What Is a Price Channel?

Sales managers often face the problem of setting prices for new products when they are launched on the market or developing new markets. Since ex-factory prices are generally determined, the setting of prices at all levels mainly refers to the price and profit in the channel. distribution.

Channel price

Right!

Sales managers at

Product price is from

/ Channel Price Social / Natural

l Government policy factors

Before setting prices, it is important to understand the government's relevant policy developments in advance. For example, the country recently announced that it will reduce the consumption tax on cars that meet the European No. 3 emission standard, and at the same time stop the reduction of European No. 2 preferences. Because China's tax is an in-price tax, the policy is ultimately reflected in retail prices. Failure to grasp policy changes in a timely manner, then either the price changes frequently or adjustments need to be made by reducing the ex-factory price or the profit of the channel link, causing unnecessary losses to enterprises and customers;

In addition, due to the imperfect legal system in China, local protection still exists in some regions, especially for high-tax products such as tobacco and alcohol. When setting the wholesale and retail prices, the sales staff must fully understand the special local policies, that is, they must know the extra cost of foreign products and the special preferential treatment of local products, because preferential treatment will eventually be converted into price advantage.

adjacent areas

The policies of neighboring regions and the market environment (including competitive products and our products) often bring fluctuations and impacts on the local market, which are also issues that need to be considered in advance. Henan is a price basin for many products, and price control in the vicinity of Henan has been a concern for many consumer goods companies.

Channel price distribution

l Distribution model

Different distribution models are adopted, and the company's sales and operating costs are also different, so the profit levels of dealers in the relative channels are also different. Generally speaking: For products that use high-cost intensive distribution, dealers' profits will be lower than those of traditional sales models.

l Payment method

If an upper-level customer needs to provide credit support to its lower-level customers (including wholesale and retail), the profit margin of this level should be higher than that of other levels when pricing. This is because there is a certain amount of risk in credit lines, and funds have time value.

l Channel's average profit level / markup rate

Customers in different regions have different expectations for the profit margin of the product. The price gradient applicable in one place may be strongly opposed by the customer in another region. For new products or new sales regions, maintain a reasonable level of profit for customers. Getting customer support is very important.

The markup rate mainly refers to customers who target high-end on-site consumption.

Channel price competition environment

l Competition price

The price of competing products is undoubtedly the most important reference for us to set prices. Here, not only the retail price but also the price of one or two channels. Generally speaking, if we hope to get more support at a certain link, then the corresponding profit margin will be appropriately inclined to this link. For example, when a new product is just on the market, when more customers need to be distributed, a batch of profits can be appropriately added to attract customers' operating interest. When the product enters a stable sales period, it can reduce wholesale profits and increase retail terminal profits In order to get more display space and opportunities, shift the focus of sales to consumers.

l Market investment

A product with a large market investment must have a high rate of return. Many manufacturers now adopt the strategy of opening high and going high, both high retail prices, high market investment, and high dealer profits. However, the false high retail prices not only damage the interests of consumers, but are also restricted by the competition in the entire market. It can be maintained for a long time, and it may often damage the self-interest of the manufacturer.

If the company's market investment is relatively large, it can appropriately reduce the profit margin of the distribution link (of course, it can be maintained), because the company's high investment often means that customers' sales will be relatively easy. In the long run, the brand equity formed by market investment is not suitable for the company to make up for with short-term sales income, so it should not be operated in the form of artificially high retail prices.

Channel price consumer factor

l Demand / purchasing power

For products with large market demand or products whose sales volume is expected to grow quickly, you can set a short-term special market rebate when the profit of the distribution link is set, and then gradually cancel it after the sales volume is stable. This can ensure customer enthusiasm in the initial stage of listing There is no need to avoid unnecessary spending by the company.

The retail prices of regions or products with high purchasing power may rise appropriately.

l Brand awareness

The products of well-known brands or well-known companies will generally have a premium in retail prices, and the profit of dealers will be less than other brands, while the products of ordinary brands are the opposite. The sales volume and turnover of the dealers are derived from well-known products, while the profits are derived from ordinary products. Consumers can get psychological satisfaction when they buy well-known products, but they have paid additional fees. The huge funds spent by the company to establish the brand are gradually recovered through a premium. In summary, in the specific design of price and profit policies, the factors that need to be considered are of the above-mentioned different types. In actual operation, we must consider both comprehensive and limited by these conditions. Existing, we can only formulate the most effective price policy for achieving our goals according to our own purposes and requirements.