WINTER 2014

56 THE DISTRIBUTOR’S

56 THE DISTRIBUTOR’S LINK Dennis R. Cowhey Dennis, R. Cowhey, started Computer Insights, Inc. in 1981 and is currently CEO. He served for many years on the Illinois CPA Society Computer Information Systems Committee. He is a frequent author of articles for Industry Trade Magazines. Before starting Computer Insights, he served as Central District Manager for a division of Litton Industries (now part of Northup Grumman). That company offered Inventory Control Systems to Retailers. Prior to that, he was a Credit and Financial Analyst for National Credit Office division of Dun & Bradstreet, Inc. He received his education at Chicago City College and DePaul University. COMMISSION DRIVEN PRICING - AN IDEA THAT WORKS The fastener business is very competitive. Many distributors choose to compete by having their salespeople become part of the business process. There are two ways that this is accomplished: METHOD 1: The Salespeople Are Paid On A Straight Commission Basis As A Percentage Of Sales The sales price is under the control of salesperson who simply chooses a letter code (or a number code) and that selection dictates both the customer’s price for that line item and the salesperson’s commission for the line item. Last Price and Level The system automatically remembers the last price and price level that the item was sold to this customer for. This is extremely important because pricing mistakes in this environment can be costly. It isn’t just the confusion relating to the individual price. The price error could be substantial and it could cause the customer to decide to send every item out for quote in the future. Price Based On Cost Multiplier The price is usually based on a multiplier that is applied to a standard cost, e.g. 1.5 x cost 2.0 x cost, etc. the salesperson can choose the different markup multiplier for each line of the sales order. In effect, he or she is choosing how much they would like to make on that order. please turn to page 190