Sounds like an oxymoron, doesn’t it? It is probably the number one issue that causes mistrust, conflict and legal issues between a manufacturer and channel partners. This article is not intended in any way to be a discussion of what is legal, ethical or the ‘norm’. This is about managing exception pricing within the channel.
Let’s define the term Exception Pricing as non-standard, discount from published pricing, or as the dictionary states “ something excepted; an instance or case not conforming to the general rule.” I’ll take it one step further. Exception pricing is given to a select partner(s) or customer(s).
This assumes a couple of points:
1. There is a ‘general rule’ which means the starting point is standard, published pricing, for purposes of this discussion.
2. Exception always means a discounted, lower price.
3. These variances can be managed fairly, legally and consistently.
There are some legitimate reasons for exception pricing of course.
* Large volume purchases
* Product clearances
* Public bids
* Competitive pressure
* Customer loyalty programs
* Cost to serve
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Those of us in the Channel world know intrinsically that channel partners are not all created equal. As a manufacturer, you may have inherited or built over time, a reseller partner map that no longer reflects your business priorities. As a reseller or integrator of products, you may have added so many products to your service offerings that your sales people no longer know what to sell. But what do most companies do about it?
The ROI tool you use can be a complicated math formula or a simple report card. I recommend three factors to consider in making these ‘keep/don’t keep’ decisions:
Cost – actual and hidden, should determine profitability
Influence – getting what you pay for
Compatibility – If they’re “just not that into you” don’t waste your time
And a common business model:
- Coverage – do your partners extend your reach into the market?
- Products – do your partners represent the best products for your customers?
- Price – are the products priced correctly for your market?
Whether you rate them with a 1-2-3 scale, A-B-C or a top to bottom ranking system you will clearly see that not all partners are created equal. Then you need to do something about that. Start firing the non-productive partners just as if they were non-producing employees and reallocate those investments into your best partners for a greater return on your investment.