Pricing for distributors without losing the shop

Companies that sell through distributors and through their own shop or website often end up with two price lists. They start out aligned, then drift. A promotion here, a special rate for a big account there, and within a few years a distributor can buy cheaper from your website than from you.

Distributors notice before you do, and every conversation turns to discounts.

One list, with a ladder

We replace the two lists with one, built as a ladder. At the top is the price a customer pays in your own shop. Below it are the prices for distributors, and between each step are the conditions that move a customer down: volume, payment terms, exclusivity in a region and the marketing they do for you.

Every condition gets a value written next to it. Paying in 30 days instead of 90 is worth a set amount. Taking a full pallet is worth another. A distributor can see what each step costs them and what it earns them.

Most companies already give these conditions away. A distributor who pays late still gets the price agreed for prompt payment, and the account that stopped taking pallets years ago still gets the pallet rate. Writing the values down shows what each exception has been costing.

Discounts without conditions become the new list price within a year.

Let them see it

Showing distributors the whole ladder feels risky. In practice it calms the negotiation down. Once they can see the conditions, they talk about which ones they can meet, and the price itself stops being the subject.

At Strathlinn Distillery both export distributors accepted the new list at the first meeting. One of them moved to quarterly orders to reach the next step, which helped the distillery plan its bottling runs.

The shop price stays where it is. Your own customers shouldn’t be able to beat a distributor’s price, and a distributor shouldn’t be able to beat yours in your own shop.