Part 2: Controlling Prices

Concept:

The Sales team should be charged with increasing volume and turnover and in maintaining/ improving the gross   margin of the business. We are all charged with keeping costs under control and saving money wherever possible, but who is in charge or dedicated to maintaining our selling prices? This doesn’t just mean the price we charge for our goods and services, but also the discounts that we give away under their many different guises.

Example:

  • The General Manager decides that business is slow and offers a special deal for this month.
  • The Sales Manager resolves a customer issue with free stock.
  • The Service Manager cannot turn up on time, so offers the next service call free.
  • The Service Engineer who carries out extra work free whilst on-site.
  • The Customer Service person who applies the same discount to all products even though the customer has not asked for it.
  • The Distribution Manager who agrees a rush delivery without charging for it.
  • The Accountant who agrees a payment plan with extended credit terms.
  • The Credit Controller who gives a complaining customer an extra 14 days’ credit.
  • The Salesperson who cuts the price to gain an additional order (to hit his month’s target!)
  • The Marketing Manager who agrees to support customer marketing activity from our budget.
  • The HR Manager who agrees a donation to the customer’s current charity efforts.
  • The Designer who provides samples and origination without charging.
  • The R & D Manager who provides free data and research to a customer without charge.

The message is clear – just about everyone in the business can affect the company’s prices and indeed profits. In isolation a small discount may not seem important but when added together, you are giving away large chunks of the company profit.

If you make net 10% discount, you have just given away half of your profits.

Let’s consider 3 ways that we can avoid giving away unnecessary discounts:

Charge for everything as a matter of principle.

Limit who can give discounts, and how much they can give away (this includes all forms of discounts, not just cash). Have an approval system.

Assign responsibility to one person, for the overall profitability of, say, each of your Top 20 accounts

The Growth Experts takes pride in ensuring that all of its advice and material on this site is current and relevant to our members. In certain pieces of material there may be reference to ‘time related’ situations (e.g. the Covid Pandemic). These pieces of material may well, in a number of cases, be left on the site because the advice and content therein remains relevant and of great value to businesses whatever their current challenges present.

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