I must lower my prices. Help!
Tuesday, August 28, 2007/
Dear Aunty B,
We used to pay a lot more for our products and so we charged a lot more. We’ve recently found a cheaper supplier for the same quality and want to pass the savings on to our current and future agents. (We really need to, in order to remain competitive.)
Our newest agents who have recently paid the higher price will be justifiably peeved! They are aware that our costs have dropped. (Good news spreads fast!) How do we handle this?
It’s great to see a market-sensitive operator who has an eye to longer-term relationships. Hopefully this extends to the quality of the agents that have joined the distribution team.
Uncle Col has a suggestion: He says the key is to pass on the lower the price in two stages.
Lower the price by 30% of what is possible to those agents who have paid the higher price as soon as they make their next order and give them a ‘team member bonus’ discount of a further 15% that is based on their sales volume.
At the same time announce that you intend to make a further price reduction to help all existing and new agents to expand their market share at the start of the next calendar year.
Use the two-step process to give everyone the sense that you value their contribution to market development and tell them all that the second price reduction can only be achieved if there is an overall increase in total sales.
Also, make sure you tell them how you are addressing marketing and product development to help achieve this higher sales target.