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Price transparency – when is a good deal, not?

By 12th June 2014No Comments

Paul Millican

Posted by: Paul Millican

These days, with so much competition on the market, it really does pay to shop around – especially when a lot of suppliers are willing to include a hefty deal to the mix. But do you really understand what that great ‘deal’ really adds up to..?

For example, when is a 40% discount worth more than 60%?  When is that fantastic deal on offer really just a headline price?  When is quality being compromised for price?  What are all the hidden extras likely to add up to?

Whatever the size of your business or whatever the level of spend, these questions are important to ask, and the wisest thing to do is to make sure you fully understand the real price you are paying your supplier.

Often % discounts are quoted to attract business – and on many occasions, they can seem to be pleasantly high numbers. However, these discounts aren’t as straight forward as you may think.

Often, discounts such as these are being offered against a so called ‘RRP’ (recommended retail price).  An ‘RRP’ is not always the same as a ‘MRP’ or ‘MRRP’ – the lack of the ‘M’ hides the fact that the so called recommended retail price may not be that which the manufacturers recommends, but just an arbitrary price the supplier has chosen to set.   This subtle difference of a single letter has the potential to confuse the buyer and result in you paying up to twice as much as you need to.

I speak from personal experience on the matter: recently, a new client had asked his stationery supplier for a price for a Samsung laser printer – knowing he was on 40% discount terms, he was slightly surprised when he was quoted £179.99. He had quickly checked a couple of websites and the MRP was only £149.99 (this was available on Samsung’s own web site!).

Questioning his supplier (one of the big national stationery & office supply companies) they explained that the 40% discount was off their RRP £299.99.  On further investigations he discovered that the majority of the catalogue items had vastly inflated RRP’s… It is an unfortunate piece of information that is missed by too many businesses: whilst not illegal, this practice is common place amongst many suppliers.

The experience above demonstrates that there are many ways in which a supplier can offer what appears to be a great deal, which in reality is not as transparent or truthful as seemed. But with some basic analysis, knowledge and understanding of how the suppliers can manipulate the prices in a particular cost category can often identify significant cost saving opportunities – often as much as 30~40% (sometimes even higher) of cost savings can be realised!

So next time you put in that supply order, make sure the question is asked: do we really understand what that seemingly great discounted deal really equates to?

If you’d like your business costs reviewed, you can enquire here for a business Health Check.