Sam Shapiro's Channel Pricing Blog

The Billion Prices Project

Sam Shapiro — Tue, 18 Jan 2011 14:26:59 +0000

Need a real time tool to track inflation? MIT recently launched its Billion Prices Project. This is online pricing research with data on 5 million items sold by 300 online retailers in 70 countries. Thus far it appears to be tracking the CPI closely with the advantage of daily updates rather than the monthly updates provided by the government. You can read more here in a recent Washington Post article.

Minimum Resale Pricing – States Fight Back

Sam Shapiro — Tue, 18 Jan 2011 14:05:24 +0000

Here is an update on the legal status of Minimum Resale Price policies. Some states are fighting the policies making it difficult for a manufacturer to utlize a consistent national approach. Think you can guess which states are leading the fight against minimum resale pricing?

Publishers Adopt Agency Model for e-Books

Sam Shapiro — Wed, 01 Dec 2010 04:17:43 +0000

Interesting article by Mike Shatzin about the evolving channel pricing model for e-books. Publishers evidently sell books to retailers at roughly a 50% discount and retailers are free to mark it up wherever they like. With e-books, 5 of the 6 largest publishers forced Amazon to adopt an agency model where the publisher sets the price and the channel’s margin. This is a good example of the suppliers, in this case the publishers, realizing their value without ceding that value and the corresponding margin to the channel.

Distributor Pricing Service Risky for Vendors

Sam Shapiro — Wed, 01 Dec 2010 03:50:23 +0000

This new pricing service by Tech Data puts more pressure on vendors to manage their price exceptions more effectively. Distributors and VARs will have the tools to track exceptions and exploit inconsistencies.

Extreme Margin Pressure

Sam Shapiro — Mon, 07 Jun 2010 23:00:46 +0000

We are in the midst of extreme margin pressure for distribution channels. There are three factors that appear to be driving down channel margins across most B2B industries:

The economic downturn is causing every distributor/channel member to cut price in order to win or maintaion the business
Globalization – We are truly in a global economy now. The North American market was still somewhat insulated from extreme global competition before the downturn. Now, every customer is looking for cost savings and will consider lower-priced brands from Asian manufacturers since most American manufacturers are bringing in their products from Asia anyways
The Internet increases pricing transparency in just about every industry. The Internet can wreak havoc with channel margins in industries with low freight costs and high price points

These three factors: The economic downturn, globalization and the Internet make it more important than ever for manufacturers to develop policies that protect channel value-add. If you do not protect channel value-add you will soon find your channel partners selling your competitor’s product

Winning the Business Every Day (or Month)

Sam Shapiro — Thu, 25 Mar 2010 01:08:56 +0000

Smart vendors try to lock in their customers with long term contracts and volume pricing. It seems like the trend, however, is for customers to increasingly negotiate everyday low prices without volume or long term deals.

Mark Checksfield, of Managed Service Provider Naverisk said that the firm is winning over clients because of its non-contract based pricing model.

“If people look at our pricing model they find it quite revolutionary,” he said. “The old licensing way is that you buy a license to use a major vendor’s software but you pay a fixed sum of money over a period of say five years. But our prices have no contract, you just pay as you use.”

They were saying that they didn’t want to commit for that length of time so our model’s perfect. We can literally, from month to month, switch the button on or off, on however many agents and licenses you want for your network.”

Ready for the “Corporate Refresh?”

Sam Shapiro — Thu, 25 Mar 2010 00:48:06 +0000

Intel’s Eric Thompson, Director, North America Distribution Sales & Channel Marketing:

“The channel is poised to take advantage of the corporate refresh,” Thompson said. “We believe 2010 will be a year of fantastic growth.” That growth, Thompson said, will come in part from new products…

Hope he’s right!

Is Your Program Spread Too Thin?

Sam Shapiro — Wed, 03 Mar 2010 22:38:25 +0000

Wedge Networks recently announced a new partner program that includes:

Customer satisfaction surveys
Deal registration
Lead distribution
“Protective” renewal margins
Market development support
Regional sales incentives
Partner certification

Sounds like a great program. I wonder however, whether they can implement with impact across all of the elements. We often find that companies spread themselves too thin by developing programs with too many elements. I would rather see a program with one piece that makes a major impact rather than a program that spreads limited resources across the board.

Higher Price in the UK

Sam Shapiro — Wed, 03 Mar 2010 22:04:52 +0000

Interesting to note that Microsoft’s pricing for its upcoming Office 2010 release will be 35% higher in the UK than in the US.

As reported on the Erictric blog: When asked about the price by IT Pro, Office Product Manager Chris Adams responded: “There are different market dynamics – channel margins, for example, local market conditions, foreign exchange – that we need to take on board.”

Get Ready for the “Bullwhip”

Sam Shapiro — Tue, 16 Feb 2010 18:32:28 +0000

A really interesting article by Timothy Aeppel about Caterpillar and the “Bullwhip effect” appeared in the WSJ recently. The bullwhip effect occurs when “small increases in demand cause a big snap in the need for parts and materials further down the supply chain.”

In the article, Jim Owens, Cat’s CEO, talked about growth it expects this year for itself and its suppliers. Cat will need to increase its production by 10% to 15% even if demand for equipment is flat. According to Owens, “the inventory burn-off is over.” The increased production will be driven by the need to restock dealers who cut inventory last year. Under this scenario, suppliers will need to increase their production by 30% to 40% because they are restocking their own shelves, Caterpillar’s and the dealers.

Under a modest growth scenario, many suppliers to Caterpillar will need to more than double their shipments to Caterpillar.

Manufacturers need to make sure that their channel programs are ready for the bullwhip. Many suppliers base their discount structures and rebate programs on growth. For many companies, rebate payouts in 2009 were very low or almost non-existent. In 2010, we can expect significant growth and payouts, simply from the bullwhip.