Fedex Courier Case
Federal Express Case
Courier Pak is an underrated service that is provided by FEC. Its profit margin is higher than all the other services provided (66%), and has huge growth potential. It has both great speed and reliability, making a service worth promoting.
Currently, executives and their assistants are mainly using CP. The top three industries that use CP are Manufacturing and distribution, Advertising, and Printing and publishing. According to Exhibit 6, the market size of “emergency,” “rush,” or “special handling” delivery of small items/documents was around 870,000 per day.
CPs are economically viable. Sales currently average …show more content…
The average price for Rush was $10, 25% less than CP. The number of Rush shipments amounted to 15.5m, and the number of shipments for Emergency was 2.5m. We want a large amount of the Rush users to use Emergency services, or CP, instead. Increasing the daily volume of CP to 6000 would mean that the Average Daily Packing Volume would be around 25000 (exhibit 4), and CP would account for 24% of it, an almost 20% increase.
How should FEC price, promote, and distribute CP? Is $12.50 the right price?
Currently, CPs revenue is $12.50 per package, but has a higher perceived cost of $62.50, as you must purchase 5 at a minimum. The variable costs are $4.25 and other fixed costs are sunk and ignored. The variable cost for CP is less than the cost of Priority One Package and Standard Air Service Package, which are $10.60 and $9.21 respectively.
CPs earns a profit of $8.25 per package, a high profit margin for a courier service. We see that there is price inelasticity in the product: as the price increased three times (more than double its original amount), sales of CP continued to increase. Therefore we do not think that the price of CP should change; the profit margin is high, while also staying competitive to both other Emergency and Rush services. Providing free envelopes should stimulate demand as well, as they wouldn’t have to pay $62.50 to send one package.
An advertising campaign that can be used would be to showcase the