How to Solve the Problem of Unpredictable Spikes Impacting Revenue and Production
When you receive unexpected sales from dealers that aren’t on your authorized seller list, it can seem like you’ve gotten lucky. Certainly, the first bump in revenue is a welcome windfall, but it’s after that, when you factor this additional cash flow into your forecasts for the future, that the risks begin to grow. The moment you begin to rely on unpredictable revenue from unauthorized sellers, you increase your chances of inaccuracies for two main reasons:
- Unknown dealers have nothing at stake and can stop selling your products at any time.
- Trusted retailers maybe not be able to compete if others are undercutting them on price, and could also stop selling your products.
When either of these situations occur, your business could fall short on your projections, and you could end up with some tough decisions to make. The revenue coming in from unauthorized sellers is unsustainable – it’s a short-term boost rather than a stable, reliable stream over the long term. It affects the value of your brand, as consumers become unable to discern what it is that makes your product distinct from others.
A secondary cause of unpredicted sales can be that of extensive drop ship orders rather than stocking orders from your distributors. When retailers don’t necessarily trust your company to provide them the support they need, they’re less likely to be willing to stock your products in their own facilities and will instead place last-minute drop ship orders, which can leave your staff scrambling to fulfill them.
Avoid These Scenarios
Prevent these unpredictable spikes from unauthorized or wary dealers in a few simple ways:
- Establish, monitor and enforce a minimum advertised price policy. Once you have a MAP policy in place, honest retailers will follow it. You can send sanctions to those who don’t abide by it to weed out those untrustworthy sellers. When retailers notice you taking your MAP seriously, you’ll foster trust between your company and your distributors, who will feel more comfortable stocking your products and supporting your brand.
- Stop distribution to any unauthorized dealers. If you’re providing untrusted sellers direct access to your products, you’re contributing to the problem. Even if the sellers you are distributing to are following your MAP and acting responsibly, it’s very possible they could be selling to other retailers who are not so trustworthy.
- Spread the word about your MAP. You might be pleasantly surprised to find that distributors who previously refused to work with you could change their minds when they learn about your MAP. Many retailers will only work with manufacturers who have a MAP policy so they know they’ll have the support they need. When you acquire new retail partners with MAP as the basis of the relationship, you’ll be able to count on the sustainable revenue from those partnerships.
To learn more about how to solve the problem of unpredictable spikes in revenue, read about how Great Day, a motor and powersport manufacturer, addressed the issue. Ensure that you’re getting the full benefit of your MAP policy by using an automated MAP monitoring tool like ORIS Intel’s PROWL to discover violators and anonymous sellers.