Demand factor Agents and distributors commission
Agents and distributors are one of the most powerful demand factors in global management challenge. According to force of influence, agents and distributors are almost as powerful as prices. Influence on demand consists of 3 components.
These components are:
Let's see how demand is changing with the change of the commission agents and distributors.
Test 1 - Scenario 12C1 - Product 1 (EU and Nafta)
Change of the commission agents and distributors in 1 period. Vertical - the relative change in demand compared to test company for product 1 in markets EU and Nafta. Horizontal - the absolute value of commission.
Test 2 - Scenario 12C1 - Product 1 (EU, Nafta and Internet)
Add to the same chart 2 extra points with commission changing for Internet market (line top).
According to the results, we can say that influence of the commission on demand does not depend on product type, influence on products 1, 2 and 3 is the same. For EU and Nafta markets, influence of the commission is equal, for Internet market influence is weaker. Dependence on the change in demand is directly proportional to the commission and does not depend on influence of competitors in the group.
Maximum commission and support from current and previous period is taken when calculating payments to agents and distributors for sales. Optimal strategy will be to set a certain commission and support for each market in 1 period and not change until the end of the game.
Test 3 - Scenario 12C3 - Product 1 (EU)
Repeat the test on scenario 12C3. Chart shows the result of a change in commission on EU market in 1 period.
Result of commission's change in EU market in 2 period.
Test 4 - Scenario 12C3 - Product 1 (Nafta)
Result of commission's change in Nafta market in 1 period.
Result of commission's change in Nafta market in 2 period.
Test 5 - Scenario 12C3 - Product 1 (Internet)
Result of commission's change in Internet market in 1 period.
Result of commission's change in Internet market in 2 period
Relatively clean tests in the same groups for relevant comparison of results in 1 and 2 period is only for Nafta market. According to these data, commission of agents and distributors has a very small residual effect on demand, which can be neglected. Impact on demand for EU and Nafta markets is equal, as well as on previously tested scenario 12C1. Influence of the commission on demand in Internet market is less than in EU and Nafta markets.
In previous version of GMC simulator, residual effect from the commission opposite was very high, which was often used by teams. In 5 period of the game, commission of agents and distributors usually reduced to a minimum value of 0.1% (whereas it was possible to specify fractional value). Demand with accumulated effect from commission in previous periods, was decreasing, but not critical and company earned additional profit by saving on deductions. After widespread such game strategy among teams, cumulative effect was significantly reduced.
Since effect on EU and Nafta markets is significantly higher than in Internet market, commission for agents and distributors in EU and Nafta markets should be chosen higher than for Internet agent. Increasing deductions to agents and distributors will be justified by good increase in demand. On the contrary, a cost minimization strategy and game with minimum commission will be optimal for Internet agent, economic effect of reducing costs will exceed the decline in sales revenue due to a decrease in demand.
Cumulative effect is absent
Dependence is linear, does not depend on competitors in the group
Effect is equal for EU and Nafta markets, effect for Internet market is less
Effect is the same for all products