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Pricing Strategy and Channel Remuneration Strategy
Many companies face difficulties in increasing market share and only achieve results by conditioning their market share gains to huge losses in their margins or the profitability of their distributor partners.
With often misguided policies, with inappropriate limits, unclear segmentation models, poorly designed demand elasticities, poorly defined and reported volumes incentives, deficient discount and tax structures, etc., many companies’ price strategy becomes frequent focus of attention and concern of the high leadership.
Many commercial and channel remuneration policies are too complex and pay off millions of dollars many times without a proportional return on sales. Proposing changes in prices and distributor / channel remuneration programs is not an easy decision.
To properly examine channel remuneration and the consumer pricing model, manufacturers need a systematic assessment of all aspects of their marketing mix and their market access strategy. Issues related to strategic business objectives, sales goals, profitability and profitability objectives of the company and channels, product competitiveness, cost of serving each channel, legal restrictions and even metrics, indicators and policies of remuneration models should be analyzed with great discretion and care.
Prime Action in its Pricing and Commercial Policy Practice offers a complete diagnosis of the current status of the channel pricing and remuneration model, seeking to identify:
- Opportunities for improvement in the current model of channel remuneration and market pricing.
- Adherence between reality and the trade policies that are advocated (if any).
- Problems generating conflicts between channels and manufacturers.
- Improvements to the incentive model, rebates and rebate structure.
- Strategies to improve the communication and understanding of the channel pricing and remuneration model.
- Incentive strategies that generate long-term channel development and competitive strengthening.
Policy and Distribution Contract Design
Implementation of a Market Access Strategy should be accompanied by Clear Market Access Guidelines and Policies. In many companies these policies are not described, formalized and communicated internally and with partner channels. Over time the need for sales, specific opportunities to open new channels, new products, campaigns, etc., deconfigure and destroy the Access Strategy.
Prime Action supports its Clients in describing a sound Distribution and Remuneration Policy that gives the Access Strategy internal and external robustness and security. Items like the following are often the subject of discussion and description in the Distribution Policies:
- Customer Segmentation
- Size and Area Exclusivity
- Brand Use
- Invasion of Area, Parallel Market and Black Market
- Appointment and Cancellation Process
- Commercial Policy / Rebates
- Logistics and Distribution
- Stocks and Repurchases