Sales Rep strategies to look out for in your businesses inventory pricing…

I supervised my very first user self-install this morning.

I was very proud to see that we have created a program that is so easy for our clients to use in my purpose for the creation of this program was completely reinforced right from the beginning. The restaurant we were setting up has not done a price comparison amongst vendors in several years and it was painfully evident that this customer was being taken advantage of by a sales rep that they trusted. I call it the blanket supplier rebate and a good sales rep will use this in conjunction with a few other well-placed discounts have led this owner to believe they are getting favorable pricing from this rep.

The strategy that this longtime rep employed for this restaurants account was to create a special price or bid pricing for approximately 5 to 7 of the most important items this owner was purchasing. The rep then told this owner his account was so valuable and business was so important that he would get a 3% rebate back monthly on his total purchases. What this means to someone like myself who has worked the street as a sales rep and has over 30 years experience understanding this buying game is the following: this is an account that has been not set up and in fact the owner will purchase every product outside of the 5 to 7 sock items this rep is working (negotiating on) at straight list margin price for this buying house. The rep identified that hamburger meat, French fries and chicken breasts needed to have special pricing which was accomplished via separating these items, creating a bid or special price scenario which happen to be slightly more favorable pricing in the computer with the promise of an additional 2% rebate on French fries purchased and then the 3% rebate that the rep is promising on top of all purchases made by this business.

There are lots of discounts being thown at my client and it all sounds like he’s getting a good deal but the reality is this owner is getting a horrible deal on everything he buys and the reason for this is the suppliers retail markup is so high that there is an unbelievable amount of negotiation space from that number. My experience was the typical retail margin in the book of products my company represented to the public was typically loaded with a margin of 27 to 30% list. The structure or lack of structure my client is purchasing inventory under allows this sales rep a margin on average of approximately 25 to 26% in my professional estimation. Supplier reps refer to this is a honey hole. Is your business a honey hole? Line item by line item negotiation and Cherry should be able to reduce this margin over a very short period of time to the 12 to 14% range which is an acceptable profit margin for a sales rep to make on an account.


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