RRP Discount Bands still a viable pricing model?

Recent cost price increases (some products moving by more than 10%!) have correlated in a rise of pricing queries to our Customer Service desk, and we can see the direct pressure our dealers are facing to compete. We believe the traditional wholesaler Discount Band pricing model should be reviewed (whereby an RRP discount is given to a product in a particular catalogue pricing band), as in many cases it might not be sustainable but may result in loss of margin.

So what can be done…

Consider a switch from an RRP Discount to a Cost Margin/Markup model, to retain margin by catalogue matrix band, even as the cost prices increase. Moving to this method, you will need to calculate a relevant markup/margin % to apply to your customers.

Review your contracts! Many customers add nett-priced lines to customer contracts from an order or quote, simply so the customer gets the same price they paid last time – even if that last time was 6 months ago or more! This approach is not recommended at all. Get rid of the non-purchased contract lines, replace low margin lines with higher margin alternatives.

You can also switch the Pricing Type of contract lines from nett pricing to markup/margin, so again the system can monitor the cost price for and adjust the sell price accordingly. Review contracts more regularly to see the impact of any price changes on your business.

The success of our Independent dealer community is key to the industry, we will do what we can to support our partners

It is our responsibility to ensure that the information and content is readily available on our various platforms, and through our training packages.

Our Customer Service team are gathering content for a YouTube webinar about switching from RRP Discount bands to markup/margin bands. We will announce the date for this when ready.

The Development Team are in the process of defining the specification for a pricing tool which will be available for you to show the impact of any RRP Discount to Margin/Markup switch. It will be a really useful spreadsheet, and can then be used alongside your Company Grid Manager to make any adjustments.

Development have also added the following enhancements to the plan, to help improve the tools you’ve got to manage your pricing:

  • Bands – where you don’t have to set discount/margin in the administration
  • Enhance company pricing bands to then be discount or margin – per customer account
  • Enhance administration to add – named, grouped, discount/margin bands e.g. created by customer Platinum = Black Band margin 34%, Purple discount 20%, Pink Margin 22% etc.
  • Add to company grid manager the ability to apply the ‘Grouped Bands’ to the selected companies (these can add or replace as option in the Grid Manager)

We’re here to help

With the above in mind, we feel it is very much the responsibility of every dealer to make sure they (and their team) understand the customer pricing model(s) applied on their individual system. If you feel changes are necessary to your system, then please talk to us. It might be an opportunity to book some refresher pricing training sessions with the Customer Service Centre. Please contact our team on 0151 423 8522 if you are looking for some advice on the subject.

 
 

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