Most of you know that work in a condition of falling margins is tough. Margins are falling in all markets. This is an obvious fact for those who have studied the theory of capital flow to more profitable segments. In the short term, if your margin starts to fall, you need to take measures to increase it.

STEP 1

Conduct an audit of distributors (sales channels) and use CRM to identify those who brought the company low margins in the last year. The margin is indicated taking into account local expenses and expenses for partners, but excluding expenses of the parent organization.

Segment distributors by margin into 3 categories (ABC). Reject the lowest-margin ones (C) – either do not extend the distribution agreement, or revise the work so that this category of dealers is not used as a sales channel.

STEP 2

With the distributors of group B (mid-margin), find out the reasons for the Company’s low margins. This could be the result of dealer’s high margins or their large expenses. If the reason is high margins, hold negotiations with the distributor’s management and discuss the possibility of reducing margins (at least for the current year). If the reason is high dealer costs, find out the reasons for such costs. These can be unprofitable clients (often the distributor insures the risks of long-term payment for the clinic with a higher margin), high marketing expenses (in this case, discuss the possibility of abandoning some marketing activities in favor of margins or replacing some of the activities with more budget-friendly ones.

In some cases, you need to work with their marketing and sales departments and help them reformat the company’s product portfolio by increasing the share of high-margin products.

IMPORTANT!!! Keep in mind that high-margin products for the vendor may not always give a high margin to the distributor (for example, service or maintenance is entirely the responsibility of the distributor and for some reason is objectively expensive)

STEP 3

If the described measures do not help, set the task of raising the margin for each customer – either by raising prices, or by knocking out discounts from contractors.

If you work in B2G markets, your margins will be affected by local trading rules. Therefore, it is important for managers to monitor legislation and look for opportunities to increase margins through regulatory loopholes. It is also important to track (at least approximately) the prices and margins in the bidding of your nearest competitors.