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A Progressive Strategy for Trade Customer Pricing

How a trade terms framework that rewards trade customer co-operation puts manufacturers back in control of pricing

Recessionary pressures are now requiring consumer products companies to re-examine one of the most important and challenging components in their go-to-market strategies – trade customer pricing.

With vigorous competition, volatile commodity costs and tight margins, the prices consumer products companies offer their retail/wholesale customers can lead to profit erosion if they are not managed in a structured, disciplined way.

However, where trade pricing and investment is applied through a coherent set of mutually beneficial commercial trading terms, it offers the potential to deliver a powerful boost to profit- opening up new growth opportunities and delivering real competitive advantage.

The subject of trade pricing has become even more sensitive against a backdrop of rising commodity costs, falling disposable consumer income and the rise of giant retail and wholesale groups with huge buying power. Although it is easy to appreciate why suppliers are often reluctant to embark on a major transformation of trade pricing, the scale of the transformation should not deter manufacturers.

IBM’s experience of working with leading edge Consumer Goods companies has demonstrated that by implementing a formal Pricing and Trade Terms Framework, theses organisations have successfully put themselves back in control with trade partners.

The benefits of this change results in a mitigation of commercial risk from margin erosion or pricing exposure across customers and the delivery of increased profit and trade collaboration.

 

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