Channel Pricing and Lost Profits

Many B2B companies do a large of amount of their business through the channel - whether it is through a reseller partner or a distributor.  Channel pricing challenges are quite unique since the manufacturer does not directly sell to the customer and relies upon limited information to make important pricing decisions.  One of the key characteristics of channel selling is highly competitive markets resulting in almost a constant need for special price authorizations.

When distributors submit these authorization requests to the manufacturer, the manufacturer does not have a comprehensive repository of channel pricing information and associated pricing guidance to make informed decisions regarding approving or rejecting the authorization request.  If they approve, the price they approve it at is often driven by gut feel rather than by informed guidance.  It is no wonder that these pricing authorization requests are often a big source of margin loss for a manufacturer and represent an area of substantial opportunity.

Tackling this problem requires the manufacturer to take a disciplined approach to collecting transaction data and associated attributes to understand the key drivers to pricing variation.  Such data can yield important insights into variation in pricing across products, markets, regions, and partners.  By understanding associated causes of this variation, manufacturers can pinpoint areas where such variation is acceptable, the degree to which it is acceptable, and where it is not.  They can then formulate a comprehensive strategy to establish segment-specific pricing guidance and arm the deal desk with the right tools to execute on the guidance.  

In a recent article in Manufacturing.net, Jamie Rapperport and Chase Powell of Vendavo discuss additional strategies to execute effectively on channel pricing.  Taking a strategic approach to channel pricing can help fix margin leakage and deliver higher profits.

You can also access our OnDemand webinar on channel pricing to learn more about how you can leverage price management and price optimization strategies to drive profits.