The Importance of a Pricing Strategy for Distributors
Distribution pricing strategy can impact profit margins significantly, but the right pricing strategy takes careful analysis to offer competitive pricing that ultimately drives revenue. An effective distributor pricing strategy evolves over time, with some businesses relying on cost plus pricing, while others find better profit margins with competitive pricing strategies reliant on value based pricing.
Your business objectives, market dynamics, segmentation, and deep analysis of your pricing strategy will improve your pricing decisions overall.
Anna Wells, Executive Editor, and Andy Szal, Editor at Industrial Distribution, recently took a dive into White Cup’s Prioritizing Profits with your Pricing Strategy White Paper. As shared in their video, distributors have always been encouraged to take a detailed data-driven approach to their distribution pricing strategy.
“Supply chain challenges have created a rollercoaster for cost and availability with constantly changing variables with big implications.”
Distribution Pricing Strategy for Better Profit Margins
In their review, Anna and Andy emphasize WHY prioritizing a distribution pricing strategy and having the right tools to do so, is so important for profit growth. Statistics from the white paper give an example of the impact an overall single percent price cut can have on a margin outcome. Smart pricing has always been an emphasis but even more so during constant cost increases, labor shortages, supply chain backup, record inflation, and volatile market conditions.
How can distributors implement a new pricing strategy? The white paper encourages distributors to pursue a competitive pricing approach that supports both advanced technologies and human intervention. Distribution pricing strategies should align with business objectives to target customers, meet customer demand, and determine the right selling price.
In a poll conducted for the Industrial Distribution Annual Survey, research reveals that 45% percent of the respondents said they were not using business intelligence or analytics to make business decisions at the time. And only five percent said that the pandemic and post-pandemic business conditions were encouraging them to consider employing such tools.
Competitive Pricing Strategies: A Critical Component for Distribution Business Success
In the white paper, Prioritizing Profits with your Pricing Strategy, examples are given on how distribution companies can use real-time data to uncover next steps for an effective distributor pricing strategy. One method is using data to help ensure distributors focus on the 20% of companies that comprise 80% of profits.
Click the link below to access the pricing strategies white paper in full and learn ways to get started with value based pricing optimization tools to determine the best distribution pricing strategy for your organization.
“Make sure you have all the information at your disposal to make decisions.”
