Detmer's Corner: Wringing The Miles Out Of Your Purchases Can Lead To A Better Bottom Line!
Since leaving my position as president of Niles Audio I haven’t had to travel nearly as much. My new business, Mike Detmer Business Solutions, takes on a limited number of clients and much of the work is completed during teleconference or in the cloud.
So how was it that I was able to jump ahead of all but the most weathered of road warriors to get my seats upgraded to first class for my recent trip to CEDIA in Denver? The answer is simple. In 1981, when I first started traveling for business, I signed up for what was at that time a new program, the American Airlines AAdvantage Program and over years of repeat purchases I earned the life-time status as a preferred customer. Because of that, I continue to be a loyal customer.
As a technology integrator, your company can earn similar rewards from the vendors who service the electronics installation channel. Nearly every vendor has a “Dealer Program” and while the details vary from company to company, you can leverage these programs to maximize the gross margin dollars that fall to your bottom line. Like the airlines, the vendors that serve you know that it is more profitable for them to keep you as a customer than it is for them to acquire a new customer and in order to keep your orders rolling across their desks vendors will reward you with a host of benefits. Knowing that and applying a little negotiation in the dealer program signing process can have a substantial effect on your bottom line. Here are a few tips you can follow to wring extra profits dollars out of your purchases:
1.) Be aware of program timing cycles. Like the airline rewards programs, most vendor programs revolve around a 12-month period. Your qualified purchases in the prior 12-month period typically dictate the program level for the upcoming year. However, due to logistics some vendors stager their program-years to begin either 3-months before the calendar year or 3-months after it. Be aware of when these programs begin and end so you can adjust your purchases by pushing them forward or holding them back to maximize your program classification for the following year.
2.) Look at all of the program components. Unlike airline reward programs, technology company dealer programs have several different components. They can be divided into two main categories which are pricing related and value-added incentive related. Many dealers tend to look only at the pricing and forget about the cumulative effects of the value-added incentives. Be sure to look at the whole picture when you are choosing one vendor’s program over another. Items like free freight with every order or expedited freight can sweeten your gross margin dollars while reducing your inventory and improving your working capital.
3.) Discover the Best Price. Dealer program discounts can range anywhere from 3% off to 30% off the published price. In order to see the entire picture, ask the vendor to show you all of the dealer programs that are available. By reviewing the maximum level you will be able to see how increasing your loyalty will reward you as well as understand what a top-rated competitor may be buying for.
4.) Compare programs. Some vendors are essential to your business and some can be easily interchanged with others. Look at the latter and compare their rewards program with the competition. You may find that switching is worth your while. However, be aware of transition costs when you move from one vendor to another and consider the costs of inventory on-hand, training and the like. Sometimes it’s not worth switching for a few percent. Competitive vendors know this and frequently have a one-time buy-in program to incentivize you to switch. Find out what that program is and be sure that you get it from the new vendor or from the vendor you are already doing business with who wants to keep you on board.
5.) Remember it’s just business. A recent press release about the CEDIA Expo 2013 indicated that overall attendance grew by 6% while new exhibitor participation grew by 20%. Dividing 6% by 20% could mean that there are 30% more vendors emerging in the marketplace who want to attract your business. This extra competition means better program opportunities for you. While sometimes it’s easy to steer the course, remember that you have a duty to your company to make it as competitive as possible and to garner as much profit as possible. So if you find yourself in a position of having a difficult program conversation with a vendor, remember that they appreciate you bringing a competitive offer to their attention and for you asking them to meet their competition in order to maintain your business.
With dealer programs being launched over the next six months, take the time to analyze the offerings and negotiate winning scenarios for your business and the vendors you choose.
Good Buying! •