Five Types of Strategic Pricing Teams

“I’ve just always had my product team set up pricing as cost-plus or list-less based on what our vendor charges. Of course, we give discounts to good customers I play golf with.” – A distributor who is losing a lot of money

Many distributors lack strategic pricing tools and give little thought to their pricing strategy. Well, other than to toss out some random discounts to customers they like or when they need to win a huge deal. They assume that all customers are the same and that the market has an expectation around the price for all products. This simply isn’t true. A customer’s sensitivity to price changes is often quite varied based on their product usage, their own customers’ needs, their relationship to your business, and many other factors. If you don’t pay attention to these cues, you are leaving money on the table.

“I’ve run my business for 15 years, and I have the best feel for what prices to charge.” – Another distributor who is losing a lot of money

You know your business, but do you have the ability to keep up with the constant change in your markets? Your competitors are using pricing tools like White Cup Pricing powered by EpaCUBE to drive new profits and increase the share of wallet and are taking business away. Your gut feeling for pricing is no longer a good match for sophisticated data-driven analysis and optimization.

“I do the best I can, but I can’t hire a pricing manager right now. So, I stay up all night and all weekend running data through spreadsheets.” – A distributor who is tired of losing a lot of money

Some distributors are trying their best, but without the right tools, you spend way too much time making decisions that are too late to make an impact. They wade through a sea of sales data trying to figure out new profit opportunities, spending hours on what White Cup Pricing can do in minutes.

“My sales reps hear what’s going on in the market.” – A distributor who is in a race with other distributors to the very bottom

Are your sales reps making their own pricing decisions without guidance? Are your pricing overrides through the roof? Do you even know?
If you allow your sales reps to make their pricing overrides, you are throwing your profit away. You may think that the sales rep is the closest to your customers and competitors, so they have a feel for the right price. But if you’re allowing your sales reps to make data-free decisions about pricing, most will choose the most straightforward path toward lower profit to get a sale done faster. This isn’t a knock on sales reps; it’s simply human nature to ignore strategic pricing and follow the path of least resistance.

How often does this kind of story happen inside your company? A buyer comes in and claims they’re getting a discount from another distributor. Your sales rep doesn’t push back, does a quick search in your ERP system on your cost, and agrees to give it away. Or maybe your brother-in-law came in this morning and got a particular item at cost, so now that price is defaulting in your order entry system or at least defaulting inside your sales reps’ heads. Sales reps tend to have biases toward lower pricing, believing things like, “I can only get 10% on this item.” Without sophisticated data analysis, how would they know any different?

Allowing your sales reps to override pricing is not only an admission of defeat around your pricing matrix but also like having 100 different pricing managers making arbitrary decisions about your most important factor in profitability.

“We hired a well-known pricing consultant that works with other members of our association” – A distributor who is more comfortable with some other company’s data-free guess than their own

There is only one way for a pricing consulting firm to be successful: they must create a dependency inside your organization, and they must conduct their analysis of your business in the easiest, laziest, most cost-effective way they can. Those two factors are the main reason that such companies keep their methods inside of a “black box” pricing methodology that they don’t like to share. Suppose you saw what was going on inside that black box. In that case, you’d realize it was the simplest and most ineffective of all pricing strategies (probably something fundamental like company size). Then you’d know you could do it on your own with little effort, ending the dependency they’ve built in your organization and ending their income stream.

An outsourced pricing consultant service can only go so far as to help with the basic math of strategic pricing and optimization. Maybe you started with the attitude that “it’s better than nothing” but found there was little to no measurable benefit after some initial small wins. There is more to pricing strategy than just crunching numbers. An outside consultant cannot know your markets, strategy, or tactics like you. Pricing strategy requires proper segmentation. Not all small customers should be treated like small customers. Just because a product is in a price-sensitive sell group doesn’t mean you couldn’t break it out for special pricing. Pricing consultants can only work with the data you give them. If you give your consultant bad segments, you’ll get bad answers.

Bottom line: Why would you outsource the most critical element in your customer relationship and profitability?

Data-driven analysis of pricing is the fastest way to drive new profits. It requires you to develop an optimal pricing strategy, implement effective pricing processes, measure, and control pricing, and align your technology with your pricing strategy. It needs to be led by your team to apply the knowledge of your customers, products, and markets.

Fortunately, White Cup Pricing makes it easy with industry-leading priced optimization software and a team of distribution pricing professionals you can rely on to speed your ROI and provide guidance when necessary. With White Cup Pricing, you get the best of both worlds. You stay in control of your strategic pricing with easy-to-use software, and you have access to our experts for guidance, best practices, and profit plays: no black boxes, no data-free guesses about price, and continuous profit improvement day after day.