The below was created by Atlantic Marketing President Brandon Flack. The review details the basic requirements you must consider for selling your product into this niche industry. Some details and examples have been purposely left off, but if you would like more information please book a free one hour sales consultation with us at this link.
First let me give you a fast overview. Please do not consider this an insult if it seems to basic, but we need a base line to start from. This mainly applies to the marine aftermarket. Also I want to point out this is the way it IS done, not the way it HAS to be done.
Distributors, Retailers, OEM’s & Dealers:
These are the various account type you will find in the marine industry. OEM’s are boat builders and are often sold off of a specific quote as the product and volumes are often specific to them. Distributors are wholesale warehouses that sell products to retailers and dealers. They often host selling “distributor shows” where they invite in 100’s of their customers (Dealers) to, they deliver products with truck or common carrier, and have outside and inside sales reps calling on accounts. Distributors are often the lowest price level customer for most marine programs as they place the biggest bulk buys. Retailers are large accounts that sell direct to consumers… It makes sense to sell them at higher price level than distributors to offset the higher costs of doing business with them (they like to do lots of advertising), and just as importantly to keep the market selling prices in line. Dealers are the small retail accounts that buy most of their supplies from Distributors. They complete with the retailers of the world on local service and knowledge. They often are the same place the boat is stored or docked, and they will do installation and service work on the boats directly as well.
Now into the nuts and bolts…
Most Programs (a program is all the information you have about how to do business with you) need to be done by September 1st. Most manufacturers will start presenting them around mid-July at the STEP conference. This is the time to show your new items and marketing materials. Hitting this time frame gives you the best chance for success for the following marine year, and the early bird gets the worm in this business!
Set an annual date to review pricing and update the marketplace. Most companies find Jan 1st or Oct 1st to be the best time of the year. These dates correlate with the traditional end/start of our marine season, and coincide with reprinting of catalogs and dealer programs. Pick a date and stick with it. Raw materials we know have been a nightmare the past few years. If you must have a mid-season price change hold off until July 1st, and give us as much notice as you can. The best programs today seem to have Jan 1st effective pricing, and they get the new pricing out around November 15th.
Many companies go with net prices, quotes, retail with discounts, etc… all are different. The clearest programs today have definitive levels. One level price for distributor, one price for a dealer, and one price for retail. The basic ranges fall around 55% off retail for a distributor, 30% off retail for a dealer, with retailers falling somewhere in the middle. Again some are more, some are less, depending on the market and the products. Many companies just leave retail and dealer out of it. They offer a basic net price for distributors and let the market set the rest. Having a price list in Excel in NMDA format goes a long way as well.
In season – Net 30 has become the standard basic terms, with 2%10 net 60 being the other major choice.
Dating – Extended payment terms for the winter months can really keep the season flowing in the Northern states. Programs with 120 day terms on one order, placed before Jan 1st allows distributors to stock up on items when they may or may not sell them for months. Terms like these help keep the inventory flowing when the market is traditionally the slowest. Otherwise they wait and order as needed, and your factory gets bogged down in the spring.
Distributor Show Specials:
The show orders are about 20% of our business all year on average, and you cannot overlook the importance of them. It is the ONE time of the year where dealers take the time to shop. They pick and choose products and lines that they are going to run with for next year. Once the product has been put on the shelf, the re-orders are automatic for the most part. A 5% discount on one order that can be combined with dating orders is standard (shows tend to run Sept – Nov). The distributor in turn passes on these discounts to the dealer to incentivize them to place orders at the show. Paying for a booth at the shows, while high in fee’s, is also standard for the industry. Booth fees can range up to $5000 for a 10’ booth. Cash back specials tend to be very effective as well. Buy $500 worth of this and get $100 back. Again you are just trying to give them the incentive to place the order on the spot and lock up (or break into) the shelf space with your products. Show specials are the largest grey area, and often the best deals are the individual ones worked up by account for that particular market. They can of course be any combination of all the above.
Catalog Allowance- Most accounts look for 1% to help offset the costs of listing your line in their catalog. That can be called a catalog allowance. I have seen many companies cap this at certain level or just offer a flat fee per page. $200 per page, or $750 cap, we prefer the 1% with a say $750 cap. It all washes out anyhow when you begin to combine this with Co-Op below.
Co-Op Advertising/Promotion- Here is where you want to be creative. At some accounts these funds can really drive sales, at others they can just be a money drain. Most manufacturers have 2 to 8% built into their pricing to allow for Co-Op. Companies that offer a full 8% may want everything to be paid out of this, show both fees, catalog, fliers, promo’s, yadda. We have found it is really best to leave a set % off the printed program, just add a line that co-op may be discussed with approval from the manufacturer. Here is where you most likely can reward the customers who are pushing your brand, but not have to get into a discussion on changing price levels. Rather than offer them a discount on their costs, offer them Co-Op bonuses while in turn getting them to do some sort of promotion to help sell even more of your products. Feel free to get creative. Tie in new products here, make them have to take on such new products in order to get such % co-op….Exclusivity bonuses….etc. Again this is the place to be flexible every year. Of course flexible does not mean vague, once a plan is in place, outline it in detail. How will co-op be paid and when, what needs to be shown to collect it, etc.
Growth Incentive Rebates:
How much is growth worth to you? Put it in the program. Even if it’s nuts give them a reach. If the business goes up 20% this year they get 2% back. This encourages the customer to not take on new lines, and push your line even harder.
Min Order, Freight, Drop Ship Fee’s:
Min Orders are pretty standard at $100 or so. Make sure to note if you will break a standard pack or not.
Freight is more important and more varied. Find a level order that makes sense for your operation and offer to include the freight or Free Freight Allowed (FFA) with the order. Figure it this way, if the customer has to pay freight, then they have no incentive to place large orders. The customer in turn will order on an as need basis. What is the cost to you to pack and ship 6 $500 orders versus one $3000 order? $3000 is pretty standard these days but that number, along with the cost of freight, is rising every year.
Drop Ship Fee’s – charge them! They pass it on to the customer, and they should all pay for the convenience. I have seen this fee as high as $50 from companies that really do not want to drop ship, to as low as $5 for companies don’t mind drop ships.
Annual Stock Adjustment:
Not a big deal, but it is better to keep these guys fresh versus stale! It keeps our line in motion, and wholesalers love movement. Offer a onetime adjustment allowing them to send back current, non-defective, and slow moving items for credit. If you keep up with this you never have old product rotting in the field, and if current stuff comes back, you can resell it now. List a fee for this. Most are around 20% but they lower or waive it if the amounts are small. It gives the buyer more confidence to stock up on the line if they know they will not die with it. Put a cap on it like 10% of annual sales allowed back.
Product Data & Company Information:
It may really seem basic, but having the important information about your company easily available removes a hurdle many company’s create by making it hard to access. A detail price list with sizes, case Qty, case dimensions, standard packs, UPC codes, MSDS sheets, yadda…. It all makes for less questions later. A solid web site with updated contacts and a Dropbox image site is the perfect way to keep your products and logo’s fresh in the market. Our customers love it, and it is very easy to keep them current.
Finally while having a written program is a must, keeping the flexibility to tailor it to the needs and desires of our customers ensures the best chance of success. A flexible structure is what we are always looking for. Hope this helps as place to start from. Feel free to email us at firstname.lastname@example.org if you would like to set up a consultation and review some examples.
About Brandon Flack – Brandon has been working in the marine industry since 1984 where he started in a marine dealership as an accessory specialist when he was 13 years old. He started his adult career as an independant marine accessory rep in 1994 and is the former president of the NMRA. Brandon has been president of Atlantic Marketing since 2006 and has served on various boards and committees inside every corner of the North American marine industry. He is also a lifelong boating enthusiast.