Are you maximising your profit margin?

Profit margins can make or break your business. Find out how to maximise your earnings with OGL Software.
May 10, 2019
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5-min read

Are you maximising your profit margin?

Pricing your product correctly can be make or break for your business. Adding a price tag to your stock items is a key decision that will impact all aspects of your business and will ultimately decide the amount of profit you can make and what expenses you can cover.

Put your cost too high and customers won't buy your products but put it too low and you'll risk not covering your costs and making a loss.

For wholesalers and distributors, pricing is more important than ever, with items becoming increasingly competitive and consumers shift in loyalty means they're confident to do their research and shop around. Plus, supplier pricing is forever changing and if you have a multi-channel selling strategy, keeping on top of your pricing can become a mammoth task.

What to consider when pricing a product

Variable cost price

Consider the variable cost price that is dependent on each product including:

  • What is the supplier price?
  • Do you need to add any components before selling?
  • Do you need to assemble the product and add production time costs?
  • What is the packaging & shipping costs?

All these need to be worked out per product so that you have a base cost to work with.

Fixed costs

These are the costs that the business will incur regardless of how many products you sell.

  • Building / office rent
  • Staff
  • IT technology services
  • General business supplies

All these costs that the business incurs, that have no effect on how many products are sold, also need to be considered to deliver your overall profit margins.

Market place value

Another thing to consider, ensuring you stay competitive in the market, is how much the product is valued by your customers. You don't want to set the price too high as you'll struggle to sell, but equally, you don't want to set the price too low as your brand could be considered as poor quality.

How to ensure you stay competitive

It's important that your can stay competitive in the wholesale and distribution industry and you want to ensure you can not only win new business but keep the customers you already have.

This is why giving your sales reps the freedom to haggle and enabling them to have the discussion about cost with their clients is key to winning and retaining business.

Your costs are likely to differ compared to quantity bought, they're also likely to differ across your customer accounts, as loyal customers expect access to improved pricing structures.

This is why a sophisticated ERP software system holds so much value for wholesalers and distributors. You don't have to worry about selling under cost price, you can give your sales reps guidelines and freedom to haggle with customers, you can easily mark out your profit margin percentages, setup special customer pricing and react to the ever-changing supplier price changes.

ERP software is designed to save businesses time and money, but this is crucial when it comes to pricing. The number of manual hours saved, human errors avoided, and profit margins improved is invaluable in the competitive distributor industry.

The prof.ITplus Pricing Module

What can the prof.ITplus pricing module offer you?

  • Easily import supplier cost price and recommended selling price for quick and easy price updates on all selling channels, including your eCommerce website and eBay.
  • Create special customer pricing so that your customers receive quality, consistent customer service to improve retention. Customer pricing can also be accessed via their online customer account in your website.
  • Set minimum profit margins for your products to ensure your sales reps don't sell below your agreed profit margin and lose you money.
  • Save hours manually updating and reviewing costs.
  • Remove human error from inputting cost data into the system.
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