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business success motivational speakerPricing Strategy: Selling Through Distribution Channels

 

Subject: Sales, Distribution, OEM, VAR, Integrators, Discount levels, Inventory, Selling, Decision Making



 

One of the problems I come across frequently is that of trying to establish pricing for different types of sales channels.  In a manufacturing business for example you can have several distribution categories:

 

  1. Distributor: A company who resells your equipment.

  2. Restocking Distributor: Is a company who not only resells your equipment, but also keeps a stock.  This is an advantage especially if product delivery or lead times are important.

  3. VAR: Value Added Reseller who takes your product and enhances its value by incorporating it into a larger system sale.

  4. Integrators: This is a company who not only buys from you, but also from other manufacturers and then bids, and hopefully wins, large system sales.  An integrator in most cases will install the end-to-end solution for a company.

  5. OEM: Other Equipment Manufacturer is a company that buys your equipment and re-labels it under their own brand name.

 Note: All five are considered “distribution channels”

 

As you can see, each type of business brings a certain value to your company.  The question is how to determine pricing to each these groups.  Do you give:

 

a)    Them all the same level of discount?

b)    The discount levels based on years of service?

c)     Them based on annual sales?

d)    A better discount if they restock?

e)    A better discount if they integrate or OEM your product?

 

These are some of the tough questions a sales manager or company head would have to answer. 

 

Another thing that you need to keep in mind is that these entities talk to each other and will eventually find out what others are getting in terms of discounts.  This will definitely be an issue when competing distribution channels go after the same bid.  So you have to be very careful how you set your discount pricing strategy.

 

Here’s an outline of a strategy I employed:

 

Level 1 - Distributors: 20%

Level 2 - Stocking Distributors, VARs and Integrators: 25%

Level 3 - OEM: 30%

Level 4 - Any Channel Selling over $500K: 35%

 

You’ll note that for Level 2 I increased the discount level based on the company’s ability to add value to a sale.  Each one of the 3 entities in Level 2 adds that value by either being able to delivery quickly from products out of their stock or by offering installation services.

 

The importance of defining these levels is critical in managing distribution channels.  Again, word will get out and competitors will find out what others are getting.  You need to put yourself in a position where 1) you can defend the discounts levels and 2) show that you value “added value” in your discount structure.

 

By establishing a level playing field for all distribution channels to compete, you then avoid any criticism in the long-run of playing favoritism to any one company. 

 

Final notes: Never give an unknown customer who decides to buy direct from your company a better discount than you do your distributors.  Nothing will drive off distributors faster then knowing they aren’t getting a fair deal (i.e., getting undercut) from the manufacturer. 

 

Hope this was helpful!

 

Victor


 

Please feel free to forward this article to a friend or colleague.

 

Victor Antonio G., one of America's top business motivational speaker and author of “The LOGIC of Success”.  

 

Copyright © 2005 by Victor Antonio G.   All rights reserved.  This article MAY be reproduced in any form or by any means, electronic or mechanical, including photocopying, as long as the author’s name, website and email address are included as part of the article’s body.  All inquiries, including information on electronic licensing, should be directed to Victor Antonio G.

 

                                             

Motivational Speaker Articles

Ode to Og Mandino

Leadership-Time Management

Stupid People Poem

Christmas Story: Misfits

Leadership-Winning Mindset

Sales-Prime Contractor

Netflix-Blockbuster Competition

Sales Training Bob

Cash Money Tree

Leadership & Trust

Management Style

Your Capacity for Success

Create Cash Flow-Equity

Pay for Performance

Road Trip to Success

The Good Life

Power Shift-Toffler

Incentive Programs

Compromise Poem

Business and Ladders

Speaker on Vanity

Leadership Style - Skill

Selling Through Channels

Consequences

Exploiter Poem

Keynote on Revenge

Motivation and Money

Computer Poem

Selling & Optimism

Speaking of Action

Keynote on Greatness

Essay on Equality

Torpedoing Success

Consumer Motivation

Creative Destruction

Motivation and Selling

The Success Matrix

Squirrel Wins - Focus

Why Take Action

Latino Market Growth

Motivational Failure

Speaking of Talent

Speaker Success Poem

Selling Without Wires

Sales Storage Evolution

Acres of Diamonds

Motivational Principle

Professional Public Speaking

Diversity & Multicultural

Sales Ethics-To Tell

Monopoly of Ideas

Self-Esteem Motivational

Employee Recognition

Overcoming Fear

Cold Calling CEOs

Reality is Plastic Poem

Life Coach - What a Joke

Innovation and Technology


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Victor Antonio G.,  Sales Influence   All Rights Reserved 2002-2009,

A business motivational keynote speaker for events and conventions 

Travels from: Atlanta, Georgia   info@SalesInfluence.com

For booking information call: (678) 895-6068

11770 Haynes Bridge Road, Suite 205-501  Alpharetta, GA 30004