Scott Sinning will be a panelist in the session “What I Wish I Knew About Driving Profits 20 Years Ago” at our upcoming Profit & Productivity Summit for Distributors, Nov. 11-13, 2024, in Chicago. Learn more.
Many distributors include responsibility for pricing in the role of a busy executive or make it a back-office administrative position.
As a result, sales reps spend too much time trying to manage the process, do their best with what they have and are less productive.
That adds to these common problems I see at distribution companies:
- Margin pressure. It’s becoming even more critical to identify and plug margin leaks.
- Excessive discount overrides. A high volume of exceptions is a sign your system pricing isn’t marketable, or your discount controls are too weak.
- Customer complaints. If customers are fed up with inconsistent pricing across your channels, satisfaction will fall.
Identify someone you trust to lead your pricing function to ensure that people, processes and technology are aligned to get the result you’re looking for. It’s more than about being good with numbers; the role of the pricing leader is to drive positive change.
Their success is critical because pricing has an outsized impact on profits for distributors.
But the people in these roles are often new to pricing or new to the industry. Or they’ve got a full plate of other responsibilities that limit their ability to drive change.
They need more support to succeed. They don’t know what they don’t know and would benefit from learning foundational concepts and industry best practices.
Here are five reasons to invest in your pricing leader’s development:
Distributor pricing is complex.
The high number of SKUs and transactions make for a dizzying combination of factors. On top of that, distributors are managing fluctuating supplier costs, competitive pressures, a diverse customer base and pricing agreements that vary widely across the business.
There’s a lot of manual work and process handoffs between departments. It’s hard to get it right.
The leader is new to a pricing role.
They may have experience in a related function and were selected based on business acumen, demonstrated talent and meaningful experiences. They may have been voluntold to lead a pricing project, which led to the leadership role. In many cases, they need deeper pricing knowledge in this complex environment. If they’re also new to the distribution industry, then the learning curve is steeper.
They need to adapt to industry-specific pricing complexities that may include regulations or compliance requirements, project-based contracts or global factors. They also need to understand your sales model and customer relationships, as well as legacy systems and practices.
They’ve never had formal training.
Many people learn distributor pricing on the job, which can involve costly trial and error. They didn’t study it in school and most have not had professional training. They have the talent and passion, and with structured and interactive training that’s specific to the distribution industry, they’ll succeed faster.
You want to shift from a tactical to a strategic approach.
Often a new leader will come from a background of tactical, functional expertise and needs to adapt to the expectations of a strategic leadership position. A tactical approach is often reactive and based on immediate needs, but a strategic approach can help you develop longer-term, data-driven strategies that are sustainable and effective. When a pricing leader understands your market, customer behavior and the relevant KPIs, they can grow margins over time.
You have high expectations for quick results.
Your pricing leader needs the skills to lead a pricing project, earn the trust of sales, build a team and evaluate software options. They need to make decisions that align with your corporate strategy and priorities. For example, they can optimize pricing to not only maximize revenue and profitability but also support market expansion or cost optimization.
While you can and should celebrate quick wins, the big gains come over the longer term as better habits take hold and the sales team gains confidence. You need a strategic leader to do this.
If you don’t have anyone internally, consider hiring an outside expert to get started on the right track until you can identify candidates for this role.
Scott Sinning is a former Vice President of Pricing Strategy at Graybar with 30+ years of experience in wholesale distribution. He founded Pricing for Distributors to help others gain the clarity, confidence and capabilities needed to improve their pricing. He has a practical approach that starts with assessing his client’s needs and creating an action plan to capture quick wins and sustained margin improvements. You can reach him at scott@pricingfordistributors.com or visit www.pricingfordistributors.com for more information.