This is an era of high prices, where the rise in marketing costs exceeds the profits brought by sales scale growth. How should distributors protect their profits during this period? To solve problems, one must focus on the main contradictions. The profit protection battle for distributors mainly begins with the following four countermeasures.
1. Block Channel Stuffing A reasonable and scientific pricing system can rapidly promote sales growth, while an unreasonable pricing system can directly lead to the demise of a product in the market.
In product price management, the following two points should be mainly noted:
1. Establish a pricing system: The complexity and diversity of the Chinese market determine the diversity of sales channels. When setting prices, the following three principles are usually considered:
- Brand positioning principle
- Principle of identifying competitors
- Principle of following the nature of different channels
2. Control the price execution process. The terminal is where products are directly sold and is also the starting point of price wars. To avoid price undercutting, one should start from three aspects:
- Adopt strong measures to stop price chaos
- Make sales guides the guardians of terminal prices
- Adjust the product structure in retail stores
2. Block Product 'Idling' To achieve overall profitability, distributors should manage and control product structure. In terms of the product line composition of a single brand, there are profit products, image products, regular volume products, special offer products, etc., each bearing different responsibilities. To ensure their own profits, distributors must learn to control the market sales structure and not simply follow the market trend or blindly use special offer products to fight for market share. Cheap goods have large sales volumes and fast turnover, but their profit margins are also limited, easily leading distributors into an awkward situation of no profit and product 'idling'.
3. Block High Expenses Due to intensified competition, promotions have become the main means of channel competition, even forming a situation where 'promotion leads to sales, no promotion means no sales'. Because merchants have developed a strong dependence on promotions, they have become the most effective competitive means to increase sales. Gifts, special offers, and on-site demonstrations have become the 'three magic weapons' of sales, but promotions consume resources. Taking gift promotions as an example, a major trend is that gifts are becoming more refined, branded, and high-quality, with prices and expenditures increasing. It is reported that gifts have a loss rate as high as 40%. The cost of gifts is rising, while product prices are falling and becoming more transparent. The profit margins of distributors are further squeezed.
Facing the rising 'exorbitant taxes and levies' of large chains, as well as daily expenses such as promotions, publicity, and channel maintenance, distributors must subtract expenses to add to profits. It is difficult to reduce the various fees of large chains, but by combining multiple product lines or cooperating with other suppliers to enter stores jointly, the fees of large chains can be shared.
4. Block Manufacturers' Empty Promises Generally, the policies requested by distributors are often 'discounted' by manufacturers. Therefore, many distributors, after suffering losses, will raise their demands based on experience, while manufacturers bargain on the spot, turning reasonable support into a bargaining chip. Many manufacturers also like to issue empty promises, and at the end of the year, they find various reasons to default or delay. Either they fulfill part of it, or they push it to the next year, counting it into the next year's payment, failing to truly honor it to the distributor. These tricks can also cause distributors to lose a considerable amount of profit.
Distributors profit by selling manufacturers' products. The size of the distributor's territory and sales volume, as well as their relationship with the manufacturer, determine the distributor's profit space. There is a folk saying: 'The crying child gets the milk.' Distributors are the same; in terms of policy support, distributors must also learn to 'cry'. After all, in the regional market, distributors have a great local advantage. Manufacturers rely on distributors for market promotion, so distributors should frequently report the progress and developments in the regional market to the manufacturer, especially when encountering problems and difficulties, and need to report and communicate more. Especially in market support, distributors should be wary of manufacturers 'packaging' at the end of the year and adopt a strategy of 'divide and conquer', requesting in batches, at different times, in small amounts, and frequently, striving to have the enterprise fulfill promises within the agreed time, thereby gradually dismantling the manufacturer's empty promises.
Through 'effort', obtaining advertising support, training support, information support, promotional support, price support, product support, etc., is not as difficult as imagined. The key is for distributors to master the skill of 'crying' and grasp the right time and opportunity. The manufacturer's support increases the resources in the distributor's hands, and the distributor uses these resources for product promotion, promoting sales and increasing volume, which in turn gives them greater voice and support from the manufacturer. This is a mutually reinforcing process. Entering a virtuous cycle in the market is a solid foundation for distributors to obtain profits.
Sales volume and profit can achieve a balance. Increasing revenue and reducing expenditure are both indispensable, but reducing expenditure is often easily overlooked and thus appears more critical. In terms of understanding, distributors must face the dialectical relationship between expenses and sales volume, balancing the input-output ratio of both, and the market can achieve simultaneous growth in profit and sales volume.
Source: Internet -END-