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Illustration 60886103 / Kheng Ho To / Dreamstime
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The Case for National Pricing

Sept. 1, 2003
Would national pricing eliminate a lot of wasted effort for all links in the marketing chain?The reality of business today is that just as the Mason-Dixon

Would national pricing eliminate a lot of wasted effort for all links in the marketing chain?

The reality of business today is that just as the Mason-Dixon Line long ago disappeared as the imaginary dividing point between north and south in this country, so too have the geographic boundaries dividing customers and the independent representatives who serve them. And what should follow that disappearance, at least in my opinion, is a national pricing policy.

It wasn't that long ago, 25 or 30 years, when there was an assumption that because prices in Boston and Philadelphia didn't have to be as competitive as those in New York City, manufacturers could work with different (regional or geographic) price schedules in different sections of the country. Well, those days are long gone.

Today, not only are manufacturers and distributors national in their operations, so too are their customers. And even independent representative agencies are now passing through geographic zones and are national in their practices and interests. Why, then, have different pricing schedules when the contractor ably armed with a computer in Nevada knows what the contractor in New York City is paying and everyone wants to be on the same page?

My complaint is this: In these days when the rep can spend anywhere between 10% and 20% of his time dealing with quotes or pricing problems, let's eliminate variable pricing. This would allow the value-added services that manufacturers, electrical distributors and reps provide to come to the fore, so that they can do the selling jobs expected of them. Wouldn't their services then take precedence over pricing? And, concurrently, if services provided by the manufacturer, distributor and rep prove to be insufficient to provide a viable force in the marketplace, why shouldn't they be removed from the channel?

Here's the way it works today. The rep receives a request to quote. He responds, but the customer believes there must be a better price somewhere. Then we, or someone else, give him a better price--and we all lose. And what about all the paperwork and wasted time on the part of the customer, rep, distributor and even the manufacturer when it comes to quoting and having outside people follow up ludicrous quotes?

Just saying we ought to consider national pricing is a lot easier than actually getting the job done. Yet, don't we already have a form of it with the Saturn automobile? Let's say the electrical industry decides to follow that example. As the industry continues to consolidate to the point where you have no more than a half-dozen manufacturers supplying a commodity product, where else are people going to go for products? The question remains, however, that once the manufacturer sets a national price, what happens when someone decides to cut the price? I would like to think that if that manufacturer cuts prices in Texas, he would be concerned with starting a national trend.

In my opinion, that threat alone should stabilize the pricing. I wouldn't be surprised if larger manufacturers have already considered this concept. Whether they have confidence to do it, I don't know. But it would create the level playing field that we all say we want.

Then, what do we do with that level playing field? The rep will have as much as 10% to 20% more time to spend on product specifications, prioritizing products, improving product lines, marketing better and answering technical questions. But most of all, he will have more time to not handle pricing problems. This will provide the professional rep with a real opportunity to shine.

Is there a down side? There always could be with something new. Obviously, this will only work as long as the market supports it. The threat comes when it's determined that there isn't enough business and someone tries to get more business by cutting price. Then there's the question of would others follow or could others provide value-added services to overcome the lower price?

How could such a strategy be implemented? Someone has to take the lead, and the approach should be that a national price policy creates competitive, reasonable prices that have been established on a national basis. As long as these prices generate enough inquiries to justify themselves, then the market will win out. We all want a level playing field. Once this strategy is implemented, I believe it will be applauded by all involved.