Building Your Own Core Competency in Pricing
A holistic approach to increasing gross margin must go beyond just applying math to raise prices and must consider the distributor’s markets, objectives, cost and vendor supporting programs (special pricing agreements and rebates) sides of the equation. In reality, for most distributors, price optimization is more accurately defined as “One” (but not the “Only One”) component of your overall Gross Margin Optimization strategy.
Most distributors maintain pricing schemas in their operational systems and create reports to analyze events in a dynamic environment long after the profits are already lost. However, the ability to analyze and model costs, optimize sell prices, reduce the loss of gross margin associated with price over-rides, rebates, charge backs, and other key attributes proactively has been more elusive.
Some companies have opted for external pricing services to help with their pricing optimization initiative. The downside of outsourcing any function is that one does not build an internal core competency. In the case of pricing optimization, the distributor may not understand or even be told the rationale behind the results. Since the outsourced service cannot be familiar with the nuances of the distributor’s markets, products or specific customers, often the results are not aligned with the strategic and tactical plan. This can create and encourage push back from branch, executive or product management and sales. In addition, making pricing decisions isolated from net into stock or special pricing agreement negotiations with suppliers can often lead to lost opportunities for gross margin improvement or even lost business.
You have many more options with a distribution focused software solution like epaCUBE to help build your pricing and gross profit optimization core competency.
Without software like epaCUBE, some companies feel the math is too complex or requires a higher-level user who they may not currently have on staff to operate their own pricing optimization software. That’s why epaCUBE’s team, with vast experience in distribution, built the software to do the hard work for you. Distributors can now get sophisticated pricing science in a software product which guides” them through the process. The software helps to drive adoption—internally and with their customers—by offering the supporting data and logic for maximum gross profit gain. In addition, epaCUBE can consider the whole equation of gross profit optimization by helping to optimize pricing, net into stock costs and special pricing agreement negotiation with suppliers.
epaCUBE Price Optimizer has an industry focus and includes built-in best practices to guide novice users through the process while making experienced pricing professionals more productive. epaCUBE users, even starting with a new employee and inexperienced user, can immediately identify hundreds of thousands of dollars in gross profit opportunities within the first 45 days of using epaCUBE Price Optimizer.
Photo credit: Pete