities exist for DHL.

- DHL can charge a premium for its extensive network span and coverage in remote areas that they serve, which are not serviced by their competitors, like Africa.

- Differentiation premium could be charged on high speed which currently DHL doesn't do specially for parcels product line. Although DHL is cautious in charging for this differentiation because of lack of guarantee, their advertisements and strength are in that regards.

- Value added services such as package tracking technology, consulting for international shipping requirements are offered for free within the shipment price itself

- DHL's strong custom relationship and network are high worth for parcel business specially for air express parcel business in Europe

- DHL is rated high on "value for money", so customers think they get more benefit for the price they pay to DHL. There is scope for

2. What are DHL's strengths and weaknesses relative to the competition?

Strengths:

- DHL has a well-established brand name that is synonymous with reliability and value for money

- Extensive International Network an accessibility of package shipment locations much more than its competitors.

- Faster Speed of delivery By using a variety of scheduled international carriers, DHL is able to optimize its transport network to minimize deliver times

- Worldwide scope, infrastructure, relationship network and people

- Custom network and relationships for faster parcel clearing

- Higher ratings in reliability and value for money

Strong Europe foothold

Weaknesses:

- Very less global contracts (only 10)/ Less MNC accounts when DHL infrastructure is suited to serve widely spread out global companies

- Single sales force selling both documents and parcels, although the decision makers for the two product lines are different at the customers' end

- The pricing scheme is complex and varies greatly throughout the regions based on country managers decisions

- Not a strong domestic player in large countries like US, Canada and Australia

3. What are some advantages and disadvantages of DHL's current pricing structures? Are they exercising price leadership? Explain.

Advantages:

- Different pricing structures can accommodate different type country market customers.

- Flexible pricing structures, which gives the regional managers direct control over pricing. The sales reps are allowed to give discounts to their biggest customers upto 35% without any approvals and upto 60% with upper management approvals which was beneficial in customizing proposals

Disadvantages:

- Due to different product lines of DOX and WPX, the frequency structure of either the half kilo structure didn't yield optimized discounting strategy. Discounting should have been on revenue base than weight or frequency

- Country managers had full control which sometimes led to unprofitable price setting or discounting

- The monthly pricing structure was disadvantageous as an "all you can get" pricing. It also made it hard to increase the price without clear basis of the expected shipment costs increase

DHL is exercises price leadership in new markets where the competitors base their prices off of them. They also have been charging a premium for their services and all the competitors are basing off their prices lower to that of DHL's. They are the dominant firm and the competitors are compelled to match and beat their price.

4. In assessing these new pricing opportunities, should DHL establish a worldwide pricing policy or allow regional managers to customize prices