Focus on the low-hanging fruit first…
Most distributors have 20 to 30% of their sales that aren’t price sensitive.
You can identify them easily. Look for items purchased infrequently by a customer and where their annual spend on that item is less than $1,000. Most of these sales are relatively price-inelastic. These sales are the low-hanging fruit for margin optimization.
Next compare your margin on these incidental sales vs. your average margin. Most distributors make 6 to 8 margin points more than their average on incidentals. However, 25% of distributors in each industry (i.e. electrical or HVAC) make more. These higher earning companies make an additional 5 points of margin on incidentals. As a result, their EBITDA is 2 to 3 times higher than comparable companies
- Customers spend an average of $250 a year per incidental item
- You can increase margin 4 to 5 points without reducing units sold
- Your customers will only spend $5 more a year per incidental item
Are You Leaving Money on the Table?
Distributor pricing is complex…
Your Sales People Walk a Tough line
You have thousands of customers buying tens of thousands of items. Your company makes 100,000+ pricing decisions each year. When you price a competitive item there’s at least market data to guide the effort. What happens when your customers buy something that’s less visible, where data is limited? Your order writers guess. Often, they simply charge your average margin or add a few points. The result is margin dollars left on the table.
This complexity is compounded by fear. In competitive markets where salespeople lack guidance they will play it safe when comes time to price.
- We help you price every item
- Gain active sales force support
- Provide Tools to build price utilization
How Complex is Your Pricing?
Better Solution, Better Results, Less Risk