The fourth in a series on appointing and managing distribution partners, written from the brand side of the table.
Two markets. The same brand. The same period. The same argument about price.
In one, we asked the partner for an increase and the business ended. In the other, the partner asked us for a decrease, we refused, and the business is still running and performing well.
Nothing about the negotiating in either room explains the difference. The outcome had been settled before anyone sat down, by something ne ither side was talking about: the profit structure underneath the price.
1. The negotiation is decided before the meeting
In the first market, we were the ones who opened the conversation. That business had been losing money for a long time, so we built the scenarios internally and formally proposed an increase.
I expected haggling over a few percentage points. Instead the partner rejected the proposal outright, which left us with a live contract and no obvious next move.
What resolved it was a conversation the day before a scheduled full-team meeting. I met their lead one to one and put our situation on the table plainly. He did the same, and told me the business was losing money on their side too.
That is the whole explanation. When continuing costs both sides money, ending is the rational alternative for both. No amount of skill at the table changes an arithmetic like that — it only decides how long it takes to admit it.
In the second market the same pressure produced the opposite result, for the same reason in reverse. That business was profitable — modestly, but genuinely. The partner wanted a lower price, but they also wanted to keep selling. Continuing was worth something to both sides, so there was something to trade.
Before you prepare a negotiating position, work out which of those two situations you are in. Everything else follows from it.
2. The diagnostic question is not "is this profitable" — it is "does volume help"
The test that separates the two cases is narrow enough to answer in an afternoon:
does our profit go up or down?
A healthy structure converts volume into margin. An unhealthy one converts volume into a larger loss, and every growth plan you write on top of it makes the situation worse faster. That is not a pricing problem. It is a structural one, and pricing conversations cannot fix it.
Where the answer is "up," you have room to trade — volume commitments, term, channel scope, all of it becomes currency. Where the answer is "down," there is nothing to negotiate. There is only a decision about whether the structure can be rebuilt and whether the other side will help rebuild it.
3. Inherited structures: the bill for "growth first" arrives in someone else's hands
The structure in the losing market predated me. When I asked why the terms were what they were, the answer was timing: the priority at entry had been speed rather than margin, so unfavourable terms were accepted in order to get in.
That is a common and not always unreasonable trade. The problem is what happens to it afterwards. Bad terms do not stay abstract — they harden into a contract, and then into channel investment built on the assumption those terms will hold.
In that market the investment had concentrated offline: shelf presentation, fixtures, display, all of it expensive to expand and worth very little if you stop. None of it transfers. So the cost of the original "let's move fast" decision was not paid at entry. It was paid years later, by whoever inherited the account and tried to change the structure.
If you are the one accepting unfavourable terms to enter a market quickly, the honest question is not whether the trade is worth it today. It is which of your successors pays for it, and what they will be able to do about it when they do.
4. When the answer is no, there is a third path — and it is not "hold the line"
In the profitable market, the partner asked repeatedly for a lower price. Our margin had almost no room in it, so a straight reduction was not available.
There are three possible responses to that request, and two of them are bad.
Giving the discount destroys margin and, worse, sets the precedent: the next request arrives sooner and starts from the new number. Flatly refusing protects the price and damages a relationship with a partner who genuinely wants to sell your product.
The third path is to move the terms instead of the price. We offered a special price conditional on meeting a minimum order quantity. They took it, and the business has performed since.
Notice what that actually is: we did change the price. We changed it in exchange for something specific. The principle is not "never discount" — it is the list price does not move during the contract term, but a small number of conditional prices can exist alongside it.
That distinction does three things a straight discount cannot. It preserves the standard price as the anchor for every future conversation. It defends gross profit by tying the concession to the volume that pays for it. And it lets the partner leave the negotiation having won something, which matters more to the next two years of the relationship than the percentage does.
5. "It was improving" is the most expensive sentence in the business
Here is the part I expect disagreement about.
By the time the losing market ended, I had already begun shifting that business from offline to online, and profitability was improving. The plan was to continue that shift through the end of the year. When the partner offered to slow the wind-down and help us manage it gracefully, I declined and asked to stop as quickly as possible.
That looks like abandoning a recovery. It was not, and the distinction is worth being precise about.
An improving trend is the most reliable bait for sunk-cost thinking, because it supplies a story — we have come this far, a little more and it turns — that survives contact with almost any evidence. The relevant test is not what the trend has been doing. It is what the next unit of money and attention will earn.
The channel shift was slowing the rate of loss. It was not going to reach profitability, because the underlying price and channel terms could not be redesigned without the partner's agreement, and the partner had already declined to redesign them. Partial improvement on a broken structure changes the speed. It does not change the direction.
When you can stop, stopping quickly is not failure. It is the discipline that frees the capital and the attention for the next thing.
6. One technique worth stealing: do not answer in the room
When the partner said the business was losing them money too, I did not react in the moment. I said I understood, asked for time to discuss internally, and committed to coming back with an answer.
That three-part response — I understand, give me time, I will come back by a date — is worth building into your reflexes. An answer given in the first thirty seconds of a surprise is an answer you will probably want to revise, and revising it costs credibility you will need later in the same negotiation.
The team discussion afterwards took very little time. The structure had already decided it. But the decision was made with a clear head, and it was delivered as a considered position rather than a reaction.
The five-line version
Your turn
- In the business under price pressure right now: if that partner doubled their volume, would your profit rise or fall? Do you know, or do you assume?
- Which of the terms you are currently living with were accepted by someone else, for speed, in a year when the priority was entry rather than margin?
- The last discount you gave — what specific commitment did you get for it, and is that commitment measurable in your own reporting?
- Is there a business you are holding because it is improving? What would the next twelve months of money and attention earn if you put them somewhere else instead?
- When a counterparty says something you did not expect, what do you do in the following thirty seconds?
Written from the brand side of this table — twenty-two years appointing and managing distribution partners across Asian markets, across categories and price tiers.
Previously in this series: How to Evaluate a Distributor Before You Sign · Exclusive or Not: Deciding Before Your Distributor Asks · When to Stop Selling Cross-Border and Set Up Locally.
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