Our friends at Panorama Consulting Solutions just published this article advising businesses who have previously had a bad experience with an ERP implementation. Author Eric Kmberling offers advice on how to learn from a past failure instead of giving up on the benefits ERP software can offer. Read Full Article
At Profit2, we often speak to distributors who have spent six figures on pricing programs that either erode after a few months or never work at all. These frustrated owners are deservedly skeptical about another yet another margin optimization system. However, here’s our take on how to avoid “throwing the pricing baby out with the bathwater”.
Identify the root cause of the failure
Maybe the pricing system you tried before just didn’t work. In our experience, we have observed that often the problem is usually not with the prices, but with the people who have to use it. Our research shows that system prices are lowered by sales people over half of the time. If your sales people won’t use the system prices, then no amount of price analysis will get you more margin. Before you attempt another pricing initiative, you will want to address these root organizational challenges first to avoid simply repeating the same mistakes with different data.
Leverage the things that did work
It’s unlikely that any well-intentioned pricing initiative failed completely. Take a moment to list the things that went well. Perhaps your efforts generated better segmentations. Or maybe you saw good results at first and your primary issue is pricing maintenance and ongoing accountability.
Learn from your industry
Distributors have thousands of products and customers which together generate hundreds of thousands of customer-item combinations. (Read: Why is Distributor Pricing Tougher?) It’s no wonder your sales team falls back on default margins when they can’t keep up, leaving money on the table. Instead, Profit2 recommends specific strategies for distributors such as letting your sales people spend their time pricing the most competitive items, and giving control over incidentals to management.
Work with an experienced pricing partner
We have worked with manufacturers and distributors in many industries, some of them come to us scarred by past pricing system failures. We get that. At Profit2, we approach pricing as a behavioral challenge. Our service includes extensive management and sales team coaching, feedback, and accountability. Our methodology is a cooperative process that gives salespeople final say over pricing, ultimately earning buy-in and compliance.
Of course our data analysis and tools are the best in the industry, but we also recognize that numbers alone won’t heal old wounds!