A KPI is a key performance indicator. Here are six business trucking KPIs every carrier should understand if they want to build a successful trucking company.
Why Trucking Business KPIs Matter
KPI stands for Key Performance Indicator. Like goals and measures, you can use these trucking business KPIs to fine tune your business model to make it more profitable and productive.
Understanding which trucking business KPIs matter most relative to your business goals can also help you evaluate your current customers and prospects. For instance, if potential new business would come in under your average revenue per mile or require a higher per mile cost, it can negatively affect your company’s profitability. If you take on a lot of new business that doesn’t meet your desired or must-have KPI levels, profits will decline.
On the other hand, if you take time to understand your trucking company’s current and desired KPIs, you can be more thoughtful in taking on new business and developing strategies that will make your trucking business more successful.
6 Trucking Business KPIs that Impact Carrier Success
1. ROI
ROI stands for return on investment. This is a question that can be asked and answered every time you spend money on your business. For instance, if you can double your trucking company revenue by doubling the size of your truck fleet, the increased revenues produced as a result are the return on investment of all the time, money and resources that went in to acquiring trucks, hiring drivers, advertising and marketing needed to secure new business, etc. While the ROI of this activity might not exceed its investment in the first year, bear in mind that lifetime ROI might still justify the decision.
2. CLV
CLV stands for Customer Lifetime Value, which is a calculation based on customer retention, average revenue per mile and the cost per mile to deliver. Turning customers into repeat buyers is critical for increasing the ROI of the cost of customer acquisition. Plus, if you are spending as much to move each new load as you are making on that load (or spending more) then you’re actually losing money.
3. CAC
CAC stands for Customer Acquisition Cost, which can be applied individually as all the costs needed to secure a particular customer or understood as an average cost – the average cost to your trucking business for acquiring a new customer. If your trucking business KPIs reveal that your cost of customer acquisition is equal to or exceeds that of your customer lifetime value, you have a serious problem.
The more customer lifetime value exceeds customer acquisition cost, the bigger your return on investment for customer acquisition efforts. An uptick in customer acquisition cost compared to customer lifetime value could mean it’s necessary to raise rates or change your marketing strategy – or both.
4. YOY
YOY stands for year-over-year. It can be used to measure any aspect of your trucking business, such as growth, revenue, expenses, salaries, fuel costs, and so on. These year over year measures help you understand whether financial performance is improving or declining overall as well as within individual categories.
5. AOV
AOV stands for Average Order Value. Average order value is a calculation based on the total dollar amount of all loads your trucking business fulfilled in a given period of time, divided by the number of loads. You can use this KPI to project future revenues based on whether you anticipate fulfilling the same, more or less loads in the future as you did before. This is another number to watch for changes over time. If you begin taking on a significant number of loads that fall below your average load value, it will drive this number down and may negatively affect other KPIs such as customer lifetime value. You can also vet potential new business as it pertains to average load value as a standard.
6. CSI
CSI stands for Customer Satisfaction Index. Your trucking business’ customer satisfaction index is an average based on all customer satisfaction scores during a specific period of time. If you see a drop in customer satisfaction scores compared to the index, it could indicate a problem within your organization as it impacts the customer experience.
Declines in customer satisfaction are often accompanied by increases in customer churn (or decreased customer retention rates). Since this can reduce your customer lifetime value and require additional customer acquisition activities to replace departing customers, it’s a very important metric. Measuring customer satisfaction scores on an on-going basis can alert you to small problems before they lead to big losses.
You can also measure trucking business KPIs like customer satisfaction index against competitors and the industry as a whole. For instance, the most recent American Customer Satisfaction Index on consumer shipping shows FedEx unchanged in 2016 compared to 2015 and UPS down 2 percentage points to a CSI of 80. Trailing in the field is the U.S. Postal Service, which also lost 1 percentage point last year and came in at 74 in the most recent report. The report also speculates on whether Amazon’s recent acquisition of trucks, airplanes and other transportation and logistics resources indicates they are preparing to formally enter the delivery and transportation business, and how this development would impact rivals FedEx, UPS and the USPS.
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