Regain Pricing Control
This is the first installment of “ Straight Talk About Foodservice Pricing”, which can be downloaded for FREE from franklin-foodservice.com.
Recently, I read an excellent article with the above title in the “MDM Advisor” newsletter. The author quotes extensively from Jim Saunders of Pricing Solutions Ltd. in Toronto.
While the article was addressed to wholesale distributors, the message applies equally to foodservice manufacturers and their concerns to regain pricing control.
To wit,
“If a sales force is out negotiating deals, there’s very little control. They come back and say ‘I’ve got a deal at $90. I know our price is $100, but if we don’t give then $90 we won’t get the deal.’ And everyone feels as if they are being held for ransom.”
Saunders says that if your company lacks a coherent price strategy “you don’t have the backbone to convince your sales force to tell the customer this is our price, and here’s why. If you can’t say here’s why, the salesperson won’t have the backbone to stand up to the customer when they are asking for a discount.”
MY TAKE – it’s safe to say that every one of my clients feels they have a premium product. But many cannot articulate what makes it unique, different, and better than the competition. Still, the Headquarters folks often lament that sales people (including brokers and DSR’s) “only sell on price.” Can you blame them?
Saunders advocates dealing with discount questions “up front,” before the Sales force goes out to sell a particular product line and “before you are confronted with a discount.” That way, the Sales person can say “we don’t discount, but you can make some choices to reduce your cost if that’s important to you.”
MY TAKE – how much time do you waste in fielding discount requests, analyzing the opportunity, counter-offering, internal negotiations, etc.? Wouldn’t it be better to have a clear strategy and policy and enforce it consistently?
Jim reminds suppliers to really understand your value vs. your competition, and what types of customers you should be targeting. “If (your product) is what your customer wants, they will pay for it.”
MY TAKE – this is the essence of marketing, and too few foodservice manufacturers invest in it. Truth be told, we seem to prefer to slug it out on price for me-too commodity products.
“As with any shift in strategy, the biggest obstacle may be employee reaction. A change in pricing strategy especially affects salespeople who may be concerned about compensation.”
MY TAKE – I have seen this over and over; price increases cause more resistance and carping from sales than customers. We must recognize that sales has relationship investments which
may be put at risk by a price increase, and broker agencies have compensation concerns. But isn’t it safe to say that most price increases cause less disruption and volume risk than was feared?
The bottom line is that pricing is one of the most effective levers for improving profitability, but most companies do not have that lever firmly under control.
If you need assistance coordinating your sales force in order to regain pricing control at your company, we would be glad to help.
Just call (239) 395-2787 or contact us online.
To your continued success,
Dave
