This from OGL Computer Services Group…
Pricing your product correctly can be make or break for your business. Adding a price tag to your stock items is a key decision that will impact all aspects of your business and will ultimately decide the amount of profit you can make and what expenses you can cover.
Put your cost too high and customers won’t buy your products but put it too low and you’ll risk not covering your costs and making a loss.
For wholesalers and distributors, pricing is more important than ever, with items becoming increasingly competitive and consumers shift in loyalty means they’re confident to do their research and shop around. Plus, supplier pricing is forever changing and if you have a multi-channel selling strategy, keeping on top of your pricing can become a mammoth task.
What to consider when pricing a product:
Variable cost price
Consider the variable cost price that is dependent on each product including:
What is the supplier price?
Do you need to add any components before selling?
Do you need to assemble the product and add production time costs?
What is the packaging & shipping costs?
All these need to be worked out per product so that you have a base cost to work with.
These are the costs that the business will incur regardless of how many products you sell.
Building / office rent
IT technology services
General business supplies
All these costs that the business incurs, that have no effect on how many products are sold, also need to be considered to deliver your overall profit margins.
Market place value
Another thing to consider, ensuring you stay competitive in the market, is how much the product is valued by your customers. You don’t want to set the price too high as you’ll struggle to sell, but equally, you don’t want to set the price too low as your brand could be considered as poor quality.
How to ensure you stay competitive
It’s important that you can stay competitive in the wholesale and distribution industry and you want to ensure you can not only win new business but keep the customers you already have.
This is why giving your sales reps the freedom to haggle and enabling them to have the discussion about cost with their clients is key to winning and retaining business.
Your costs are likely to differ compared to quantity bought, they’re also likely to differ across your customer accounts, as loyal customers expect access to improved pricing structures.
This is why a sophisticated ERP software, like prof.ITplus, holds so much value for wholesalers and distributors. You don’t have to worry about selling under cost price, you can give your sales reps guidelines and freedom to haggle with customers, you can easily mark out your profit margin percentages, setup special customer pricing and react to the ever-changing supplier price changes.
ERP software is designed to save businesses time and money, but this is crucial when it comes to pricing. The number of manual hours saved, human errors avoided, and profit margins improved is invaluable in the competitive distributor industry.