Pricing Strategy for Distribution

1. Strategic Pricing Management Process
Pricing Is A Large Opportunity: 2 to 4% of Sales
Strategic Pricing Associates Can Help You
•The typical distributor earns net income of only
Get Your 2%+
about 4 percent of sales
•We use a proprietary analytical process to
•A 2 percent improvement in overall price
evaluate your “book of business”
performance is worth a 50 percent net income gain
•You give us a 12-month transaction data set
•Cost-Plus Mentality and Lack of Discipline
•We analyze customers’ comparative
•Complexity makes it difficult for distributors
pricing performance and each sku’s relative sensitivity
to price effectively: 1,000s of customers,
•We recommend pricing structures at the customer/sku
1,000s of skus = millions of pricing permutations
level to help you capture premiums from less sensitive
•Sales reps lack good training or tools in pricing
products and customers, reducing wasteful discounting
•Chaos in Pricing: under-priced small accounts
•You may make 2 to 4 margin points; EBITDA up 50%
•Missed Premiums on low-sensitivity items
SPA Has A Process to Help You Get 2%+
Your Historic Performance: 2%+ Lost
•Develop a Pricing Team for Your Business
y = -1E-06x + 1.0394
Core vs. NonCore Pricing 2
R = 0.0002
•GM, IT, Sales leader, Controller
1.80
•Submit your data to SPA (confidentiality)
1.60
•Review Our Recommendations
1.40
Customer's SKU Price Index
•Load into your ERP and train your sales reps
1.20
•We have helped over 200 distributors
1.00
One Customer’s Low-Spend SKUs With Below-Market Prices
0.80
succeed at gaining 2 to 4 margin points
0.60
Low-Spend Customers With Below-Market Prices
•Across a broad array of distribution segments
0.40
•Faster on Activant’s Prophet 21 & Eclipse
0.20
•Contact david.bauders@strategicpricing.com.
-
•www.strategicpricing.com; Phone 216.536.2800
- 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
Customer's SKU 12 Month Sales

2. Client Testimonials
“As an Industrial Distributor with a record of fifty-five consecutive profitable “Our vendor introduced our company to Strategic Pricing Associates (SPA)
years, we thought we knew both how to operate a business and price products. for which we are very grateful. The processes, created as the result of input
As the SPA Pricing Program was implemented, we moved from being skeptics from SPA, have yielded a positive bottom-line financial result more quickly
to believers as we saw a 2% overall gain in gross margin before the first year, and profitably than any other activity attempted. As a point of comparison,
and after three years margin growth continues!” over that period we have been fortunate to have received exclusive channel
assignments for activities where literally millions of dollars of sales
“Strategic Pricing is the single most bottom-line program … in my 35-year momentum was transferred and yet, our income from SPA in the first year
career! It allows us an opportunity to reinvest in the growth of our business.” eclipsed each of those.”
“The Strategic Pricing Program proved to be one of the best investments we “I, along with the entire Management Team, am very excited about the
have made in the history of our company. We have seen no other initiative opportunities we can achieve through participation in Strategic Pricing. Like
make this kind of impact on our bottom line—ever! Most distributors work most companies who have completed the process, we also thought we were
feverishly to manage their SG&A expenses and are thrilled when they can already doing a good job in capturing the best profitability through our own
shave a half a point from their operating expenses. With Strategic Pricing, efforts. How wrong we were!”
these same distributors are experiencing two, three, even four percentage
point improvements in net income. The return on investment is unbelievable.” “Strategic Pricing has given us the confidence to implement the correct
pricing level to the various customers we serve. The overall impact of this
“Over the years we have tried to apply some basic Strategic Pricing principles new process will have significant affect to our bottom line. Strategic Pricing
is a new way of life for our company.”
to our business. Last year it took a dedication to the process from the whole
organization, which has resulted in significant gains in profitability. We look
forward to working with Strategic Pricing Associates for a long time to “Strategic Pricing is having a very positive impact on our bottom line. Not
come...” only is it helping us increase our margins, but is has pushed us to look at
other areas and operations within our business that are also impacting our
“A big benefit we have received from Strategic Pricing is having a strategy for bottom line.”
our pricing. It was difficult to say exactly how we decided on pricing for our
“Strategic Pricing has changed the economics of distribution. We have
customers before Strategic Pricing. Today we are three margin points ahead of
last year.” increased our gross margins over 4 points and now enjoy ROI above 35%.
This is a revolutionary concept.”
“Strategic Pricing is now a way of life at our company. We have embraced
SPA’s principles and strategies and the financial impact will be everlasting.” “The Strategic Pricing program has improved our margin from 27% to 31%.
These results have moved us to the NFPDA High Performers Profit Category.
The increase in profit has allowed us to justify increasing the sales force,
customer service and the funding of new marketing programs.”