manager using software for product price optimization for sales reps

Product Price Optimization is a Low-risk Strategy for Sales Reps

We’re often surprised how often distributors tell us that they are worried that product 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 White Cup Pricing, powered by epaCUBE, sale rep objections are nonexistent because you make your price changes based on real data. This is put into effect with careful customer segmentation using your knowledge of your customers, products, and competition. Sales reps trust your pricing because it is correct. Most sales reps appreciate the corrected pricing guidance White Cup Pricing 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 distributor–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)

Research shows very few of your clients buy on price alone. In fact, in an extensive 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 proper 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? Not really.

Here’s the secret that industry-leading distributors are trying to keep to themselves. The best pricing strategy is not offering the lowest prices; it’s driving profitability and customer experience.

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. Turn around time is very important to buyers. You may have better in-stock inventory and a fully staffed warehouse for timely logistics. 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 and educate them on your products and process. 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, etc. Your technological advantage makes it easier for your customers to process orders 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. What is more important to them is getting to their next job quickly with the parts and equipment they need.
  • 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, 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. They won’t be addressed by a product price optimization strategy alone. 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?

However, with White Cup Pricing, we prefer not to make guesses about profitability. Our software helps you easily create sophisticated customer segments based on actual sales data. It’s possible that some of the 18% are power buyers. 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 improve their profitability.

Where the Rubber Meets the Road

Our experience with distributors is that when your segmentation and pricing are 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 you have a sound product price optimization strategy in the first place, you reduce the amount of pricing overrides from sales reps.

Additionally, White Cup Pricing users enjoy our Sales Assistant, which provides front-line pricing guidance right from your order entry screen or CRM. 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 a unique price negotiation, they’ll have the best tools to successfully and profitably bring the sale to a close.

Written By

George Dunham Profile

George Dunham

Chairman of the Board & CEO, EpaCube

George Dunham is the CEO of epaCUBE, the pricing and segmentation platform that powers White Cup Pricing. Since 2015, George has brought his extensive senior management experience in services, technology, and manufacturing industries to help make epaCUBE the leading profit optimization solution in the distribution industry. He is passionate about building a culture of growth, achievement, and accountability.

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