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Your Peanut Butter Pricing Could Use Some Jelly

Your Peanut Butter Pricing Could Use Some Jelly

July 24, 2018

As a distributor, you know that pricing habits are hard to break. Often, your team develops what they consider to be a fair price for product categories, and then they just habitually give that same price to everyone.

They spread that ‘peanut butter pricing’ to all customers without really thinking about it. It’s easy, its fair (in their minds), and they are busy. Plus, it saves time to just price all the order lines with the same margin or discount level.

So, what can you do to help break the habit and make a better profit sandwich? How do you add some jelly (or bananas, if you are an Elvis Presley fan) to build a more profitable business?

Here are three ways to help you build a better pricing strategy:

1. Get organized feedback from your sales associates.

To work on breaking pricing habits, you have to understand why your teammates price the way they do. Developing regular surveys that ask for your associates’ feedback is critical.

You need to get measurable numbers to understand how often your associates feel they need to change prices, how they react to a customer asking for a lower price, and how competitive they think your pricing is in the market.

There are 10-12 key questions to ask your team to get the feedback you need. If you understand why they feel they have to discount, you can craft a strategy to respond. At our upcoming MDM Analytics Summit, as part of our pre-conference seminar, we will be helping attendees to build their own pricing survey.  It requires some thought and discipline, but creating a regular feedback loop can lead you to potential improvement programs.

After you develop your survey and analyze the results, it’s time to look at your transaction data and look for your team’s pricing habits.

2. Use your transaction data to build a price profile for your associates.

By looking at how your associates’ price, their manual orders and their habits, you can start to understand your team’s pricing personality profiles.

Marketers have been building personality profiles for years in the consumer world. They analyze your purchase behavior and actions, using the personality profile they generate to predict your actions.

You can use that same analysis to build a price profile for each individual sales associate by looking at their pricing behavior.  You can put your teams in the proper buckets and develop training and support programs to help them maximize profit.

Understanding your sales team’s price personality profile is the key to unlocking profitable growth.

3. Train your associates with pricing and profitability programs.

As a former B2B distribution pricing leader, I’m always surprised when I ask distributors if they have regular pricing and profitability training programs for their associates and the answer is, “No.”

Often I get a confused look and responses such as, “We don’t do any organized training but we are talking about prices every day. Why should I waste time to do something that we already know how to do?”

Often their schedule is packed with product and HR training, but many distributors don’t invest in profitability training. The expectation everyone seems to have is that the associates know it already. A few years ago, our B2B distribution pricing team created a quarterly training program. The concept was simple: We did quarterly one-hour lunch-and-learn training sessions on pricing and profit.

It wasn’t complex training, like how to build a price profile. Rather, it was about making sure the associates attended a regular event that encouraged them to think about profitability, and learn a tip or two in the process.

We developed it with the field and it gave us some amazing insights. We found the majority of our employees had very little knowledge of how small changes in margin could make a big impact to our profitability.

For example, does your team know what a 1 percent across-the-board price increase can mean to your profitability? Over the past seven years of surveying B2B distribution associates I’ve found that less that 20 percent of frontline associates who are pricing orders answer correctly.

I’ve also seen time and again that margins improve immediately when associates go through regular training programs that teach them how small price changes can make a big difference.

You already have a great team of people who want to be successful, and they hold the key to improving your profits. By building a better pricing analytics and using surveys to get regular associate feedback, you can design training programs that make a difference.

Then, you can quit worrying about ‘peanut butter pricing’ because your associates will find ways to add jelly and make your company a much tastier profitability sandwich.

As always, we value your feedback. Feel free to comment below or contact me at john@mdm.com

 

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