Fuel, freight, and energy charges are some of the many items distributors are discovering some customers are willing to pay for. The key word is "some."
Brent Grover, author of the new book, "Strategic Pricing for Distributors: Tools and Rules for Building Higher Margins," recently spoke with MDM about his new book for the latest issue, and he says that the key for any add-on to an invoice is to do it in customer segments that are least likely to resist those charges. "It’s not a matter of being tough and putting in an across-the-board change," he says. Distributors should not want to lose a customer due to an add-on charge.
"The ability to recover outbound freight charges is a big profit lever for distributors," Grover says. "Strategic Pricing addresses this important component of the overall margin by identifying opportunities to recover some or all of the outbound freight costs."
In his book, Grover also addresses many other components to distributor pricing, including Special Price Records. He encourages distributors to "eliminate as many as possible."
These records in the ERP software contain a discounted price and sometimes a supplier-supported special cost, and expiration date, for a customer/item combination.In the book he writes: "Most distributors have far too many special price records. Not only are they a clerical nightmare, but wholesaler-distributors often honor agreements far beyond their expiration dates," which he says is avoidable. He says that strategic pricing dictates that special price records are needed only for core items for large customers.
Read the article on strategic pricing in the latest issue of MDM, featuring Grover: Conditions Ripe for Better Pricing.
His book is available through the National Association of Wholesaler-Distributors.