Sometimes you need to shake things up and that’s exactly what Sharp beginning Oct. 1 when they rolled out Promotional Plus Pricing to their dealer channel. Originally referenced at their dealer meeting in July, what this does is take all of the discounts that were provided to dealers in the last six months and put it into their every day pricing.

What makes this so significant? “Today, all manufacturers have an artificially high price to dealers that they then run ‘Promotions’ off of,” explains Mike Marusic, senior vice president, Marketing & Business Solutions Group, who acknowledges this is something that Sharp has historically done as well. “Dealers can get 10 percent, 20 percent, even 30 percent off of dealer price for loading up on inventory.”

On the surface those discounts sound like a good deal for dealers, but in the overall scheme of things it changes the way they sell, leading in certain cases to selling products that may not exactly be a good fit for their customers’ needs. Now Sharp is taking a stand and changing the rules for the following reasons:

The range of discounts is unfair to dealers. “Depending on a negotiation, a dealer in the same market can own product at wildly different price points,’ notes Marusic. “This effectively kills their competitiveness. After a dealer ‘negotiates’ a 15 percent discount, they are left to wonder if the dealer across down negotiated a 20 percent discount.”
It forces dealers to load up on inventory to get to the competitive price. “Manufacturers are basically forcing the dealer to be their warehouse for them,” says Marusic. “If the manufacturer thinks carrying inventory for them is bad, why is it better to put that risk on the dealer?”
It creates unpredictability in the dealer’s price. “When a sales rep needs a price in October for a potential sale in December, what price does the dealer use?” asks Marusic. “They have no idea of the ‘deal’ being offered in December. This makes it risky to be on a low price, but you know the ‘high price’ will not work.”

Sharp took all these issues into consideration and also received input from their dealers before coming up with the Promotion Plus Pricing. Marusic emphasizes the program now allows them to focus on selling not buying.

“When we talked to dealers their whole strategy was on the buy side. They’d look at what the discount was on the buy side, they’d stock up on inventory, then build up their warehouses, and then have to move what they had inventory of rather than move what the customer was asking for. Our goal is to stabilize for the dealer predictability. A lot of them plan their business according to how they want to plan it versus when we want to move the inventory.”

We asked Marusic if it was an internal challenge changing a long-standing business practice.

From a dealer perspective there isn’t much of a downside to this initiative unless of course Sharp raises prices and dealers find they were getting a better deal before Promotional Plus Pricing. In theory this simplifies things at the dealer end too.

“No longer is a dealer’s sales force not closing deals, they’re closing out paperwork, and then the dealer has to make sure they have all those claims and credits by model, 10 points off this, 20 off this, it’s a huge burden on a dealership to make sure they got their money,” says Marusic. “That kind of thinking is not selling. The goal is to sell, so our belief is we wanted to make this a little easier for our dealers, help them understand our products better, and help them close more business instead of helping from an admin perspective closing out credits.”

Promotional Plus Pricing also levels the playing field for smaller dealers. “What’s really happened is our smaller and midsize dealers who typically couldn’t [take advantage of] those buy-ins are looking at dramatically better pricing. This allows those dealers to compete with the big guys in the sense of this 15-25-point price gap for the end of the month deal.”

“I think the prices will help smaller deals win more deals,” agrees Chip Miceli, president of DPOE. “The bigger dealers that always buy in bulk get better pricing which is lower than the new price structure.”

That’s what Bill Fraser of Frasier AIS in Reading, PA has found. “We did a large buy in September and this initial pricing looks like it will be higher.”

It will be interesting to see if other manufacturers follow Sharp’s lead on this. In the meantime it’s too early to get an accurate read on the program, however, early returns reveal that as of Oct. 22, the company was at 92 percent of plan for the month. “That’s encouraging,” says Marusic. “I don’t want to say it’s a smashing success because we’ve only seen three weeks of data, but it seems like they get it and they’ve acted on it already.”