Target Buying Price
Annual negotiation opens on the supplier list price and argues it line by line. The binding constraint sits downstream: the price the item has to sell at to hold its competitive position and fund its promotional plan. Starting from list price means securing a reduction that falls short, with no way of knowing by how much, or which line of the deal should carry the rest.
The reverse calculation already exists in most organisations, at a rate of one spreadsheet per buyer, each with its own convention for handling back margin and promotional funding. Nothing consolidates, and the opening position cannot be arbitrated at category level, so each buyer negotiates against a different definition of margin. One convention, applied across the full line list, makes positions comparable from one buyer to the next.
Target Buying Price
How to read the result
What you enter
- Target shelf price, after competitive alignment
- Promotional mechanic: depth, duration, share of volume
- Front margin targeted on the item or category
- Contracted back margin and expected promotional funding
- Excel import for line-by-line processing and export
How to read the result
- The figure is not an opening position, it is a ceiling on what is acceptable
- The gap to current list price sizes the reduction required, in value as in points
- The breakdown shows where that reduction can sit: back margin or promotional funding
- What follows: negotiate, revise the target price, or delist the item
What the result does not tell you
- The ceiling ignores the retailer's weight with that supplier and where the negotiation sits in the calendar, though its commercial realism depends on both.
- Back margin is counted as earned. A rebate tier missed at year end removes it retrospectively, while the shelf price it funded has been trading all year.
- Shrink, unknown loss, returns and logistics costs stay outside the calculation. On fresh categories the gap to realised margin is material.
- Excel import runs no consistency check across rows: two items from one range can demand contradictory concessions from the same supplier.
The exported file is internal preparation material. It is not meant to travel as far as the supplier.
A first thirty-minute conversation
Thirty minutes are enough to frame a retention, expansion or pricing issue, and see whether there is work to do together.