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Mrs Gti gives a 25% commission to her sales agents by discount on the RRP. This month she wants to do a special promotion of 15% off the RRP, the load shared 7.5% between the agent and herself. How does she structure the pricing so that the agent still gets his 25% while sharing the 15% special discount with her?
Both of us are scratching our heads over this one.
I'm not sure what you mean. Let's say the item costs 100.
So normally the agent gets 25
Mrs Gti wants to sell the item for 85 this month.
25% of 85 is 21.25 So I think either the agents commission (as a %) goes up to about 30% (ish) or the agent gets a cut as well.
Have I understood correctly?
Ummm, take 7.5% off normal full price RRP to cover agents share of 15%, then commission is 25% off that figure?
Can we have the first sentence in understandable English please
42
Hth
Pretty sure you can't share the discount evenly and still give the agent 25% commission: since mrs gti gets three quarters of the rrp, if you give 15% off she'll foot three quarters of the discount.
She and the agent would both be 15% down on what they usually get.
If you do want both to be down the same number of £ (rather than the same % each) then the agent will be working for a much lower cut in effect.
I think sweaman is correct. You can't say that the agent has to take on an extra 7.5%hit but still get an unchanged percent of the price. Oxymoronic. No?
If its a shared promotion. Then I would agree with sweaman2. The agents get 25% of the sale price (you set the price it's your business). If the sale price is lowered by 15% then the sales agent would get 25% commission of the lower price. Doing anything else will cut you margin two ways and the lower price should encourage the agents to sell more.
To share the cost equally I think you offer the customer the 15% off, then give the agent 20.6% commission:
On rrp of £100, price was £100, shared £75/£25
Price now £85, shared £67.50 (79.4%)/£17.5 (20.6%)
You've both received £7.50 less, so shared the £15 discount, but now the agent is working for only 20.6%, rather than his old 25%.
The agent can't get still 25% and share in the discount.
Take 15% off the rrp to get discounted price, then take 18.5% off that to get the agents price.
Otherwise, £85 is split £63.75 (75%)/£21.25 (25%).
This is how I suggest it be done.
You just adjust the discount to allow for the offer if its being shared between them.
The rep sells and you invoice at (75-7.5)/100 which would be 67.5% or 32.5% off the rrp.
That way on an item for £100 the rep normally earns £25, if he sells for £85 the rep would be invoiced for £67.50, making £17.50 instead of £25. This way you share the discount.
Just invoicing the discounted amount at 25% commission would earn them £21.25 so you can see they are forfeiting a bit of margin to share in the discount promotion.
Edit... Beaten to it. Stupid tablet typing! Others make the point that the way your proposing isn't very fair on the rep by sounds of it but it depends on the margin that is on the product, if its costing 50% of RRP or higher then its the best way to do it, otherwise your rep is making more than you on the product!
Price now £85, shared £67.50 (79.4%)/£17.5 (20.6%)You've both received £7.50 less, so shared the £15 discount, but now the agent is working for only 20.6%, rather than his old 25%.
This is the most helpful bit! Thanks everybody for your replies, she's off now to her sales meeting where the boss will probably scupper the whole discount scheme anyway.....