INTRODUCTION

[Audio] Road freight transport is a vital component of international, regional, and domestic markets, but it operates in a highly competitive environment shaped by fluctuating prices, strong competition, and regulatory pressures. Rising Competition Over the past three decades, competition in the industry has intensified, with many operators focusing on cost reduction and efficiency, while new entrants often undercut prices to secure market share. Pricing Strategy as a Survival Tool A strong pricing strategy is essential for balancing cost recovery, profitability, and competitiveness, while also considering economic principles such as price elasticity, supply and demand, and cost-benefit analysis, alongside regulatory constraints and market forces identified in Porter’s Five Forces model. Challenges for New Entrants New entrants face the immediate challenge of survival, which requires developing strategies that respond effectively to both market opportunities and threats, while adapting to variable factors such as fuel costs, seasonal demand, and backhaul opportunities. Dynamic Nature of Pricing Pricing in road freight is not a one-off decision but a continuous process that must be reviewed and adjusted regularly to reflect market demand, regulatory requirements, and customer perceptions of value. Strategic Focus for Operators Operators must carefully choose between full cost and marginal cost pricing models, incorporate customer value-based approaches, and remain adaptable to external shocks and competitive pressures. INTRODUCTION Road freight transport is a vital component of international, regional, and domestic markets, but it operates in a highly competitive environment shaped by fluctuating prices, strong competition, and regulatory pressures. Rising Competition Over the past three decades, competition in the industry has intensified, with many operators focusing on cost reduction and efficiency, while new entrants often undercut prices to secure market share. Pricing Strategy as a Survival Tool A strong pricing strategy is essential for balancing cost recovery, profitability, and competitiveness, while also considering economic principles such as price elasticity, supply and demand, and cost-benefit analysis, alongside regulatory constraints and market forces identified in Porter's Five Forces model. Challenges for New Entrants New entrants face the immediate challenge of survival, which requires developing strategies that respond effectively to both market opportunities and threats, while adapting to variable factors such as fuel costs, seasonal demand, and backhaul opportunities. Dynamic Nature of Pricing Pricing in road freight is not a one-off decision but a continuous process that must be reviewed and adjusted regularly to reflect market demand, regulatory requirements, and customer perceptions of value. Strategic Focus for Operators Operators must carefully choose between full cost and marginal cost pricing models, incorporate customer value-based approaches, and remain adaptable to external shocks and competitive pressures..

[Audio] Key Principles & Models for Pricing in Road Freight Transport 1. Full-Cost (Cost-of-Service) Pricing -This approach determines freight rates by accounting for all fixed expenses (such as vehicle depreciation, employee salaries, and insurance) alongside variable costs (including fuel, tires, and tolls) and then incorporating a profit margin. It guarantees cost recovery and is typically utilized in long-term agreements where consistent revenue is essential. Although this method fosters financial stability, it may lack adaptability in competitive environments (Rodrigue, 2020; Emerald Publishing, 2023). 2. Marginal Cost Pricing -Marginal cost pricing sets rates based strictly on the incremental cost of transporting one additional load and is often employed during backhaul or partially filled trips. While it supports competitive adaptability, it can be risky if overhead costs are overlooked. Carriers adopting this model must be careful not to undermine long-term profitability (Button, 2010; Transport Geography, 2020). 3. Value-Based Pricing -This pricing strategy establishes rates according to the perceived worth of the service to the customer. For instance, clients who need to ship urgent, perishable, or high-value items are generally willing to pay extra for speed, reliability, and safety. This model enables transport providers to capture greater value from customers who prioritize quality (Rushton, Croucher, & Baker, 2017; Wikipedia, 2024). 4. Competitive-Based Pricing -In this model, prices are shaped by prevailing market rates and competitors' pricing. Although this can help companies stay appealing to customers, an overreliance on matching or underpricing competitors may lead to a damaging "race to the bottom." Sustainable application necessitates thorough knowledge of costs and differentiation through service quality (Bowersox, Closs, & Cooper, 2013; arXiv.org, 2023). Key Principles & Models for Pricing in Road Freight Transport 1. Full-Cost (Cost-of-Service) Pricing -This approach determines freight rates by accounting for all fixed expenses (such as vehicle depreciation, employee salaries, and insurance) alongside variable costs (including fuel, tires, and tolls) and then incorporating a profit margin. It guarantees cost recovery and is typically utilized in long-term agreements where consistent revenue is essential. Although this method fosters financial stability, it may lack adaptability in competitive environments (Rodrigue, 2020; Emerald Publishing, 2023). 2. Marginal Cost Pricing -Marginal cost pricing sets rates based strictly on the incremental cost of transporting one additional load and is often employed during backhaul or partially filled trips. While it supports competitive adaptability, it can be risky if overhead costs are overlooked. Carriers adopting this model must be careful not to undermine long-term profitability (Button, 2010; Transport Geography, 2020). 3. Value-Based Pricing -This pricing strategy establishes rates according to the perceived worth of the service to the customer. For instance, clients who need to ship urgent, perishable, or high-value items are generally willing to pay extra for speed, reliability, and safety. This model enables transport providers to capture greater value from customers who prioritize quality (Rushton, Croucher, & Baker, 2017; Wikipedia, 2024). 4. Competitive-Based Pricing -In this model, prices are shaped by prevailing market rates and competitors' pricing. Although this can help companies stay appealing to customers, an overreliance on matching or underpricing competitors may lead to a damaging "race to the bottom." Sustainable application necessitates thorough knowledge of costs and differentiation through service quality (Bowersox, Closs, & Cooper, 2013; arXiv.org, 2023)..

[Audio] 5. Zone-Based / Distance-Based Pricing (Geographical Pricing) -This pricing model determines rates based on established zones or distances travelled. For instance, a shipment may have a standard rate for a 200km radius and an increased rate for distances beyond that. This method is straightforward for clients to grasp and supports scalable pricing systems (Rodrigue, 2020; Wikipedia, 2024). 6. Weight / Volume-Based Pricing -Also referred to as freight class pricing, this method charges clients based on the greater of the weight or volume of the cargo. This approach prevents revenue loss from large but lightweight items and encourages efficient use of vehicle capacity. It is especially effective in cases involving mixed-load or consolidated shipments (Emerald, 2023; ResearchGate, 2024). 7. Time-Based Pricing -This pricing strategy involves charges based on the length of service rather than solely on distance or volume. It encompasses waiting time at loading docks, delays due to traffic, or dedicated service time. Commonly used in city logistics or contractual agreements, this model compensates for nonproductive time and promotes operational efficiency (Pienaar & Vogt, 2016; Freightender, 2023). 8. Dynamic / Flexible Pricing -Supported by data and advanced technology, dynamic pricing enables real-time adjustments to rates based on external factors such as fuel prices, seasonal demand, capacity utilization, and even weather conditions. Carriers make use of Transport Management Systems (TMS) can automate these modifications, enhancing their responsiveness to market fluctuations (ACM, 2024; ResearchGate, 2023). 9. Game-Theory / Platform-Based Pricing Models -Contemporary freight pricing increasingly uses auction mechanisms, bidding systems, and digital freight platforms (like Loadlink, Uber Freight). These models align the interests of shippers and carriers by allowing for real-time negotiations or algorithmic pricing, enhancing transparency and efficiency. Game theory assists in making strategic pricing decisions in multi-actor markets (MDPI, 2022; Izadi et al., 2020). 5. Zone-Based / Distance-Based Pricing (Geographical Pricing) -This pricing model determines rates based on established zones or distances travelled. For instance, a shipment may have a standard rate for a 200km radius and an increased rate for distances beyond that. This method is straightforward for clients to grasp and supports scalable pricing systems (Rodrigue, 2020; Wikipedia, 2024). 6. Weight / Volume-Based Pricing -Also referred to as freight class pricing, this method charges clients based on the greater of the weight or volume of the cargo. This approach prevents revenue loss from large but lightweight items and encourages efficient use of vehicle capacity. It is especially effective in cases involving mixed-load or consolidated shipments (Emerald, 2023; ResearchGate, 2024). 7. Time-Based Pricing -This pricing strategy involves charges based on the length of service rather than solely on distance or volume. It encompasses waiting time at loading docks, delays due to traffic, or dedicated service time. Commonly used in city logistics or contractual agreements, this model compensates for nonproductive time and promotes operational efficiency (Pienaar & Vogt, 2016; Freightender, 2023). 8. Dynamic / Flexible Pricing -Supported by data and advanced technology, dynamic pricing enables real-time adjustments to rates based on external factors such as fuel prices, seasonal demand, capacity utilization, and even weather conditions. Carriers make use of Transport Management Systems (TMS) can automate these modifications, enhancing their responsiveness to market fluctuations (ACM, 2024; ResearchGate, 2023). 9. Game-Theory / Platform-Based Pricing Models -Contemporary freight pricing increasingly uses auction mechanisms, bidding systems, and digital freight platforms (like Loadlink, Uber Freight). These models align the interests of shippers and carriers by allowing for real-time negotiations or algorithmic pricing, enhancing transparency and efficiency. Game theory assists in making strategic.

[Audio] FULL COST ANALYSIS Key Points Critical in saturated markets with tight competition and low margins. Represents total resources committed to production/service (long-term view). Shapes pricing, revenue potential, and profit margins. Informs decisions at all levels: Strategic: market entry, positioning, economies of scale, break-even targets. Tactical: pricing policies, product mix, capacity, inventory management. Operational: daily cost efficiency (routing, scheduling, quality control). Ensures sustainability by avoiding unsustainable price competition. FULL COST ANALYSIS Key Points Critical in saturated markets with tight competition and low margins. Represents total resources committed to production/service (long-term view). Shapes pricing, revenue potential, and profit margins. Informs decisions at all levels: Strategic: market entry, positioning, economies of scale, break-even targets. Tactical: pricing policies, product mix, capacity, inventory management. Operational: daily cost efficiency (routing, scheduling, quality control). Ensures sustainability by avoiding unsustainable price competition..

[Audio] MARGINAL COST ANALYSIS Key Points Cost of producing one additional unit—shapes short-run responsiveness. Short-run uses: Handle seasonal demand shifts. Decide on special/one-off orders (e.g., LTL freight). Determine minimum acceptable selling prices. Future uses: Evaluate scalability and economies of scale. Guide expansion (equipment, labour, markets, new services). Assess opportunity cost of allocating resources. Integration of full cost + marginal cost = balance between sustainability and flexibility. MARGINAL COST ANALYSIS Key Points Cost of producing one additional unit—shapes short-run responsiveness. Short-run uses: Handle seasonal demand shifts. Decide on special/one-off orders (e.g., LTL freight). Determine minimum acceptable selling prices. Future uses: Evaluate scalability and economies of scale. Guide expansion (equipment, labour, markets, new services). Assess opportunity cost of allocating resources. Integration of full cost + marginal cost = balance between sustainability and flexibility..

[Audio] What Role Does Customer Value Perception Play In Pricing Strategy In Road Freight Transport Customer value perception (CVP) is key in road freight pricing as it shapes how customers judge service value based on cost, expectations, and experience. It drives satisfaction, loyalty, and competitiveness, allowing companies that emphasized reliability, transparency, and responsiveness to justify premium prices through value-based strategies. Customers are often willing to pay more for timely and trustworthy services, a trend reinforced during COVID-19 when efficiency and trust became critical to retaining clients. How Customer Value Perception Affects Pricing Strategy In a competitive market with similar service offerings, companies must differentiate through perceived value rather than price alone. Value-based pricing allows providers to charge premiums for features customers prioritise, such as timely delivery, transparent tracking, and quick response. In contrast, highly price-sensitive markets may force aggressive pricing, reduce margins and underscoring the need to understand customer demands and deliver consistent value. What Role Does Customer Value Perception Play In Pricing Strategy In Road Freight Transport Customer value perception (CVP) is key in road freight pricing as it shapes how customers judge service value based on cost, expectations, and experience. It drives satisfaction, loyalty, and competitiveness, allowing companies that emphasized reliability, transparency, and responsiveness to justify premium prices through value-based strategies. Customers are often willing to pay more for timely and trustworthy services, a trend reinforced during COVID-19 when efficiency and trust became critical to retaining clients. How Customer Value Perception Affects Pricing Strategy In a competitive market with similar service offerings, companies must differentiate through perceived value rather than price alone. Value-based pricing allows providers to charge premiums for features customers prioritise, such as timely delivery, transparent tracking, and quick response. In contrast, highly price-sensitive markets may force aggressive pricing, reduce margins and underscoring the need to understand customer demands and deliver consistent value..

[Audio] Value-Based Pricing vs Cost-Based Pricing Value-Based Pricing Rates set by customer-perceived value, not production costs. Relies on expectations, service experience, and satisfaction. Encourages investment in quality, reliability, and information sharing. Justifies premium prices if customers value timeliness, transparency, and responsiveness. Cost-Based Pricing Prices set by internal costs (labour, fuel, maintenance) plus markup. Focuses on financial recovery rather than customer perceptions. If priced below cost = no profit. Even when costs are covered, customers may refuse to pay if value seems inadequate. In response to competitors reducing prices, CVP allows firms to compete on service quality rather than entering unsustainable price wars. By aligning pricing with what customers truly value such as timeliness, reliability, and transparency companies can recover costs, maintain profitability, and remain competitive without being forced into aggressive cost-cutting. Value-Based Pricing vs Cost-Based Pricing Value-Based Pricing Rates set by customer-perceived value, not production costs. Relies on expectations, service experience, and satisfaction. Encourages investment in quality, reliability, and information sharing. Justifies premium prices if customers value timeliness, transparency, and responsiveness. Cost-Based Pricing Prices set by internal costs (labour, fuel, maintenance) plus markup. Focuses on financial recovery rather than customer perceptions. If priced below cost = no profit. Even when costs are covered, customers may refuse to pay if value seems inadequate. In response to competitors reducing prices, CVP allows firms to compete on service quality rather than entering unsustainable price wars. By aligning pricing with what customers truly value such as timeliness, reliability, and transparency companies can recover costs, maintain profitability, and remain competitive without being forced into aggressive cost-cutting..

[Audio] Responsive Pricing in Road Freight Road freight faces high costs, volatile demand & thin margins → requires adaptive pricing strategies. Fuel Surcharges Fuel = 24–50% of operating costs (SA higher). Surcharges tied to fuel indices; adjusted weekly/monthly (sometimes real-time). Decouples fuel price volatility from base rate → protects margins & ensures transparency. Example: 10% rise in diesel → ~6–7% freight rate increase. Seasonal Demand Predictable peaks (holidays, harvests) → higher rates due to truck & driver shortages. Off-peak → discounts/promotions to fill trucks. Tiered pricing & predictive analytics help balance demand & maximize asset use. Responsive Pricing in Road Freight Road freight faces high costs, volatile demand & thin margins → requires adaptive pricing strategies. Fuel Surcharges Fuel = 24–50% of operating costs (SA higher). Surcharges tied to fuel indices; adjusted weekly/monthly (sometimes real-time). Decouples fuel price volatility from base rate → protects margins & ensures transparency. Example: 10% rise in diesel → ~6–7% freight rate increase. Seasonal Demand Predictable peaks (holidays, harvests) → higher rates due to truck & driver shortages. Off-peak → discounts/promotions to fill trucks. Tiered pricing & predictive analytics help balance demand & maximize asset use..

[Audio] Backhaul Availability Up to 30% of trucks return empty → lost fuel, labour & time. Backhaul pricing: charge marginal costs (fuel, tolls, wages) to attract return loads. Outbound trips sometimes priced higher to compensate. Partnerships (brokers, load boards) & route optimisation improve utilization & profitability. Overall Takeaway Fuel, demand cycles & backhaul are key drivers of freight pricing. Adaptive strategies (surcharges, flexible/seasonal pricing, backhaul optimization) → improve profitability, efficiency & competitiveness. Backhaul & Strategic Adjustments Backhaul & Strategic Adjustments Backhaul Availability Up to 30% of trucks return empty → lost fuel, labour & time. Backhaul pricing: charge marginal costs (fuel, tolls, wages) to attract return loads. Outbound trips sometimes priced higher to compensate. Partnerships (brokers, load boards) & route optimisation improve utilization & profitability. Overall Takeaway Fuel, demand cycles & backhaul are key drivers of freight pricing. Adaptive strategies (surcharges, flexible/seasonal pricing, backhaul optimization) → improve profitability, efficiency & competitiveness..

[Audio] CONCLUSION Pricing Principles The firm should monitor market rates to stay competitive but avoid setting prices below cost. Fairness can be achieved through zone- or distance-based pricing and weight- or volume-based pricing, while time-based pricing can protect margins by charging for waiting or dedicated service time. Managing Cost Fluctuations To address fuel price volatility, the company should implement transparent, indexed fuel surcharges linked to diesel price benchmarks. Seasonal demand can be managed through tiered or dynamic pricing, charging higher rates during peak periods and offering discounts in low-demand periods. For backhaul trips, reduced rates covering marginal costs can improve truck utilization and profitability. Hybrid Pricing Model The most sustainable approach is a hybrid model that secures cost recovery with full-cost pricing and surcharges, ensures competitiveness with marginal cost and backhaul pricing, and maximizes value capture through value-based and dynamic pricing. Final Recommendation In a competitive environment, survival depends on balancing cost recovery, profitability, and competitiveness. Instead of unsustainable price wars, the firm should adopt a hybrid pricing strategy combining full-cost recovery with marginal cost, value-based, and dynamic pricing models to remain both profitable and agile. CONCLUSION Pricing Principles The firm should monitor market rates to stay competitive but avoid setting prices below cost. Fairness can be achieved through zone- or distance-based pricing and weight- or volume-based pricing, while time-based pricing can protect margins by charging for waiting or dedicated service time. Managing Cost Fluctuations To address fuel price volatility, the company should implement transparent, indexed fuel surcharges linked to diesel price benchmarks. Seasonal demand can be managed through tiered or dynamic pricing, charging higher rates during peak periods and offering discounts in low-demand periods. For backhaul trips, reduced rates covering marginal costs can improve truck utilization and profitability. Hybrid Pricing Model The most sustainable approach is a hybrid model that secures cost recovery with full-cost pricing and surcharges, ensures competitiveness with marginal cost and backhaul pricing, and maximizes value capture through value-based and dynamic pricing. Final Recommendation In a competitive environment, survival depends on balancing cost recovery, profitability, and competitiveness. Instead of unsustainable price wars, the firm should adopt a hybrid pricing strategy combining full-cost recovery with marginal cost, value-based, and dynamic pricing models to remain both profitable and agile..