Most manufacturing companies have connections with wholesale distributors to see their products and commodities. Now, when a manufacturing company is dealing with a distributor, the prices have to be set and this price would be present in their dealings from that time onwards. This distributor pricing can be easily calculated if you have a software to help you.

However, there are many theoretical concepts about distribution pricing that people aren’t aware of. Since it is such an important part of the marketing strategy, it is imperative that you are aware of these concepts and their impact on your strategy. The following points will help you to understand it properly –

1. Pricing Strategy – Distribution pricing has a big impact on the final retail sales price of e product which is why it should always be an important point of consideration when pricing strategy is being made. The wholesaler’s prices are calculated by adding the cost of direct material, direct wages, overheads and delivery cost. Then, after adding a reasonable mark-up, the product is sold to the retailer. Usually, the retail price is double of what the wholesale price is. It is always prudent to use quoting software and solutions to ensure effective sales.

2. Plan Of Promotion – The distribution price would also be affected by the promotion policy. There are many things that come under a promotion plan like depletion allowance, bonus for referrals and allowance for special purchase. Allowance for special purchase provides lowered or special prices to the distributor over a period of time. If distributors provide referrals to new distributors, they get bonus for referrals. If stock is sold within a fixed amount of time then depletion allowance comes into picture. When the distribution price is set, it should be low enough that all these incentives get included in it.

3. Sales Potential – Projected sales is calculated by multiplying the expected per customer revenue by expected number of total distributors. After the few initial months are over, these projected sales figure help the manufacturers to find out the appropriateness of the distribution price. It has to be ensured that the distribution price is just right because if it is too high then wholesalers would suffer.

4. Reanalysis and Other Considerations – After all the sales are done and recorded, a reanalysis has to be done of all the affecting marketing factors. This is because earlier, the marketing strategy just gave you an estimate and now you have actual figures. Distribution prices should be constantly monitored and evaluated to ensure that they are right.

Many manufacturers believe that a good product always sells and pricing doesn’t matter. This is not true because wrong pricing can bring your entire business down. Always ensure that the final distribution price that is set includes all the factors and costs. External factors like competition and competitor’s prices, demand, market environment et al should never be ignored either.