Start with one default list
Most distributors need fewer price lists than they think. Start with one default list that every customer buys from unless something else has been agreed. Every extra list is one more thing to update each time a supplier raises a cost, and ten lists mean ten updates, ten chances to miss an item and ten customers who may be priced wrongly for a week.
Add a list only where there is a real and lasting difference in how a customer buys. A price you gave once to win an order is not a reason for a new list; a signed agreement is.
- A key account with a signed price agreement
- A wholesale channel that buys by the pallet
- Customers you invoice in another currency
- Customers who buy at prices with VAT included
- A subsidiary that sets its own prices
TipName each list after who it is for, not when it was made, so nobody has to guess which one is current.
Price every unit you sell in
A carton and a piece of the same item are different products to your customer. Price each unit you actually sell, rather than letting someone divide the carton price by the pack size at the counter. Dividing gives a price that ignores the work of breaking a carton and the part-cartons it leaves on the shelf.
Most distributors charge a small premium per piece for that reason. The premium also nudges shops towards buying whole cartons, which are faster to pick, load and count.
TipCheck that 24 single pieces never cost less than one carton, or customers will learn to order in pieces.
Use quantity breaks to grow the order
A quantity break lowers the price from a minimum quantity up. Done well, it moves a customer from 40 cartons to 50 because the step is worth reaching. Done badly, it gives a lower price on orders the customer would have placed anyway, and the margin is simply gone.
Set each break a step above what a typical customer buys today, not at what they already buy. The price you give away should be smaller than what the bigger order saves you in deliveries, picking and stock that sits waiting.
- Look at what each kind of customer orders today
- Set the first break a step above the usual order
- Keep the price drop smaller than your margin can carry
- Use no more than two or three breaks per item
- Check after a month whether orders moved up
TipIf nobody reaches a break in three months, it is either too high or too small to matter.
Give key customers their own list
A negotiated price belongs on a list of its own, assigned to that customer, so every order takes the agreed price without anyone having to remember it. When the price lives in a rep’s head or on a sticky note, it is right on the days that rep takes the order and wrong on the others.
A contract price with no end date becomes permanent by accident. Put the agreement’s start and end dates on the list, and set a reminder a month before it ends, so the renewal is a conversation and not a surprise.
Decide whether prices include VAT
Shops that sell to consumers often think in shelf prices with VAT included, while trade buyers compare net prices. Choose for each list which way it is written, and keep every price on that list the same way. A list that mixes the two will be misread by the person who types the next price change.
Whatever the list shows, your margin is earned on the net price. Work out the VAT inside a VAT-inclusive price before you compare it with your cost.
TipWrite “VAT included” or “before VAT” in the list’s name, so nobody has to open it to know.
Change prices without chaos
When costs rise, change prices on a set date announced in advance, and let orders already agreed keep their prices. A customer who accepted a quote last week should not find a different price on the invoice. Prepare the new prices before the date, so the change is a switch and not a week of typing.
Work the new price out from the new cost and the margin you want, not by adding the same amount the supplier added.
- Work out new prices from the new cost and your target margin
- Tell customers the date, ideally two weeks ahead
- Prepare the new prices before that date
- Switch on the change date, not mid-week at random
- Check the first orders priced after the change
Checklist: Before your next price change
- Start from one default price list
- Add a list only for a lasting difference
- Price every unit you sell in
- Keep piece prices above the carton price per piece
- Set quantity breaks above the usual order
- Put contract dates on customer lists
- Choose VAT-inclusive or net for each list
- Announce price changes with a date