How software automates the process to get you maximum profit without raising prices and cutting the right costs.
Keeping up with the fluctuating conditions in the distribution industry means moving away from manual-input spreadsheets, arbitrarily raising prices, and painstakingly going through books to find ways to cut costs. Savvy distributors boost profitability by quickly and efficiently determining the right cost-cutting strategies, attracting and retaining customers, and eliminating pricing guesswork. Here’s how.
Analyzes sales history to calculate and identify opportunities for you to raise prices and eliminates manual pricing in spreadsheets.
Identifies opportunities for increased sales and places where you can improve the quality of the sale.
Uses world-class product and customer segmentation based on similar profitability, buying power, and cost-to-serve characteristics in addition to sales volume.
Focusing on boosting revenue may seem like a straightforward way to get bigger profits, but as most leaders know, that’s not always the case. For example, an increase in sales volume from a slow-paying customer who drains your resources may even cost you money. On the other hand, raising prices too high to absorb costs may keep you from staying competitive.
Active competitors continually change the landscape, and external macro-economic forces and events create pressure to drive prices down.
It’s no secret that distributors face rising costs and almost constant uncertainty — but does that always have to entail raising prices to yield better profits? The short answer: no. Pricing optimization simply means pricing for maximum profits under the circumstances.
Pricing optimization simply means pricing for maximum profit under your unique circumstances. Sometimes this means raising prices — and sometimes it means lowering them.
The key to unlocking profitability is knowing what the right price is for the right customer at the right time. So, how do you determine this?
Customer segmentation: Know who your best and worst customers are and why.
Leverage historical sales data: How much have the different types of customers been willing to pay for similar products? Examining pricing overrides by the sales team will provide some clues.
Gather feedback from all the key pricing committee stakeholders, including fellow executives, pricing team members, data specialists, and salespeople.
Communicate goals and mutually agree on what you’re trying to accomplish.
Use a transparent pricing tool to find the sweet spot that maximizes profits — whether that means raising or lowering the price.
In the fast-paced distribution industry, time is a precious commodity. When prices change three to six times per year, it’s nearly impossible to keep up with the changes by manually entering and adjusting prices in spreadsheets. This tedious process also produces mistakes.
Pricing optimization software eliminates spreadsheets and automates the pricing process to save time and decrease errors. It also helps current staff members make informed, data-based decisions.
Manually adjusting prices in complex spreadsheets takes a lot of time, and it’s difficult to refine prices beyond broad categories. Pricing optimization software brings transparency and refinement to the pricing process, saving time, money, and reducing errors.
Manually pricing products is costly and labor-intensive. Pricing optimization technology analyzes data automatically and establishes prices in seconds so the sales team doesn’t have to figure out prices arbitrarily. This saves time and money.
Pricing management solutions also equip the sales team with relevant data like historical prices, margins, customer grades, and customer profile information to help them better manage relationships and stay ahead of the competition.
Although adopting technology may come with a learning curve, pricing optimization software ultimately makes the sales team’s job easier and more efficient.
Rising costs, inflation, and supply chain issues have created a volatile market with unpredictable profit margins. Selling to as many customers as possible might offset churn and improve market share.
However, finding a new customer costs about five times more than retaining an existing customer. And segmenting customers strictly on sales volume decreases margins if they have a high cost-to-serve.
In a shifting distribution landscape, aligning prices with what your business needs is vital. You must also attract and retain customers that bring the most value to your business today. To accomplish this:
Use pricing optimization software to identify undesirable customers and place them in the proper pricing tier.
Leverage technology to segment customers into the correct tiers based on the concept that similar customers buying similar products should pay a similar price.
Pricing technology helps distributors stop leaving money on the table by giving the wrong customers unnecessary discounts. Pricing optimization tools also help attract and retain the right customers by identifying who they are and making sure they’re priced right the first time.
Salespeople might balk when a program tells them that an alleged “A” customer who gives them a lot of orders suddenly drops to a “D” tier. Fortunately, high-quality pricing optimization technology shows them the “why” through relevant customer data and buying practices. Having confidence in the prices enables the sales team to eliminate unnecessary discounts for the wrong customers.
Instead of spending labor-intensive time setting arbitrary prices, salespeople can also use data as a powerful sales tool to explain current pricing and advise lower tier customers how they can move into a higher pricing tier.
Pricing optimization software is an investment that delivers significant ROI by giving sales teams and distribution leaders sophisticated, data-backed pricing recommendations while simultaneously segmenting customers based on their buying behavior.
The idea that you can discount your way to more profits is usually a fallacy, especially in a competitive, shifting distribution landscape. A 1% change in price equates to an 11% change in profit. That’s why minimizing pricing overrides helps protect profits.
Keeping up with frequent price changes means moving price management from spreadsheets to a central platform. A central pricing optimization platform minimizes lag time between manufacturer prices and your prices by making real-time adjustments. It also presents customers with optimized prices at the point of order entry.
Customers are conditioned to accept price increases, and pricing optimization systems strategically increase margins. Making real-time pricing adjustments very quickly for entire product lines is an efficient tactic that also enables you to stay competitive.
Pricing optimization means pricing for maximum profit given your unique circumstances. Sometimes this means raising prices, and sometimes, it means lowering them.
It allows you to steer clear of manual, labor-intensive spreadsheets and instead leverage an automated central pricing optimization platform to save time and reduce errors. Using pricing optimization technology with quality segmentation tools quickly identifies high cost-to-serve customers and puts them in the proper tier.
The system also segments customers into the proper pricing levels in seconds and gives the sales team confidence in the prices. Because pricing software helps attract and retain the right customers, it cuts the hefty cost of finding new customers.
Most importantly, it’s an up-front investment that pays off in dividends in the long run by bringing all pricing data into one easy-to-use, centralized platform.
epaCUBE provides a suite of price optimization solutions and services designed BY distributors FOR distributors. For over 20 years, we’ve used our industry experience to help distributors maintain and grow profit margins, even during times of economic uncertainty. Our solutions integrate with all major CRMs and ERPs, ensuring easy implementation. Our customers typically experience 10x ROI on our solutions, and we’re ready to help you achieve sustainable profitability.
If you’d like to learn more about our solutions or pricing in general, please feel free to reach out to us today or book a demo.
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