Wednesday, January 28, 2015
Regarding #USANA Product Price Adjustments
by Pete Zdanis
As an independent USANA Associate, I cannot speak on behalf of USANA regarding corporate business practices and decisions. However, with Dora and I having 20 years of experience as USANA Associates, and both of us serving on USANA’s Independent Distributor Council (IDC) for nine of those years, I can share some insights which will may be helpful to you in better understanding USANA reasons for product price adjustments. .
No one likes price increases, and USANA dislikes them as much as anyone else. That I know to be a fact.
However, as a going concern and publicly traded company, USANA has a fiduciary responsibility to remain profitable in order to meet its obligations to its shareholders, employees and Associates.
My experience is that ALL USANA product price increases are driven by product costs, which are obviously impacted by the cost of ingredients which go in to USANA’s products.
USANA does everything possible to avoid price increases, including seeking out alternate sources of product ingredients and raw materials whenever possible. However, USANA would never do so at the risk of compromising or diminishing the purity and quality of USANA products.
USANA price adjustments are infrequent, typically not more than every year or so.
And, just as importantly, USANA does not make “across the board” price increases on all products at one time. USANA only increases prices on those products on which ingredient costs have increased.
And, to be clear, USANA product prices are not related in any way to a “cost of living” index, as some people believe. That would be a very arbitrary pricing policy, where, in contrast, USANA is very specific regarding establishment of its product prices.
Having said all that, whenever USANA is forced to recover cost increases of any given product, it has three options:
· Increase the product’s Preferred Price charged to Associates and Preferred Customers alike.
· Lower the Sales Volume Point (SVP) value of the product which decreases commissions paid to Associates when a given product is sold.
· Some combination of the above.
When deciding to adjust the Preferred Price and/or the SVP value of a product to recover cost increases, USANA carefully analyzes the total sales volume of the product, as well as which customer class (Associates or PCs) purchases what percentage of those sales.
For example, if USANA needs to recover, say, $1 of a cost increase on any given product, they could simply increase the Preferred Price by $1 which would spread the cost increase evenly among Associates and PCs.
However, if that product is particularly popular among PCs, passing along the price increase evenly between Associates and Preferred Customers might significantly decrease the overall sales of the product to PCs, which would also negatively impact commissions of Associates upline from those PCs.
In that case, USANA may elect to increase the Preferred Price by (for example) only $.75, and decrease the SVP of the product by a certain number of Sales Volume Points. This would be less painful to PCs, and would help maintain sales volume to PCs, and lessen the overall negative impact on Associate prices and commissions.
While Associates would earn lower commissions on the reduced SVP value of the products, the impact would ideally be less than potentially reduced sales to PCs due to a higher price increase to PCs.
On top of all of this, USANA needs to carefully analyze the potential impact of prices of 1) different formulas of 2) different products in 3) different countries to 4) different customers in 5) different currencies.
In other words, product pricing is a very complex and delicate balancing act.
Having been involved in selecting some of the pricing options (in the US) in years past as an IDC member, I know that USANA does the best they can in being judicious and fair in making pricing decisions.
I hope this helps everyone understand the reasons for periodic USANA product price adjustments.
Posted by Pete Zdanis