6 Simple Changes That Lead to Higher Profits

When distributors learn that customers achieve 2-4% gross profit improvements through price optimization, many dismiss it as impractical for their business. Yet profit gains are accessible to those willing to implement systematic changes.

1. Fix Your Customer and Product Segmentation

Most distributors remain dissatisfied with current segmentation strategies. Product segments often follow manufacturer line cards without considering profitability, while customer segments may rely on industry categories, geography, or size alone. These approaches fail because they ignore profit-driving behaviors and attributes.

Two customers in identical industries may require different pricing strategies. One might prioritize volume discounts while another values location convenience. Similarly, products deserve segmentation based on sales data, reflecting customer willingness to pay based on availability, brand recognition, and specific requirements.

Using specialized tools enables rapid segmentation adjustments, eliminating tedious spreadsheet work that previously discouraged regular updates.

2. Employ Data-Driven Pricing

Daily pricing decisions require data support. Many distributors rely on sales representative opinions, competitive rumors, or customer complaints—a race to the bottom approach. Without data analysis, pricing lacks accountability and generates unanswered questions.

Broad pricing adjustments without measurement prevent success evaluation. Implementation of data-driven strategies with built-in best practices enables immediate profit identification and performance scorecard tracking.

3. Reduce or Eliminate Pricing Overrides

Excessive override permissions undermine profitability. Statistical analysis reveals that a 1% price reduction requires 20% volume increases to break even. Most distributors would benefit from eliminating overrides entirely.

Representatives override pricing because existing matrices lack credibility—typically because they're outdated and data-free. Proper matrix construction drives systematic, strategy-aligned pricing rather than ad hoc decisions.

4. Make Pricing Your Core Competency

Outsourcing critical profitability decisions to external consultants often fails. Consultants apply standardized methodologies that frequently misprice inventory—one CEO reported being quoted 40% above market rates.

Rather than external reliance, combining optimization software with expert partnership provides superior results. Internal teams apply market knowledge while leveraging statistical guidance for continuous daily profit improvement.

5. Get a Handle on Your Pricing Contracts

Individual pricing contracts enable strategic deals but require ongoing management. Research indicates 60% of custom contracts become permanent discounts through neglect. Unupdated contracts create substantial losses—$70,000 annually per $1 million in outdated sales.

Specialized contract management tools facilitate tracking, notifications, and profitable pricing maintenance as conditions change.

6. Keep Score

Without measurement frameworks, improvement efforts remain invisible. Delayed awareness prevents timely adjustments when unprofitable decisions occur. Effective tracking requires comprehensive performance dashboards displaying profit increases, override reductions, and dollars gained weekly alongside expected benefits analysis.