Increase Your Control Over Pricing
Your salespeople are scared. Don’t let their fear put a dent in your profits.
In the best of times salespeople care more about sales than margin. Now the temptation to panic is powerful. We see distributors bidding on business that will never be profitable. And we see them dropping pricing on non-competitive items without being asked. It isn’t helping volume. It’ll just undermine profits when business resumes.
You’ve got to take more control over pricing. Increase your oversight on new contracts and bids. Set pricing criteria based on the customer, product and the potential volume. Create a system so you know of and have executive approval of key pricing decisions. Don’t rely on your pay plan to help salespeople to make the right call. Move pricing control into more strategic minded hands during this time of challenge.
Plug Profit Leaks
Imagine your company as a boat that has a lot of small leaks. When you’re sailing fast the leaks may not matter. When you’re going slow they matter a lot. You’re no doubt looking at expenses. But are you focused on where you’re giving away profits? Most distributors give away one point of margin from these pricing leaks…
- Thousands of customer contracts based on dated assumptions
- Too small a premium for cash and walk-in customers
- Missed rebate opportunities
- Selling non-stocks at too low a margin
- Fixed or net pricing that hasn’t been updated
- Underpricing non-competitive, occasionally purchased items
Tighten up your ship and reclaim the profits you need.
Have A Recovery Plan Ready
Better times are on the way. Will you be ready to take advantage? It may seem counter-intuitive to focus on pricing in the middle of the chaos. But it’s the right time. When things open up, you’ll be busy, and your customers will be catching up. A distributor can safely increase their margin on the “bottom” 30% of sales by 5 points.
Focus on items your customers buy less than once a quarter and spend an average of $250 per item per year. Gain 5 points more on these sales and generate a +1.5-point gain on total company sales.
Your recovery plan can be ready in 4 to 5 weeks and you’ll finish 2020 strong.
