The Best Payback in the Distribution World

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SPA was featured in an article authored by Frank E. Hurtte Jr. who has 28 years of distribution industry experience and a lifetime in sales. It describes how strategic pricing initiatives can have a very fast ROI.

Excerpts of the article follow.

“we have an objective and standard measure for payback”

So how can I make a claim like the “Best Payback in Distribution”? Am I no different than my friends down between the Brazos and the Rio Grande? Unlike barbecue where all judgments are purely subjective, we have an objective and standard measure for payback. Here’s a short definition:

Payback period – is an estimate of the time that will be necessary for an investor to recoup the initial investment. It is used to compare investments that might have different initial capital requirements.

Early last month we had an opportunity to take part in the interview of four distributors who had applied the Cleveland-based Strategic Pricing Associates process to their businesses’ pricing dilemma. These distributors came from a number of lines of trade. During the interview we asked the question: “How long did it take for you to recoup the cost of participating in the SPA program?”

“a two month payback”

For the sake of our discussions, let’s call this a two month payback. Based on dozens of interviews with distributors who have implemented the SPA pricing process, we know that dollars returned actually increase as months go by. In other words the revenue to the distributors is very likely to not be linear but instead ramp up. So the impact of the first couple of months is not as hefty as the remainder of the year. Most companies ramp up their activity with pricing process starting first with tiny customers and gradually taking on customers with greater sales numbers. But we want to be conservative, so let’s assume the bucks remain the same throughout the year.

Click here to read the complete article.

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