Federal Express Corporation

Federal Express Corporation (FEC) should expand the Courier Pak business through a marketing strategy that directly targets executives and their secretaries rather than shipping department managers. The Courier Pak is FEC's highest margin product, as shown in the chart below, making it a good place for FEC to gain market share in the rapidly growing small package air shipping market.

Research suggests that mailroom clerks are timid individuals who just want to avoid problems with their supervisors and thus are unlikely to change their shipping habits unless told to do so. Decisions to use Courier Paks, however, are often made by executives or secretaries, who are much less price sensitive than a typical shipping department. They are willing to pay a premium for the convenience and reliability of a Courier Pak. 20% of users do not have an FEC account number, which suggests that they are bypassing the shipping department altogether. Advertising should be directed at this segment, and sales teams could distribute free samples of Courier Paks with additional order forms enclosed. Executives who are satisfied with their Courier Pak experience will likely use it in the future and may even direct their shipping departments to use FEC for their other services. Since FEC has historically had trouble convincing shipping departments to use their products, this could be an effective alternate route into that market.

The product fits well with FEC's current operational capabilities and would allow FEC to better utilize excess shipping capacity. The average FEC jet has 15% excess volume capacity. The flexibility of the Courier Pak to be shipped either in containers or individually would allow FEC to efficiently utilize this space as demand increases. Additionally, the majority of Courier Pak users are in top FEC stations, so there will be little need to create new routes as this product segment grows.

Although FEC's previous advertising has targeted Emery Air Freight, the main competitor in the Courier Pak business is actually the USPS, who provides a similar product with their Express Mail service. The USPS charges lower prices than Courier Pak ($2.25 from post office to post office or $6.25 from post office to addressee), but instead of competing with USPS on price, FEC should keep the current price of $12.50 per Courier Pak and focus on product differentiation. Advertisements should emphasize Courier Pak's special waterproof, tear-proof envelopes, offer premium services similar to those they offer for Priority One packages, and continue to point out the reliability of their unique routing system.

One risk of this strategy would be a price