A limited view of invoice-level pricing decisions makes it hard for distributors to identify where money is being left on the table.
Why did that customer get that price?
It could simply be the system-generated matrix price. It could be the price that was negotiated for that customer’s contract. Or maybe it’s a number that the sales rep came up with to win the business.
Knowing the answer matters because it allows distributors to analyze pricing trends, detect margin leakage and proactively optimize their pricing for the market. This is especially important today, when distributors are fighting to outpace inflation and uncertainty around tariffs.
Unfortunately, many distributors don’t know because their ERP systems only capture basic invoice details – the customer, the SKU, the quantity and the price.
Distributors have massive amounts of structured and unstructured pricing data. The data needs to be normalized and brought into one spot so they can do more with their pricing data. The good news is that today’s technology makes that possible.
With enriched and unified pricing data, distributors can:
Improve pricing accuracy and control. Monitor and optimize the frequency of manual pricing overrides by sales teams, striking the “optimal” balance between deviating from system pricing and by how much.
Strengthen margin protection. Your sales reps may be offering major discounts when it isn’t necessary to close the deal. More complete pricing data makes it easier to see when and where this is happening beyond the category level. It also allows you to see how rebates are affecting your final margins.
Provide a better customer experience. When you have a clearer picture of your pricing, your sales teams can turn around more accurate quotes, more quickly. Complex pricing negotiations can generate a lot of friction; simplifying the negotiation with an optimized quote relieves it so the customer can move on with their day.
Personalize sales coaching. Invoice-level data is not only useful for detecting team-wide trends. It can also give you a better sense of how each individual rep is performing. If a rep is straying too far from the company’s pricing strategy, you can give them the coaching they need to get back on track.
Shift from reactive to proactive pricing. Comprehensive pricing data means you’ll have deeper insights into things like rebate impacts, price sensitivity by product and customer segment. It will also give you real-time pricing benchmarks, both internally and externally. As a result, you’ll no longer be playing catch-up — you’ll be proactively adjusting to the market and getting ahead of the game.
It’s not an insignificant undertaking, but as long as you’ve been collecting basic data, you can work your way toward better pricing decisions. Here’s how:
Make sure your pricing data is clean, organized and de-siloed. Depending on your current ERP setup, this could either be a simple step or the start of a big project. You’ll want to pull all your pricing data together into one place where it can be readily accessed. If it’s already well-organized in a modernized, cloud-based system, you’re off to a great start. If not, you may want to consider finding a technology partner who can help.
Work with a data engineering team to enrich your basic data. Data engineers can take all your historic system pricing data, compare it against your matrix pricing and contracts, and often deduce whether each price was system-generated, contractual or a manual override. From there, they can build a database that structures your data into quartiles or indexes, in turn enabling you to analyze and detect key trends.
Start capturing the right data moving forward. Layer current and ongoing pricing data with historical data in the same database. It’s just like working on a puzzle by starting at each corner; eventually the pieces will meet in the middle, and you’ll have a complete picture. But first, those corner sections will point you in the right direction.
Instill a data-driven sales culture. B2B sales reps have traditionally been given a lot of autonomy, so when you try to apply insights uncovered by enriched pricing data, you may receive some pushback. Demonstrate the value of this data-driven approach. With pricing strategies that operate on sophisticated data rather than mere averages – that are based on customer-, product- and transaction-level insights – they’ll be able to close more profitable deals without resorting to steep discounts.
Too many distributors are letting their margins suffer because they lack insight into what’s really driving pricing decisions. Even if it feels like things are going smoothly, you may be leaving money on the table. Don’t wait for your margins to crater to move toward enriching your pricing data. The sooner you do, the better position you’ll be in the future.
Jon Ladle is ProfitOptics’ Managing Partner and Head of Digital Strategy, Enterprise Solutions. Jon’s focus at ProfitOptics is designing, building and managing mission-critical technology systems. He creates products and platforms that work within a company's current ecosystem, allowing for expansion and unlocking value from existing technology. He specializes in building enterprise platforms and building digital products to enhance systems like ERPs, CRMs and LIMs to create advantages that out-of-the-box systems don't offer. Before joining ProfitOptics, Jon held various leadership positions at Advanous, including President, Director of Product Development, and Pricing & Margin Analyst. Jon holds a Master of Business Administration (MBA) from Brigham Young University.