Distributors Want My (Manufacturer) List Price Higher Than Their Own
Hi everyone,
I’m facing a situation that I hope you can help me with. My distributors are requesting that my list price be set higher than theirs. Their main concern seems to be avoiding competition with me for sales and preventing their customers from choosing to buy directly from me online for convenience. While they don’t engage in online sales, that’s my primary focus.
It’s worth noting that these distributors account for a significant portion of my sales, and I offer them competitive pricing and solid margins in return. I understand their perspective, but it feels a bit odd—and potentially misleading to customers—that my prices could be 10-20% higher than their listed prices.
Is this a common practice in B2B, or am I being taken advantage of? Any insights would be greatly appreciated!
One Comment
It’s not uncommon in B2B relationships for distributors to request that manufacturers maintain a higher list price for their products. This practice helps protect the distributors’ margins and ensures they can compete effectively in their markets without the concern of customers bypassing them for a lower price online.
Here are a few points to consider:
Channel Strategy: Having a well-defined channel strategy is crucial. If your distributors account for the majority of your sales and offer a robust margin, it’s understandable that they want to safeguard their business interests. They likely have a vested interest in keeping their price competitive and maintaining their customer base.
Perceived Value: Higher list prices can be misleading, and you’re correct that it may create confusion for customers. However, you can position your online presence as providing added value (such as convenience, exclusive products, etc.) to justify the price difference. It may be useful to communicate clearly about your pricing structure to avoid any customer confusion.
Common Practice: This practice, often referred to as “minimum advertised pricing” (MAP), is relatively common in many industries. It serves to control pricing and protect the relationship between manufacturers and distributors.
Negotiation: If you feel strongly about the situation, consider discussing it with your distributors. Explore whether there’s room for negotiation and discuss potential compromises that could benefit both parties. Perhaps you can offer exclusive online deals or bundles that only you provide, helping to reinforce the value of your direct sales while also supporting your distributors.
Assess the Relationship: Given that the distributors make up most of your sales, think about the long-term relationship. If they’re providing significant volume, it might be worth it to align with them on pricing, but ensure the arrangement also makes sense for your direct customers.
Ultimately, it’s about finding a balance between protecting your retail relationship and ensuring your customers feel they are getting a fair deal. Communication and transparency are key moving forward.