I employ Salesguy X, we’ll call him Ted, who works only with distributors. Distributors get a price break.
Ted starts talking to a new distributor. Ted discovers that this new distributor will have a huge markup on our materials. Ted decides that the new distributor can afford to pay higher prices. Ted doesn’t offer the new distributor the price break we always offer distributors.
This infuriates me. To me, it’s dishonest and makes my company look like we’re cheating.
To Ted, since new distributor agreed to the price, everything is fine.
I’m guessing that Ted didn’t consult you first. I’m wondering if Ted’s job is on the line.
I personally think that you have every right to be infuriated. Sure, it’s nice to get more money, but not at the expense of your pre-set rules. When this gets out, that distributor is going to be furious, and possibly do business with somone else. And it will get out, I’m sure. I don’t know what you sell, but if it’s got distributors then it’s probably got conferences or other gatherings that competitors hob-nob with each other.
Also, this may be a new business entirely that doesn’t know how much they can reasonably sell your product for. That is the distributor’s problem not yours really, but if they can’t afford to mark down their prices to be competitive, they won’t be a repeat customer.
However, you may want to look at if Ted has a point and that it’s time to raise your prices across the board. But I agree that this wasn’t the way to start it.
Good Luck.
In my opinion, no, you’re not overreacting. I would consider it unethical at the very least. I would be worried what might happen if this distributor finds out about the other distributor’s discounts that he didn’t get. If that makes sense.
What, if anything, can you do about it, and do you intend to do anything about it?
(I’m being nosey - I know - don’t answer if you don’t want to. :))
Going on only what you’ve just said, I would have to say that yes I think you’re overreacting.
My reasoning for this is that the main role of a sales rep is to create profit for the company they work for and it would seem as though this is exactly what Ted is doing. If anything, I would be commending him for securing the higher price for your product.
But again, there are a lot of reasons for selling things at certain prices, so perhaps you could fill us in with a little more detail such as what kind of volumes your distributors are shifting?
Generally, retailers (AFAIK) mark up their prices as a function of the price of their suppliers.
If the supplier knows the retailer is going to place a huge mark-up on the product/service, the supplier should be able to raise HIS price accordingly.
I think the problem is here, with the phrase “Distributors get a price break” if your company automatically gives a price break to distributors then your not really giving a price break, but selling to cheaply.
Every distributor should feel that they have bargained for and earned their price break, that way they will feel good about the deal.
If the price break is always earned then there wont be a problem when the new distributor finds they could have got your product cheaper if they bargained harder.
BTW is the sales person on commision?
I am not in sales, but I like your attitude about pricing. Horsetrading always makes me feel like I’m in a pawn shop. Besides, if you take Ted’s suggestion and make companies work for that discount, wouldn’t that imply that all business pricing is negotiable? Does you sales staff have time to haggle over every sale?
I dunno, I’m in Pricing, and I feel that, generally speaking, a company should get the highest price for their product that they can. We call it “not leaving money on the table.” If this customer is willing to buy at a high price, why not sell it to them at that price? I see nothing even remotely dishonest or unethical to negotiate a very profitable price for your product. These are not little old ladies being reduced to eating cat food, these are competent adult businessmen who negotiated a bad deal.
This is ALWAYS balanced with things like, customer satisfaction, matching publicly announced prices, following pricing procedures, those sorts of things.
Do you think this will cause a customer sat problem in the future?
Does Ted’s price conflict with publicly announced prices?
Did Ted overreach his authority to give this higher price?
Whether the distributors “deserve” a price break, whether the company is selling too cheap, and whether the distributor is making a boatload of cash off your product are all irrelevant to this situation. The relevant fact is that Ted knowingly violated company policy. IMHO, he should be dealt with accordingly. There is a correct way to handle this situation, to wit:
Realize that the distributer is making huge profits on your product or service.
Bring this fact to the attention of the appropriate manager
Discuss pricing options/opportunities with appropriate manager
Decide on a pricing plan
Quote the deal
Ted decided to eliminate steps 2-4. In my world we call that a loose cannon.
Overreacting? Not at all. Looks to me like Teddy forgot who he works for and I think protecting your reputation is important. Send Ted to a remedial ethics class, and if he passes, have him call the distributor and tell him he made an error calculating his discount and give him the corrected prices.
What Doctor Jackson said. It’s not really an “ethics” issue, it’s a policy issue, and Ted needs the big picture re handling distributor relations. Jamming one guy and giving everyone else the deal is a prescription for losing business.
If every distributor deal was negotiated that would be one thing, but they aren’t. Trying to squeeze everyone would be fine, but when you’re squeezing one guy, just because you can that’s a bit abusive.
You EMPLOY Ted, is that right? If so then he does what you say. Was it clear to him that whether he should stick to price, or charge more were possible? If there’s reasonable doubt, tell him to do what you want, and give him a break this time.
Surely, if you WANT to, you can ring up this client and say “It’s your lucky day. You just got a discount.”
If Ted has, or in future does, deliberately disobey, then maybe it is mediavel-on-ass time
The other side of the coin is - was he right? Who sets this policy? If Ted makes a good argument, listen, in case he’s right, and if not, explain why, or ask him to humour you…
In general, it’s a bad thing to give different distributors or resellers different prices, because they will talk to each other, and a trusting relationship is very important with your channels (and customers).
On the other hand, there are plenty of reasons you could give a distributor better deal, volume commitment is an obvious example. The key is to be fair.
