Xeneta organizes its freight rate benchmark data into 5 pricing groups to help you compare your prices against different segments of the market. These groups are as follows:
|Market Average||The average price seen on the market.|
|Market Low||The price seen at the 2.5 percentile of the market. In other words, 97.5% of market prices will be above the prices seen here.|
|Market Mid-Low||The price seen at the 25 percentile of the market. In other words, 75% of market prices will be above the prices seen here.|
|Market Mid-High||The price seen at the 75 percentile of the market. In other words, 25% of market prices will be above the prices seen here.|
|Market High||The price seen at the 97.5 percentile of the market. In other words, only 2.5% of the market prices will be above the prices seen here.|
In very simple terms, you can think of these benchmark as windows into different sections of market prices for a trade lane or trade corridor.
How Xeneta Creates a Benchmark
Xeneta creates a benchmark by first requesting a list of rates that are comparable to your prices from its database then aggregating that list of rates into a single number based on your selected benchmarking position.
As an example, let's assume that you want to benchmark your prices for the Shanghai–Oslo trade lane on today's date. For Xeneta to provide a single benchmark price, a number of calculations will need to be done behind the scenes.
For our example, let's assume that the following 10 rates are available to Xeneta for the Shanghai–Oslo trade lane. Notice that the rates are provided in order of increasing price.
These 10 rates represent the different prices that have been paid to ship freight from Shanghai to Oslo. Any single price by itself will not say anything meaningful about the freight market as a whole. However, taken together, we can find the average price, as well as the lowest and highest prices for the trade lane.
Note: The example described here is shown for illustration purposes. It does not reflect real-world freight rates on the Shanghai–Oslo trade lane nor does it use Xeneta's data quality considerations.
The market average price is calculated by taking the arithmetic mean of all the rates available from the database.
In the case of our example rates, the arithmetic mean will be calculated as follows:
This number will then be rounded to a whole number, in this case $648, and will then be used as the Market Average value against which your prices on the Shanghai–Oslo lane will be benchmarked against.
Market Low and Market High
The market low and market high benchmark prices are calculated by looking at the rates at the 2.5 and 97.5 price percentiles of the trade lane data available to Xeneta.
We can visualize where the market low and market high points will be for our example rates by plotting the values on a line graph:
Since our example only has 10 rates, the 2.5 percentile is located between rate 1 and rate 2, while the 97.5 percentile is located between rate 9 and 10. To provide a value for benchmarking, Xeneta will take a linear interpolation between two rates to assign an appropriate value for the low and high market segments.
As such, in the case of our example, the Market Low value will be $425 and the Market High value will be $938.
Market Mid-Low and Mid-High
The market mid-low and market mid-high benchmark prices are calculated by looking at the rates at the 25th and 75th price percentiles of the trade lane data available to Xeneta.
We can visualize where the market mid-low and mid-high points will be for our example rates by plotting the values on a line graph:
Since our example only has 10 rates, the mid-low segment is located between rate 3 and rate 4, and the Mid-High segment is located between rate 7 and 8.
To provide a value for benchmarking, Xeneta will take a linear interpolation between two rates to assign an appropriate value for the mid-low and mid-high market segments.
In this case, the Market Mid-Low value will be $531 and the Market Mid-High value will be $698.
As a whole, our set of example rates has five different benchmarking positions, with each position providing a different view of the market. Setting an appropriate benchmark will help you set reasonable goals for your freight strategy.
To learn more about effective benchmarking in Xeneta, see this article.