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| | The Marketing, Channels/Partnership & Sales Execs Network is not currently active and cannot accept new posts | | Price Dilution problem - need advice | Views: 969 | | Feb 17, 2005 7:22 pm | | Price Dilution problem - need advice | # | 
Ron Sam | | Concern over Price Dilution -
We are exclusive distributors for a manufacturer of a unique safety product for buildings. We sell to wholesalers primarily. Recently, a guy wants to buy 500 units and market them to his customers of a related business.
We give him the same discount as to wholesalers. He marks them up slightly and sells them in 10 unit lots. His SP is $100 less that our 10 unit lot price.
We can only control this by cutting off the supply to him.
An alternative that might allow a sub-distributor, is to conform to our price structure and give him a finders fee. No contracts will be set.
I believe it will cause a permanent negative image of our company and my partner thinks it is good for business to get this new product out into the market faster.
Does anyone have advice on methods for prevention of Price Dilution?
RonPrivate Reply to Ron Sam | | Feb 18, 2005 5:12 am | | re: Price Dilution problem - need advice | # | 
Nilesh Joshi | | Hi Ron,
The broad pricing policy can be A) Skimming (make huge profits based on the nicheness of the product or its innovativeness, etc). In this case, you need to have total control over your distribution channels to ensure that the premium tag is not diluted due to price undercutting. However, at some stage in product life cycle, you need to change this strategy and deploy the
B) Penetration strategy, wherein you target wider customer base but loose control over the end Price, Discounts, Partner margins, etc.
I have seen that in some cases, prodcuts are sold by channel partners at No Profit, due to their bundling strategy (bundle it with another product and make money on that product) or to retain the customer or to break into competetion customer, etc.
Hence, in my opinion, if your product is still in phase where, you can command premium and are not looking at higher Volume, you can cut-off supplies to your partner.
However, if you are looking at volumes, you need to accept such price dilution.
All the best.
Nilesh
> Ron Sam wrote:
> Concern over Price Dilution -
>
>We are exclusive distributors for a manufacturer of a unique safety product for buildings. We sell to wholesalers primarily. Recently, a guy wants to buy 500 units and market them to his customers of a related business.
>
>We give him the same discount as to wholesalers. He marks them up slightly and sells them in 10 unit lots. His SP is $100 less that our 10 unit lot price.
>
>We can only control this by cutting off the supply to him.
>
>An alternative that might allow a sub-distributor, is to conform to our price structure and give him a finders fee. No contracts will be set.
>
>I believe it will cause a permanent negative image of our company and my partner thinks it is good for business to get this new product out into the market faster.
>
>Does anyone have advice on methods for prevention of Price Dilution?
>
>Ron Private Reply to Nilesh Joshi | | Mar 14, 2005 7:01 pm | | re: Price Dilution problem - need advice | # | 
Chen Sun | | Do you have any way of controlling or limiting the distribution channels? If the sub-distributor can be controlled in such a way that he can only sell to certain sectors (e.g. only to his customers in his line of business), then this would reduce the pricing dilution problem. In another word, if the subcontractor says he wants to distribute only to his customers in a related business, he shouldn't have any problems agreeing to such a channel restriction.
Chen Sun
www.WebAndNet.com
Private Reply to Chen Sun | | Mar 17, 2005 5:52 pm | | re: Price Dilution problem - need advice | # | 
Where The MIND is Without FEAR | | HI,
Price dilution is a everlasting problem in a supply chain.
That too end-user pricing can never be striclty controlled even in a controlled situation. One thing you can do is to offer the product through your channel partner(wholesaler), thereby controlling the end-user price fluctuation.If this is not taken up he becomes a threat to your own business and there you have catch-22 situation
regards,
karthik Private Reply to Where The MIND is Without FEAR | | |
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