Digital Booking 101

Today’s most profitable and fastest growing brokerages embrace digital booking. They let approved carriers book loads directly, without a carrier sales rep or any person at the brokerage talking to the carrier.

At first glance, this can feel counterintuitive. Isn’t freight built on relationships? How do I avoid carrier fraud? Do I lose an advantage in negotiations if I put a price on the load?

Every thriving digital brokerage asked all these questions; read on for the answers and how to set up digital booking at your brokerage.

What is Digital Booking?

Before we go too deep, let’s make sure that we know what we mean by digital booking. At Parade, when we talk about digital booking, we mean the following:

1. An available load has a “Book Now” price on it. This is the price at which an approved carrier can purchase the load without talking to someone at the brokerage.

2. One or more carriers are permitted to digitally book. These are in-network carriers that your brokerage has approved and who still meet your safety/insurance standards. It is critical to understand that out-of-network carriers will never be permitted to digitally book your loads.

3. Approved carriers can go to a website or app, find your load, see all the data they need to understand the load and click the “Book Now” button to take the load – all without talking to anyone at your brokerage.

4. After clicking “Book Now,” the load is automatically assigned in the TMS to the proper carrier and team, the ratecon is sent to the carrier and the load is removed from loadboards.

What are the Benefits of Digital Booking?

At Parade we’ve been helping America’s best brokerages digitally book for  years. Digital booking makes these brokerages more profitable – and it does so in some very subtle ways.

A really simple model of the carrier sales side of your brokerage thinks of cash generation in two ways. You generate more cash if you can convince carriers to take loads at lower rates (”gross margin”). And you generate more cash if you can enable your carrier sales reps to do more loads per day and therefore not hire more carrier sales folks as you grow (”operating margin”).

Digital bookings help with both. 

First, digital bookings help you get high quality carriers to accept your loads at lower prices, increasing gross margin. The chart below shows the gross margin of digitally booked loads vs. loads booked outside Parade. The trend consistently holds that digital bookings are more profitable than manually booked loads. 

This happens because digital bookings don’t negotiate; there’s no one to give $50 off over the phone to close a deal. Also, as you execute your digital booking strategy you’re going to train your best carriers that they can always get a great load from you. When carriers get predictable revenue they’ll reward you with lower costs.

Digital bookings also help you with your operating margin by letting your carrier sales reps cover more loads per day. One obvious way that digital bookings help is by automating the entire process; your reps come in and find that they have 1-2 loads already digitally booked, freeing them up to do other loads. 

But our data shows that the best brokerages use digital booking to become more efficient in some very interesting ways. Specifically, loads with digital pricing don’t just get digitally booked – the also get more quotes and at better prices. Part of digital booking is carriers offering a quote if they don’t like the Book Now rate – and loads with a Book Now rate on them are 6x more likely to get a quote than loads without a rate!

These quotes are also better than a traditional freight quote. By putting a price out there, you anchor the carrier and they give you a better rate. The typical quote for a load with a digital rate is 300 bps lower than a quote for the same load with no digital rate. Carriers don’t know how to price lanes; by putting your rate out there you start the negotiation to your advantage. 

Again, the best brokerages double down on this to their advantage. They set a private reserve rate (that carriers never see) that is slightly above their Book Now rate. When a quote comes in that is higher than the Book Now rate but below the reserve rate, it is automatically accepted and turned into a digital booking. 

The net result of this is that brokers who lean into digital booking book ~18% more loads per day per rep than those who do not.

How do I set my Book Now Price?

Every customer asks us for advice on how to set a Book Now price. A good digital price satisfies a few criteria.

First, it is a discount to the market rate. You are offering a carrier the opportunity to save time by digitally booking and therefore they should offer you a reduced rate. You should be pricing below the market rate a carrier would get if they negotiated.

Second, it is an anchor. You cannot prevent a carrier from quoting on a load – but you can signal where you will begin from.

Third, it is a fair price. Go too low and you end up with carriers not engaging your freight.

Okay, but how do you you set this price?

The best digital bookers follow one of two pricing strategies: 

Strategy 1: Seller Knows Best. Most brokerages have a “starting price” for a load. The seller who won the load from the shipper sets a base price where any negotiation should begin. This is usually stored in the TMS and the carrier sales rep is expected to start the negotiation there.

The simplest pricing strategy is to send this to Parade and make the starting pricing the Book Now rate for every load. And if your TMS doesn’t support a “starting price” you can manually enter it inside Parade as your Book Now rate.

Strategy 2: Tease out Best Price. This type of brokerage is worried about leaving money on the table and will sacrifice engagement on loads to maximize margin. In this case, you make your Book Now rate the “starting price” from the TMS minus a fixed margin (usually 10%). You then make your private reserve rate the same as your TMS “starting price.”

Your public Book Now rate is very low – and as quotes come in they are auto-accepted if they’re below your private “starting price.”

How do I Determine Which Carriers to let Digitally Book?

The most common – and simplest strategy – is to permit any active carrier in good standing to digitally book. If they are onboarded with you, continue to meet your safety/insurance standards (i.e., your RMIS or My Carrier Packets standards) and not marked as “no dispatch” (or equivalent term depending on your TMS), let them digitally book. 

However, if you want you can toggle individual carriers on/off for digitally booking. But, again, the best practice is to enable every carrier in good standing. We find that if you want to toggle individual carriers on/off it can rapidly become time consuming and not yield any results.

Where will Carriers Digitally Book my Loads?

You need to get your loads in front of your approved carriers in order for them to digitally book. You can accomplish this in three ways:

1. Emailing loads to relevant carriers. A digital booking platform like Parade will both automatically email good loads to carriers (”Dispatch Campaign”) and also let you set up carriers to notify about certain lanes (”Smart Rules/Lanes”).

2. Training your carriers to come to your website. Parade gives you a “private portal” where approved carriers can search and book your freight.

3. Posting bookable loads to as many marketplaces as possible. You want to push your loads to all the loadboards, dispatch services and tools where your approved carriers find work. A digital booking platform helps you post broadly while also making sure that your loads are bookable. Remember: the goal is driving digital transaction, not a call or email to the brokerage.

What Else Should I Know About Digital Booking?

As we’ve helped dozens of brokers digitize we have consistently heard three myths about digital bookings and we want to call them out here.

Myth 1: Digital bookings hurt carrier relationships

There is a myth that if you do digital bookings your carrier reps aren’t talking to carriers and therefore aren’t building relationships. This isn’t true – in fact, the brokerages that have the most digital bookings also have the highest carrier reuse.

The reason for this is that a lot of times in freight we mistake calling a carrier and saying “do you want this load?” as relationship building.

It’s not; it’s transacting.

Real relationship building is calling carriers to identify their equipment and lane preferences and then putting that into a system – like Parade – that can use this to find matching freight.

Digital booking takes loads off the board faster so that carrier sales reps have more time to invest in these relationship calls instead of just transacting.

Myth 2: If I put a digital price out there I’ll overpay for that carrier who needed a backhaul

There is a mythical carrier out there who is in desperate need of a backhaul and who is just about to call your brokerage and you’re going to make 40% margin off of him – but if you publish a Book Now rate on a load you’ll end up overpaying on this unicorn carrier. 

Digital brokers realize that you make a lot more money if you can make a bit more money on every load instead of great money on one load – hence they put Book Now rates on every load. Getting an incremental 200 basis points gross margin on many loads pays off much more than occasionally winning big on a single load.

Myth 3: Carriers use digital booking to cherry-pick my best freight

Some brokers worry that enabling digital bookings just lets carriers cherry pick their best freight. “They’ll take my best freight and I won’t get the chance to sell them on that 48,000 lb ice cream load from Florida to Montana…”

We don’t see this happening. If cherry picking was going on we’d expect to see the share of loads digitally booked at our best customers quickly plateau once the cherries were picked. 

This is not the case. If this was the case we’d see the share of digitally booked freight quickly plateau. Carriers would cherry pick the best loads and the rest would be manually covered.

But this isn’t how carriers book. The chart below shows the share of loads digitally booked by the top 25% of digitally booking brokerages. It is steadily increasing over time as they experiment with pricing and distribution. They are using digital booking to cover all their loads.

Next Steps

So there you have it: everything you ever wanted to know about digital booking. It is the simplest and best investment you’ll make this year

Remember the following three things and you’ll be grow both your gross and operating margins:

• Price: Put a Book Now and a reserve rate on all your loads

• Carriers: Enable all carriers in good standing to digitally book

• Exposure: Push your loads to where your carriers find work so they can digitally book

  
  

If you’re already a Parade customer and want help with this, contact us via support@parade.ai. If you’re not yet a Parade customer, contact us via sales@parade.ai and we’ll help you execute your digital booking strategy.