Issue link: https://www.e-digitaleditions.com/i/480616
38 FEDA News & Views M any distributors continually strive to build pricing confidence across their sales organizations to effectively deal with sales objections over price, or to simply ensure that prices quoted to their customers are economically sound decisions. A key factor that is sometimes overlooked by distributor pricing managers and sales reps is the importance of under- standing your cost as it relates to offering a sales price. If there's one thing that you can't overemphasize to those in charge of determining a selling margin, it is the cost of doing business. By the nature of the business, distribution is an expensive proposition. Management understands this and strives to control costs to maximize the company's overall profitability. However, sales reps and others charged with the most impor- tant profit driver—pricing—often do not understand the full cost to serve within distribution. When a distributor sales rep quotes a price to a customer, a common dialogue that ensues might be: Your price is X… but I can probably do better. Your price is X… (and if there is any hesitation from the customer)… but I can do better. How does X sound? One of the reasons that many sales reps may present these options to a customer is that they do not fully understand their company's true cost to serve. When sales reps think of distribution, a typical understand- ing of the process is as follows: 1. I take the order from the customer. 2. I call the order into my warehouse. 3. My warehouse ships the order to the customer. 4. I get paid. Clearly there is something missing in the rep's understand- ing of the distribution process. Here is a better overview of the cost of distribution: 1. Investments: warehouse, inventory, infrastructure, per- sonnel 2. Vendor/product line decisions 3. Product ordered from vendor 4. Product received into warehouse 5. Product checked for accuracy of shipment 6. Product staged for shelf placement 7. Product put on shelf 8. Product stored on shelf (carry costs) 9. Vendor invoice received 10. Vendor invoice processed 11. Outdates, shrinkage, damaged goods 12. Reconciliation of errors from vendor (shipment and/ or invoice) 13. Sales rep training/investment 14. Cold calls to prospective customers 15. Relationship building with customers 16. Rep takes order from customer 17. Rep calls order to warehouse 18. Customer Service enters order into system 19. System produces pick ticket 20. Order picked 21. Order checked 22. Order packed 23. Order staged for shipment 24. Order shipped 25. Invoice to customer 26. Reconciliation of errors to customer (shipment and/or invoice) 27. Invoiced payment collected 28. Sales commission paid One concept that will definitely build pricing confidence with sales reps or those in charge of setting sell price is the understanding of cost to serve. To help build this understand- By Jon Ladle, ProfitOptics Inc. Building Pricing Confidence in the Field with sales objections over price, or to simply ensure that prices quoted to their customers are