When looking at your company’s pricing policies and practices, don’t forget surcharges, service fees and other additional costs. “Many of these small charges seem like nickels and dimes to the sales force, but when we add them all up for people – the cost of expediting something or the cost of a change in fuel surcharges – they see that all these nickels and dimes suddenly become dollars and meaningful profit,” says Matt Johnson in Countering Price Pressure in Distribution.
Johnson’s firm, Simon-Kucher, recently released its Global Pricing Study and found that distributors often forget to account for the “little stuff.” But because many distributors already operate on small margins, “even the very small stuff can have an impact on the profit,” said Wolfgang Mitschke, director at Simon-Kucher.
Distributors need to make these costs more visible to salespeople, as well as educate them on why some additional fees are sometimes needed so that they can better overcome customer pushback.
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