Demand factor - Agents and distributors commission

04.05.2017

Let's see how demand is changing with the change of the commission agents and distributors.

 

Elasticity of demand from commission of agents and distributors in 1 period

Change in commission of agents and distributors in 1 period. Vertical - relative change in demand compared to the previous period. Horizontal - absolute value of the commission of agents and distributors. The impact of commission on demand does not depend on the type of product; the impact on products 1, 2 and 3 is the same. For the EU and Nafta markets, influence of the commission is equal, for the Internet market it is weaker. Dependence of demand on the commission of agents and distributors does not depend on the influence of competitors in the group. When calculating payments to agents and distributors, the maximum commission and support from the current and previous periods are taken. The optimal strategy would be to set a certain commission and support for each market in 1 period and not change until the end of the game. Agent and distributor commissions have a very small residual effect on demand of 10-15%.

Since the effect on the EU and Nafta markets is much higher than on the Internet market, the commission for agents and distributors on the EU and Nafta markets should be higher than for an Internet agent. The increase in agent and distributor fees will be justified by a good increase in demand. For an Internet agent, on the contrary, the strategy of minimizing costs and playing with a minimum commission will be justified; the economic effect of reducing costs will exceed the decrease in sales revenue due to a decrease in demand.

 

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.

 

Hints

  1. Residual effect on demand from the commission of agents and distributors is 10-15%
  2. Dependence of demand on the commission of agents and distributors is expressed by a power function
  3. Effect on demand from commission of agents and distributors is equal to products within the market
  4. Dependence of demand on the commission of agents and distributors is not influenced by competitors in the group

 

Automatic demand forecast based on comission of agents and distributors is built into the Calculation model, which can be purchased in our store.