We’re often surprised how many times distributors tell us that they are worried that price optimization will result in pushback from their sales reps. Of course, there is a reason for this: many distributors have outsourced their price optimization to pricing consultants with black-box methods who don’t understand their clients’ businesses. If that is your approach to price optimization, it’s no wonder you are worried about issues like sales rep pushback, training and adoption. I wouldn’t trust the work of a pricing consulting company either.
With epaCUBE, sale rep objections are nonexistent because you make your price changes based on real data from careful customer segmentation using your own knowledge of your customers, products and competition. Sales reps trust your pricing because it is right. In fact, most sales reps appreciate the corrected pricing a guidance epaCUBE provides because it makes them more competitive and results in higher top-line sales. In fact, we recently rolled out optimized pricing and segmentation in one of our larger customers – a $2B durable goods distributors – and not a single sales rep in that enormous company had even a small complaint.
Why Your Customers Really Buy From You (Hint: It’s Not Price Alone)
Very few of your clients buy on price alone. In fact, in a very large study involving over 40,000 survey respondents, Stax Insights found that only 18% of buyers considered price the most important factor in their decision. Is price important? Yes. Your price has to be, “right.” With the right data analysis you can offer the right price for the right product to the right customer at the right time. Does your price need to be the absolute lowest in the market to win a deal? Only for 18% of your customers.
Here’s the secret that industry-leading distributors are trying to keep to themselves: the best pricing strategy isn’t based on offering low prices, it’s based on driving profitability and customer experience.
Here are just a few of the real reasons customers buy from you, which is what gives you the opportunity to raise prices in strategic segments:
- Speed. You have better in-stock inventory, you have better hours, your shipping is fast and convenient and perhaps you are a preferred vendor so there is less red tape for the buyer to work with you.
- Support. You understand your customers’ customers. That helps them win business with solid products and support.
- Technology. You have built efficiencies around ordering, e-commerce, mobile, field sales enablement, VMI, EDI and more. Your technological advantage makes it easier for your customers to work with you regardless of price.
- Convenience. For some contractors nothing beats being in the neighborhood on their way to their next job. They’re going to pass the invoice onto their customer anyway, so what is more important to them is getting to their next job more quickly.
- Relationships. It’s nice to do business with you. Your sales reps are friendly, your golf tournaments are fun and you are happy to make customer visits when necessary.
- Product mix. If a customer is committed to a particular product line for whatever reason, you won’t win them over with lower prices on unbranded products.
What Do I Do With The 18%?
Of course, that still leaves 18% of your customers who count price as their number one concern when buying. What do you do with them? You could fire them and send them to a competitor, especially if they are a profit drain. If you’re losing money on a particular customer, why do it in volume?
At epaCUBE, however, we prefer not to make guesses about profitability. That’s why our software helps you easily create sophisticated customer segments based on real sales data. It’s possible that some of the 18% are actually power buyers and their volume is profitable and worthwhile to your business. Another segment might need particular sales action to make them more profitable and introduce them to your value-added services. Some might just be cherry-picking you for the lowest prices because they don’t understand the depth of your entire product line. But by getting the 18% into the right behavioral segments, you’ll understand the right strategies and actions to take to improve their profitability.
Where the Rubber Meets the Road
Our experience with distributors is that when your segmentation and pricing is based on real data, your sales reps trust your pricing and appreciate the guidance on each sale. Sales reps then become more confident in the reality of your price levels so they panic less in their negotiations and they trust your price matrix. When your pricing is right in the first place, you reduce the amount of pricing overrides from sales reps.
Additionally, epaCUBE users enjoy our Optimized Price Quoter, which provides front-line pricing guidance right from your order entry screen. Your sales reps can immediately pull up a graphical, bell-curve representation of the statistically optimized price ranges for every customer and product intersection in your matrix. That means when they do enter into a unique price negotiation, they’ll have the best tools to successfully and profitably bring the sale to a close.