Tip: Develop a Coherent Pricing Strategy to Improve Your Bottom Line - Modern Distribution Management

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Tip: Develop a Coherent Pricing Strategy to Improve Your Bottom Line

Strategic pricing can create positive results for every item in your inventory with every customer.

Often in distribution, there is little relationship between the importance of the customer to the business and the pricing that the customer receives. Instead, pricing often depends on which salesperson did the deal, if the customer bought lunch that day, or if it was the end of the month. Having a coherent pricing strategy can strengthen relationships and improve profitability, according to Tim Reynolds in Strategic Pricing: The Next Big Thing?

The objective of strategic pricing is to create positive results for every item in your inventory with appropriate discounts for each of your customers.

Evaluate each major customer and determine how you want to spread discounts across all the items he buys. Model proposed price changes and determine what the bottom-line impact will be. Then fine-tune your strategy.

Successful strategic pricing initiatives depend in part on science and in part on art, according to Brent Grover in The Art of Executing Strategic Pricing. Pricing analysis, using statistical analysis and other tools, is the “science” part of the equation.

The “art” is implementation, which is the hard part. It requires breaking what seems to be an overwhelming task into smaller pieces, down to which department performs which functions.

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