GPI 349 – When prices are commodity-like and difficult to increase, raise your weighted GP % by enriching sales mix.

In some markets prices will be very difficult to raise. There may be lots of competitors offering, many similar products with little variation in perceived value. This is typical of commodities where the price of corn or beans is the same nearly everywhere you go in the market. As products mature in the market and all the competitors become similar to the buyer, older competing products in the market become commodity-like. When this happens, prices are hard to raise and margins are lower and more difficult to improve. Given this scenario, you must look elsewhere for other GP improvement options.

Enrich your sales mix. One choice you must choose is to drive sales on higher margin products. Enrich your sales mix. When you want to raise your overall weighted average gross profit, identify the higher profitable items and make it a point to sell these along with the sale of commodities.

Pay your sales people to do this. Teach your sales people to negotiate a healthier mix by tying their wallet to monthly gross profit dollars.   Put a bonus or incentive on this target and let them decide how to raise their share.  Where there is the opportunity to make money, they will find it. Pay them on gross profit and get out of the way. They will work around your low margin commodity items.  They will improve your bottom line when they determine where the best margins lie.