A SUPPLIER PRICE INCREASE: FRIEND OR FOE?
Don’t let the initial response of emotional panic to price increases detract from the joys of what can be a financially rewarding outcome!
A dealers’ typical response to supplier price increases is generally one of loss of control over the pricing process. This is geneally followed by a sense of aggravation about the required actions to support the increases.
Dr. Albert D. Bates, President, Profit Planning Group agrees that when pricing changes are forced upon the dealer, some angst is inevitable. “The operational aspect of making changes in the dealer management information system to reflect the changes in cost, updating pricing information and the like can certainly be an irritant,” says Bates. Dealers also experience anxiety about explaining the increase in pricing that you now have to pass on to customers, who have seen too many price increases before.
In his article, “Supplier Price Increases Are Your Friend,” which can be accessed through the AED’s Construction Equipment Dealer magazine, Bates helps dealers to understand the economic impact of price changes by breaking down dealership expenses into two components; fixed expenses and variable expenses. He also explains the positive impact of a supplier price increase on dealership profit margins, despite the increase in variable expenses. In all, Bates feels that dealers should actually thank the supplier for their actions as they now have potential to make a lot more money, and, blame the price increase on the “idiot supplier.”
In addition to the warmth of knowing that a price increase will ultimately make you more money, usiing a dealership management system that provides flexibility with pricing is another way to stay positive and maintain control over supplier price increases.
ASPEN provides several options to let you be the boss of pricing and have control over your margins:
- Price file subscriptions keep you on top of pricing changes for the brands you carry and can easily be entered in to the system to update impacted parts.
- Choose to flag a specific part in the ASPEN system to NOT update from an updated price file.
- You can also control pricing levels for different types of customers by specifying pricing groups in ASPEN for customers and parts. For example, set special pricing formulas for customers, contractors and employees by brand/supplier or as an overall group. You can keep your best customers happy by letting them know they are getting a “good deal,” if you choose, the dealer list price will show on their invoice!
- Override MSRP by setting your dealer list price to calculate by margin percent, percent of published cost, or markup percent plus a designated amount. For example, apply a different markup to your remanufactured parts as than your new ones.
- Adjust parts pricing to vary by location.
- Use ASPEN’s mass update function to reduce the need to individually maintain parts, such as an update in tax information or to apply a price group.
Price file updates for your dealership management system take the aggravation out of managing price increase. In ASPEN, you CAN receive price file updates from your suppliers, and still stay in control over pricing!