Profitability for DistributorsStrategic Pricing

Taking a Holistic Approach to Improving Wholesale Distributor Profitability

Your organization is greater than the sum of its parts. Rather than thinking in terms of tactics and silos, shift to a broader, more strategic approach to truly unlock your company’s potential.

At Evergreen Consulting, we believe in taking a holistic approach to improving wholesale distributor profitability. Our thought process brings three core strategies to your company designed to hone the way your organization does business:

  • The first strategy involves strategic pricing, a way of ensuring a better return on your sales.
  • The second looks at cost-to-serve and examines the net profitability of your customers.
  • The third and final part concerns sales training and compensation.

The strategies utilized in these three areas are designed to help you run your business more intelligently and efficiently.

Why are they so important? Because the distributor profit picture is changing. If you’re like most distributors, you’ve probably noticed that your margins are getting squeezed and your competition is getting tougher. In fact, it may even feel like you’re getting squeezed out of running a profitable business!

To survive in this new environment, distributors must become nimble and more willing to change their approach to the market. Part of this process involves taking a cue from companies like Amazon and Grainger. These organizations are heavily data-driven and if you hope to compete, you must incorporate a lot more data into your strategy and decision-making process.

The good news is that data is more widely available than ever before.

Distributors used to need expensive and sophisticated programs to make use of data, but today there’s a tremendous amount of horsepower in even smaller distribution ERP packages. Easily access and leverage the information needed to gain powerful insights into how your business should and could be operating. This includes insights into product pricing, product selection, targeted marketing, and the services offered to customers.

In the 1980s or 1990s many decisions were left entirely in the hands of sales reps, but today the margin of error is too thin to take that risk. In fact, the margins today for many distributors are so razor thin that gaining or losing a couple of points of margin can make all the difference in the world.

That’s why using more sophisticated pricing strategies today is so essential. Improving customer profitability requires scrutinizing cost-to-serve to ensure that you are a low-cost provider.

Change the way you manage the sales team with new types of training and improved compensation practices. All of these areas depend heavily on data – which you likely already have in your systems – to be leveraged together to achieve the maximum effect.

To succeed, don’t look at these strategies as existing in silos. Instead, recognize where these three key areas intersect and understand how they work together. Once everything is going in the right direction, prepare to experience success approaching that of Amazon or Grainger.