ERP Software

Pricing Power for Wholesale Distributors (Part 2)

Pricing power for wholesale distributors comes from knowledge, special insights into customers, products, segments and trends that inform the pricing process and drive margin improvement. Price and margin management functionality added to a wholesale distribution ERP solution enables organizations to optimize market intelligence and arm the sales force with the tools to spot and seize margin improvement opportunities. Dealmakers can make better-informed decisions and manage to the bottom line. And as the database of deals expands, intelligence is gathered to support even better pricing down the line.

The first step in creating a margin-improving pricing program is accepting that not all customers are created equal in terms of the cost to serve them and the pricing they have earned. Pricing software groups customers into tiers, or segments, based on past behavior and by mining data that has already been captured by ERP and CRM applications. As the data changes over times, tiers are automatically adjusted, assuring that pricing is consistent and defensible.

Actual price setting within a wholesale distribution ERP environment balances risk and reward, optimizing margins within each segment. Much research has been done on pricing dynamics and customer responses. A good pricing application incorporates best practices gleaned from this research, enabling distributors to set segment-specific pricing and detailed guidance for sales teams.  Salespeople are armed with information on customer transaction history, appropriate pricing based on the tier the customer falls into, and comparative data for other customers in that tier. This enables them to negotiate profitable outcomes while simultaneously getting closer to the customer. Customers sense that the deal is customized for them, not pulled off a one-size-fits-all price list.

Pricing and margin management applications provide visibility into key performance indicators (KPIs) at each stage of the pricing policy, insuring decisions are informed, consistent and don’t leave any money on the table.  You can spot margin leakage in real time and discover the various components of profitability at both the transaction and cumulative levels. This way, management can address the cost components that impact prices and margins. Collectively, over time, the organization evolves a culture of margin capture that pervades every aspect of the business. Each stage of the ongoing pricing process is integrated with other enterprise-wide business processes, helping wholesale distributors orient the entire organization toward maximizing profits through unified pricing strategies and giving all participants a clear view of how their actions impact the bottom line.

There are a lot of applications that, over time, get bolted on to a wholesale distributor’s ERP backbone; price and margin management is one that can genuinely transform the organization.

Written by :

tracey boxer