When distributors think about ways to increase profits, they usually look at sales first. How can we sell more to existing customers? How can we find new customers? Their second thought often is about operations. How can we reduce costs and overhead? How can we do more with less? I typically don’t see distributors focus first on their product pricing; likely because it’s a tough nut to crack. But here’s some food for thought: a change in the processes used to price products could result in as much as 2 points on your bottom line.
That was the first paragraph of an article from our newsletter last March where we announced our partnership with epaCUBE. It’s strikingly similar to the beginning of an article we recently saw in Industrial Supply magazine (A Game of Inches: Stellar Industrial Supply utilizes pricing analytics model to make incremental margin improvements). It’s about an industrial and safety supply distributor (and Activant customer) in Tacoma, Washington. They recently implemented a pricing optimization program called SPA and have experienced a convincing outcome. The article states that Stellar Industrial Supply “discovered that it is possible to make incremental margin improvement even when sales are flat or down.” The company’s president, John Wiborg, said, “We’re improving efficiencies and better managing supplier pricing, which helps with our marketing and purchasing efforts. We’re closing loopholes in our processes that we didn’t know existed.”
Stellar’s results are a good reminder of the potential of pricing analytics. I encourage you to go back and read my article from last year, and to read the full article on Stellar. There’s alot of good information on the benefits and concerns with adding a pricing module to your Eclipse platform. Whether you use epaCUBE or SPA, pricing optimization can have some stellar ROI for your business. Let us know if you want to talk more about your options.