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Pricing: Strategic or Tactical?

Is pricing tactical, simply a part of a distributor's day-to-day activity? Or is it a strategic endeavor, a part of a distributor's overall business strategy?

In his recent MDM Webcast series on strategic pricing, Brent Grover, managing partner at Evergreen Consulting, argues for the latter, because wholesale distributors often delegate responsibility for pricing to the sales force and, to some extent, the sales support team.

"We cannot have a conversation about pricing in wholesale distribution without also including the salespeople and the sales support people in the conversation," Grover says. To be effective, salespeople need to understand the role pricing plays in the overall business strategy.

Pricing requires strategy more than other tactical elements of operations, such as loading trucks or invoicing, Grover says.

In addition, pricing is strategic for distributors because pricing is often based on an existing business relationship rather than transaction size. "Most companies today, when they buy a particular group of products, they buy it from the same distributor every time," Grover says. "And they expect to pay the same (unit) price every time. That's driven partly by the fact that our customers are using computer systems themselves."

Approaching pricing from a strategic point of view allows those relationships to be considered by customer segmentation. But that, of course, assumes you are segmenting those customers correctly already. (Read How to Segment Customers for Better Pricing Decisions to learn more.)

Access the full webcast series, including Part 1: How to Tune your ERP System for Strategic Pricing and Part 2: How to Implement Strategic Pricing with your Sales Team from the MDM Downloadable Webcasts page.

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