Over time many companies particularly in B2B come to a point where they experience what we call “INDUCEMENT OVERLOAD”.
INDUCEMENT OVERLOAD has symptoms that may sound very familiar including:
1) Obscure rebate programs which are only seen at P&L level or as corporate overheads
2) Dating of invoicing in such a way as to extend customer terms officially or in some very troublesome cases unofficially
3) Bonus programs which are simply a discount under a different name or bundling programs that provide the same impact
4) Free shipping with ever smaller order minimums
5) Waiver on minimum quantities while still providing volume discounts
A blog could be written simply about symptoms of INDUCEMENTS however here what I am suggesting is to start by conducting a thorough audit to understand:
a) Which INDUCEMENTS you are providing today to which customers?
b) What the buying behavior of the customers receiving INDUCEMENTS has been over the previous three year period as compared to customers not receiving INDUCEMENTS?
c) If INDUCEMENTS are extended to a distributor or agency are any of the discounts “flowing through” to customer level?
Once the data has been collected bring management together and review with them your company findings- the synthesized information is typically very illuminating. Following the review of the findings the next step is to begin to build a pricing process incorporating and integrating your customer tracking systems to best serve your customers in a profitable manner.