Managing Margins

It’s an age-old question in the promotional products industry and one that is probably being asked often now: “How can I grow my margins?”

There are two camps in the industry: price-sellers, who advertise themselves as the cheapest, and those who aim to provide value. Some distributors strive to be the cheapest, relying on sales quantity rather than quality. Those of us in the second camp believe that it’s our duty to bring value to our clients. For these distributors, the ultimate goal is to prove their worth every time they interact with a client — and that means approaching them with solutions, not products.

The concept of selling solutions is repeated regularly in industry publications, webinars, conventions and conferences, but what does it really mean? In today’s economy, it’s all about return on investment. The ROI is what determines the value you provide to your clients. Value is even more important in the current economy as clients more closely scrutinize spending. Distributors who know how to provide that value will find their businesses growing even as the industry contracts.

As a distributor, you can also provide value with vendors. By combining a vendor’s products with your ideas to create winning promotions, you bring value to that vendor and become a valued sales resource. Later, you can leverage that importance to bring more value to your clients. Value is a cycle; when you provide it to both vendors and your clients, you gain a great advantage.

So, what does this all have to do with margins? When you provide clients with value through great service and excellent vendor relationships, they won’t be tempted by offers of cheaper products, and you will be able to protect and increase your margins. Here are seven tips for increasing value and growing margins:

1. Be Willing to Lose

Know that it is OK to walk away from a sale. Do you really want the kind of client who insists on a bargain-basement price, asks you to beat competitors’ prices, or doesn’t seem to care about value and ROI? Avoid getting tied up in big bids and reverse auctions. In those circumstances, the client can’t win because we can’t provide value.

2. Build Great Vendor Relationships

The ability to earn greater margins is often due to an affiliation with a preferred-supplier network offering better pricing. Without the benefit of a large network, such as a major distributorship, promotional consultants can still work to improve their margins by building good relationships with their vendors. Try to work with a select group of suppliers that have high-quality products and excellent customer service. Develop your relationships with them to get better pricing, more specials and notification of sales.

3. Extend Value, Not Bargains

You may occasionally hear of special offers, such as EQP pricing. While it may sometimes be a good idea to pass this savings along to a client, it can also