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Discover why transactional pricing falls short for high-volume shippers and the available alternatives
For businesses in the market for a new shipping software solution, most of the focus is on things like features, functionality, integrations, and carrier support. Though vital, it is less often we see shipping software buyers start by questioning the pricing model. However, for high-volume shippers moving thousands of parcels a day, the way they are charged can significantly impact their cost control and scaling ability.
A transactional pricing model is based on a per-transaction or per-unit basis. For shipping software, a vendor may charge the customer per label or shipment. While this pricing model may seem straightforward and easy to manage, it only becomes more expensive as your volume grows, which can become problematic for high-volume parcel and less-than-truckload (LTL) shippers.
Let’s take a closer look at how transactional pricing works, what other pricing structures are out there, and what shippers should consider when evaluating the long-term pricing effects of investing in shipping software.
Shipping Software Pricing Models
Before diving deeper into transactional pricing specifically, it’s important to understand the common pricing options shipping software providers utilize. Each pricing model can have a different impact on how you control costs, your business’ scalability, how you optimize your shipping operations, and several other factors.
Transactional Pricing (Pay-Per-Use)
As stated previously, this pricing model charges a fee on a per-unit basis whether that be by shipment, label, transaction, etc. Transactional pricing can allow for greater flexibility and cost-effectiveness for shippers who ship a lower volume or experience volume fluctuations. This way, they can pay for what they use, avoiding long-term contracts or being locked into fixed rates. However, transactional pricing models can come with hidden fees for things like rate shopping, business rule automation, and accessorial fees, significantly impacting your overall shipping expenses.
Subscription-Based
This model, like any subscription-based service, charges the software user on a recurring monthly or annual basis. The price can include things like maintenance, integration, software upgrades, and technical support, enabling the user to avoid developing costly IT infrastructure. Shippers on a subscription-based model can leverage the advanced tools and functionality of shipping software at a predictable, recurring cost without making a large investment upfront.
Perpetual Licensing
This pricing structure is a one-time upfront license fee, giving the shipper full ownership and long-term use of the software. While there is an annual auto-renewed maintenance fee that covers ongoing support, upgrades to core base functionality are already included in the perpetual license. This model is especially well-suited for high-volume, enterprise-level IBM i shippers who want full control of their shipping solution without the concern of unexpected or recurring upgrade costs.
It is important to note that there is no one-size-fits-all pricing model. There also isn’t a “correct choice”, which is why understanding how each pricing model aligns with your shipping strategy, business goals, and operational complexity is crucial. When evaluating the best pricing model for you, it’s important to dedicate time to researching and making a careful assessment of your business to ensure it aligns with your operational and growth needs.
Transactional Pricing for Growing Shippers: Where it Falls Short
The logic behind this pricing model is there, however, oftentimes it’s not the best choice for high-volume parcel and freight shippers. While transactional pricing is praised for flexibility, it can quickly become a major cost for growing shippers. There are several reasons this model can be unfavorable for high-volume shippers, including:
- Volume penalties: With every unit of output, the cost to the shipper increases. This means the more successful your business becomes, the more costs you incur, making it challenging to control margins and forecast shipping costs. Instead of celebrating a growing business, transactional pricing penalizes it.
- Limited automation: Automation is a major factor contributing to the efficiency of high-volume shippers, enabling them to streamline tasks like rate shopping and batch processing. With a transactional model, these automated functions come with an additional fee, forcing shippers to limit feature use and decrease efficiency.
- Unpredictable costs: Transactional pricing is directly correlated to volume and usage, which makes it difficult for high-volume shippers to budget. The unpredictability of peak season spikes or stints of rapid growth can drive your costs through the roof, adding additional stress into a complex environment.
- Exposure to increased risk: Shippers can be exposed to increased risk during high-volume periods such as holiday peak and back-to-school seasons. Accounting for carrier surcharges, capacity constraints, and chaotic fulfillment centers while adding unpredictable shipping software fees significantly complicates things and diminishes profitability when shippers are the most vulnerable.
- Carrier diversification barriers: Integrating new carriers or enabling a multi-carrier strategy can also increase costs with transactional pricing. With a greater focus on per-unit transactions, carrier diversification is discouraged, pricing is inconsistent, and resilience in the face of supply chain disruption is far less achievable. [Explore 7 benefits of carrier diversification.]
Finding a Smarter, Scalable Alternative
Shipping success is measured by more than just how many packages make it out of the door. High-volume shippers require control, agility, and the opportunity to optimize operations without being penalized for it. Because of the limitations that come with a transactional pricing model, we’re seeing more and more enterprise shippers moving towards smarter, more scalable alternatives.
Built for Growth: Subscription and Perpetual Licensing
Both subscription-based and perpetual licensing models offer high-volume shippers the stability needed for operational continuity and efficiency. There are several reasons why these models are better suited for complex shippers:
- Encourage automation: Shippers can take advantage of automated functionality to help increase operational efficiency without having to worry about additional fees.
- Support growth: Whether you pay a subscription fee or purchase the software upfront, your software stays consistent and scales with your business.
- Strategic control: Shippers have the freedom to implement business rules, evaluate costs, add new carriers, gain control over their operations, and make data-driven decisions that make the most sense for their unique needs.
- Protect margins: Predictable costs make budgeting less stressful for the shipper, while eliminating the direct correlation between cost and volume helps shippers maintain profitability, even during periods of increased demand.
The pricing model of your shipping software shouldn’t negatively impact your ability to automate, streamline, or expand. For high-volume shippers, choosing a solution that supports flexibility and stability is the key to sustainable growth.
Varsity Logistics: Multi-Carrier Shipping Software Built for Success
As the only holistic parcel and freight shipping solution built for the IBM i (AS/400) Power Systems, Varsity Logistics understands that high-volume shippers need a solution that can scale with your business without additional costs or complexity. Varsity currently offers a perpetual licensing model designed to support shippers as they grow, not penalize them.
By providing transparent costs, robust functionality, and operational control, shippers can experience the flexibility and agility your supply chain needs to thrive. Whether you’re shipping freight, moving thousands of parcels daily, or a combination of both, Varsity delivers:
- Unlimited shipment processing: There is no limit or minimum tied to the amount of shipping your business can process. Varsity allows you to ship what you need without added per-transaction fees and your software stays consistent as your volume grows.
- Advanced automation: Varsity’s automation makes daily tasks like rate shopping, containerization, and load planning a breeze without ever adding additional costs.
- Choice and control: Leverage advanced business rules and a suite of parcel and LTL add-on modules to customize your solution to meet the unique needs of your business.
- Built-in scalability: Whether you need to integrate new carriers, adjust workflows, or add additional facilities, Varsity is designed to evolve with your business and adapt to your operations.
- Unified parcel and LTL: Handle both parcel and freight operations from a single, unified platform, eliminating bottlenecks and empowering streamlined data flow and supply chain visibility.
Shippers know firsthand just how quickly things can change in the unpredictable world of logistics. That is why your shipping software should empower growth and eliminate friction. Varsity Logistics provides high-volume shippers on the IBM i (AS/400) Power Systems with a way to scale with confidence and worry less about your bottom line.
Ready to experience a solution that supports transparency, efficiency, cost-savings, and growth? Contact our team of shipping experts today or schedule a pressure-free demo to learn more about how Varsity’s multi-carrier shipping solution can be your partner for long-term success.
