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When does it make sense to budge on price? A distributor offers perspective

Getting the right price from customers has always challenged independent mobile distributors. One veteran independent Massachusetts distributor recently spoke to Professional Distributor about the factors that contribute to his decision to be flexible on price. This distributor shared his insights with Professional Distributor on the condition that he remain anonymous.

The distributor tries to get a fixed 40 percent markup on all tools he sells. But he will go as low as 10 percent above cost is if the product is one of his higher ticket items or does not need a warranty. "If the equipment is drop shipped and is very price competitive online or from competitors, I will drop the price so that I get the sale instead of somebody else," he said. "Especially when it is very expensive, the profit is already good, a high percentage above cost just puts you out of the price range."

Another reason he sometimes bends on price is if the customer pays upfront with cash as opposed to using installments. "There are costs involved and lost revenue when servicing someone's debt," he noted. "So, I have to pass those costs to those who don't pay upfront for what they need."

The distributor also considers his customers' individual situations. He is more likely to give a break to someone who needs help but he thinks will be a good customer long-term. "I try to help the ones that need [the help]," he said. "That's another reason where I might drop price."

"If a guy wants it for too little or he walks away, they are not a good customer," the distributor added. "You don't want customers that are more trouble than they're worth. Good customers know you need to make money to stay in business."

He said it is important to be firm about price as often as possible. "In order to maintain the right price, it is important to not budge from the number that you determine is what you need. If they say 'Can you do any better?' you tell them 'No' with a straight face, 'No, if you want me to be here.' They're street smart; if you are straight with them, they will trust you and take your price."

His final piece of advice: "Just try to be real and direct. That usually works in the long run."