Pricing Out Distribution Marketing – What Are The Costs?

Asking the right questions about distribution marketing pricing can not only help increase your ROI, but satisfy your customers, too.

Businesses of all sizes depend on distribution marketing in order to ensure exceptional service standards. The choices they make will depend on their product and specific customer needs which can greatly influence the success of a business. Pricing out distribution marketing can help you not only increase your ROI but cut back on expenses if a business makes well-informed choices. Here are areas to take into consideration for a cost-effective distribution marketing strategy.

STORAGE FEES

Storage pricing doesn’t usually come at one flat rate given the several types of storage that are available. These vary based on a business’s particular needs. Types of storage include block stacking, racks, shelves and bins, dry storage, cold storage and more. The way a product is stored can influence its profitability for example, whether or not it’s easily accessible.

It’s important to note that different businesses with storage needs will require different types of automation, levels of manpower and more; one business might require a carousel whereas another may need several forklifts, a pallet jack or more. “In particular, when you move inventory whether first-in, first-out or last-in, first-out [it] affects how you value inventory and, thus, your enterprise’s profits and taxes” (1).

Storage comprises an important part of distribution marketing and can influence pricing outcomes more than businesses may initially anticipate. To help cut back on costs, ask plenty of questions about which options will work best for your business needs.

HANDLING COSTS

When considering your distribution budget, don’t overlook handling costs. Businesses tend to simplify pricing methods by focusing on storage along with the inbound and outbound movement of their goods. However, it’s important to consider variables such as a product’s weight, size, stackability and even how many times it needs to be handled by a human. Warehouses categorize these different costs differently, as described by The Balance Small Business.

“Some finance departments like to include those transportation costs in the actual product cost of goods (i.e., they count against product margin) and some finance departments account for them separately, where they are expensed to a non-product general ledger account” (2).

Customers setting their distribution budgets marketing should consider whether or not prices are fixed and if not, when they may change. No two warehouses are the same because different inventory flows can influence pricing, according to Multibriefs. “Because storage costs are calculated on a monthly basis, the total cost of storing an item depends on how long it will be in the warehouse”  (3). It is likely that “an inventory that turns 24 times per year should cost less to store than one that turns six times per year. For that reason, the inventory turn rate is a critical data point in creating storage prices” (3).

DELIVERY TIMING

Customers are the focus of any efficient and cost-effective distribution marketing process. To help cut down on costs and improve customer satisfaction, businesses can ask warehouses if they’re able to customize their delivery timing. According to the Logistics Bureau, “Stretching delivery time windows offers a massive opportunity to businesses” (4).

If your customers expect to receive your delivery within a small time frame, widening it by even just an hour can “Have a massive impact on your ability to better utilise your delivery fleet” (4) since it allows a business more autonomy. For example, you could alter your delivery route for more efficiency, change your vehicle options and ultimately, strengthen your distribution marketing standards.  

ANALYZE THE NUMBERS

Analyze numbers through a microscope when considering distribution-marketing services. Break your suggested retail pricing (SRP) down with an accountant. Breaking down the proper price to the distributor is important for making cost effective solutions, according to Shelf Life.

“If you want your SRP to be $9.99, you would need your delivered price to the distributor to be $4.88. The general rule of thumb is that your SRP works out to roughly twice what you sell it to your distributor for, and from this example you can see why” (5).

Businesses looking to understand their distribution marketing pricing are more likely to attain positive results if they ask thorough questions and do their research. Likewise, an experienced 3PL partner will be fully transparent about its distribution marketing pricing. Reading all contracts and combing through the fine print can also keep you in the know about effective distribution marketing practices.

Citations

  1. https://smallbusiness.chron.com/types-inventory-storage-72662.html
  2. https://www.thebalancesmb.com/where-are-your-supply-chain-s-hidden-costs-2221232
  3. http://exclusive.multibriefs.com/content/understanding-the-costs-of-warehousing/distribution-warehousing
  4. https://www.logisticsbureau.com/reducing-distribution-costs-the-low-hanging-fruit/
5. https://medium.com/shelf-life/how-distributors-work-and-how-to-work-with-them-part-ii-7c88ea099943
2019-04-30T11:07:51+00:00April 30th, 2019|