I am old enough to remember when a manufacturer’s program (back of sheet deal, VIR, GIR, etc...) was an incentive to do more business with that manufacturer by providing a profit bonus reward for more share of business. “Buy more from XXX and improve your profit margin”, was the motivation for the retailer to buy to the program.

Recently in discussions with retailers I have most often discovered the following sentiment... “If I buy to XXX’s program I can mitigate the loss of profit in XXX’s brand due to all of the transshipping and unauthorized Internet sales”.

Dig this: A specialty retailer’s business is derived on the “front end” from a long term profitable relationship with the consumer. The consumer’s understanding of the “price” of a product is its street price, not the suggested retail value (SRV) or minimum advertised price (MAP) suggested by the manufacturer’s policies and price sheet. When the street price is lower than the SRV and/or MAP, you might be among the select group of retailers offered the program and you are supposed to be comfortable with the idea that the profit margin loss is at least partially restored if the retailer buys to program. Yeah well, sort of...

BUT, when the manufacturer increases the minimum program purchase requirements to “earn” the loss of profit back at the end of the quarter and/or reduces the amount of profit loss compensation, how is the retailer supposed to recover the loss of profit then? Keep buying more and expecting less profit? Can you go to the consumer and say...

“Well the price is higher now because the manufacturer took away my back of sheet program. Now I gotta get a higher price from you to make sure I make enough profit to pay my bills. You understand, dontcha?”

Some retailers may find some consumers willing. I suspect however, most retailers will find most consumers perceive the value of the product does not increase just because the retailer lost his back of sheet, profit recovery program.

As the guy responsible for your long term profitable relationship with your consumer, it is your responsibility to take charge of how, when and why you can make profit. If you let the manufacturer take charge of your profitability, I contend your complaints of decreasing profitability will fall on ears that have already declared, they simply don’t care. You have to be in charge of your profit program.