Is your pricing strategy to optimize margins, maximize sales or getting more profit from existing accounts? Do you have a pricing strategy? According to the Simon-Kucher research, nearly 50% of companies think they are in a pricing war. Over 80% of those companies believe someone else started it. Evergreen Consulting's work, exclusively with distributors, proves a powerful positive correlation between management influence over pricing and profits. Whale curves from our clients' data illustrate that optimizing profits from existing accounts is a shorter and more reliable path to profits than chasing new business. Although distributors care very much about their sales reps and suppliers, our data shows that - except in rare cases - money-losing transactions and customers are not a viable result, even when they help a rep (or supplier) make their numbers. How do the research findings compare to your company's approach to pricing? Where are you in terms of distributor pricing maturity?
Pricing Optimization for Distributors
Now that pricing analytics are becoming universally available to distributors, price optimization is no longer a profit effectiveness luxury. It is a must-have no matter what legacy ERP system you use. Market-driven pricing and healthy profits benefit all: customers, sales reps, support staff, managers, suppliers and of course owners.
The pricing optimization techniques that create sometimes mystifying differences in the cost of hotels and airline tickets are being used by distributors to redefine their profit results. In the distributor environment, the vast array of products and variations in cost-to-serve require the price optimization on an enterprise scale. That's why we developed SmartPricing, which is beneficial to key sales KPIs such as an increase in average order size, meeting sales targets and shortening the average selling cycle.
A solid pricing architecture for distributors combines automated discount flexibility for routine pricing with human intervention, by exception. Pricing "guardrails" empower reps to make pricing decisions on their own, without having to slow down the buying process by having check with their sales manager at every intersection. In an era when long-established practices about light-handed sales management are changing rapidly, new technologies and processes necessary to support them start to look less like nice-to-haves, and more as necessary ingredients for successful sales effectiveness strategies.
Pricing Process Design & Management
Evergreen consultants have extensive experience with the pricing modules included in most popular distributor ERP systems. The majority of ERP pricing modules have more than adequate functionality to implement SMART Pricing. Our staff assists clients with formatting and downloading data from their ERP system to us, and with uploading our pricing recommendations into the ERP system.
SMART Pricing is a solid foundation for pricing new business. We create market-driven pricing matrices for each product category and customer segment that reflect variables such as customer sensitivity, item visibility, and product value. We assist in the installation of SMART Pricing matrices within the ERP system’s hierarchical pricing module. In most systems, the pricing matrices can be fully integrated with order entry including off-line order entry applications. One of the goals of market-driven pricing is to drastically reduce the need for special contract pricing records. Another primary goal is streamlining the pricing process to provide fast, consistent and accurate pricing decisions with a minimum amount of staff time and effort.
We are available to advise SMART Pricing clients with evaluation of their current pricing process, troubleshooting problem areas and designing better processes. Our staff is available to assist in planning, organizing, directing, controlling and staffing the client’s pricing function. We are also available to provide pricing training for our clients.
Advanced, Cloud-based Pricing and CPA
Online Pricing Reporting System
Stale pricing information and cumbersome spreadsheets are giving way to instantly accessible, current cloud-based market pricing information. Tracking customer pricing outliers, margin slippage and pricing opportunities have never been this simple or accurate. Our reporting system is fully integrated with Evergreen’s SMART Pricing. Call us for more information about this new, cloud-based market pricing capability designed specifically for distributors.
Online Customer Profitability Analysis and Cost to Serve System
Yesterday’s cost-to-serve information and cumbersome spreadsheets are moving to easy to use, high impact cloud-based analysis capabilities. Our system, fully integrated with Evergreen’s SMART CPA, is built around the tactical moves required to execute distributor profit strategies for customers in each quadrant. Call us for more information about this new, cloud-based market pricing capability designed specifically for distributors.
Real-time Pricing Decision and Selling Tool for Mobile Devices
Computer-assisted selling moves into another dimension with the delivery of market-driven pricing instantly on the sales reps’ mobile device. The current market price for that item, for that customer, appears along with product specs, diagrams, photos, and availability. Selling at market pricing has never been this simple. Our pricing and selling tool is fully integrated with Evergreen’s SMART Pricing.
Sales Compensation Plan Design
Evergreen Consulting’s holistic approach to strategic pricing and customer profitability leads to intense discussions with clients about ways to link incentive compensation, including sales compensation, to operating profits and not just sales and gross margins.
We are enthusiastic only about sales compensation plans that attract and retain the best and brightest sales professionals. Our principles are that sales incentives should be linked to the company’s long-term success, to results that the salesperson has control over and that compensation plans should be as simple as possible. Whenever practical we endorse unlimited income opportunities for salespeople so long as they are tied to operating profits. Our long-term view and respect for sales professionals, as well as decades of experience in distribution, have convinced us that frequent and dramatic changes to sales compensation plans are disruptive and lead to undesired turnover.
Sales compensation plan changes must be modeled with great care, taking into account both data as well as the company’s culture. We believe strongly that transitions must be managed thoughtfully and that sales professionals deserve to have ample time to make adjustments to preserve and build their income. Proactive inside sales is becoming more prevalent in the current era of multichannel marketing Specific sales compensation programs for different types of inside sales reps, and sales credit policies, are needed to assure the success of inside sales professionals.