Strategic Pricing Newsletter – June 2015

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SPA - LinkedIn Group Hero Image3Inside this edition:

  • President’s Message
  • Recent Articles
  • Case Studies
  • Upcoming Events
  • Featured Content

Message from SPA President, David Bauders

“Price Completion” is the Top Concern Amongst Distributors This Year

A recent article in Industrial Distribution’s 68th Annual Survey of Distributor Operations reports “Price” as the top concern amongst distributors this year.  The price concerned came in at 54 percent outpacing economic conditions, increased operating costs and even new distributor competition.  Thinking about this topic, makes one pause.  Clearly, margin pressures are real, but distributor association benchmarking reports don’t demonstrate a massive negative trend.  Could it be “Price” concerns are instead deeply rooted in the way we learn about competitive price points?

Most companies rely on their sales team for pricing-centric feedback.  And, very few of these sales organizations have hard data.  Instead, they rely on anecdotal pricing feedback; things like “We lost the big order to the other guy on price” or “The new prospect told us our prices were too high.”

Here’s the rub, customers have a vested interest in telling you “your price is too high.”  Whether they seriously consider you as a supplier or nay, passing along a high price message sets the stage for even lower pricing into the future.  Price levels that can be used to leverage current suppliers and receive even greater discounts if you ever end up with an order.  Further, feedback from the purchasing side points to “price level” excuses as sugar-coated camouflage for issues with service, trust and loyalty to incumbent suppliers.

Additional pricing issues arise when distributors fail to understand the concept of price sensitivity.  One example from our daily life is the bread and milk loss leader strategy.  Here’s how it works.  Grocery and convenience stores all recognize most families are closely tuned to the market price of the most commonly purchased products (in this case bread and milk).  This creates price sensitivity.  Advertising very low prices on these and a few other commodities, which have high price sensitivity, gives the impression of low prices throughout the store.  Consequently, the margins of a short list of high sensitivity items are far lower than the rest of the shopping basket.

The theory applies to every industry, yet few distributors consider price sensitivity in setting their pricing strategy.  The “price competition” may very well be coming from a savvy competitor who understands the concept.

The short answer to addressing at least a portion of this top concern comes via a data-driven pricing process.  Strategic Pricing Associates has assisted over 400 distributors in developing a proven system for understanding price sensitivity and establishing fair margins for the products and services they provide.  We’ve discovered the typical distributor using SPA adds over two full points to their gross margin.   What’s more, these same distributors report top line sales growth commensurate with the markets they serve.

The whole SPA team invites you to explore our time tested process, eliminate the “price concern” and hopefully sleep better.

Articles

A Pricing Tale: Old Joe
Read an article that highlights how important it is for distributors to realize the power of a solid, scientific pricing process that will stop unnecessary discounting by sales people.

Kris Kringle’s Executive Meeting
Read part one of a two part series of fun articles that highlight how important it is for customers to focus on the value added by distributors to their operation’s supply chain efforts and why paying a premium is worth it to Santa and his executive team.

Knowledge-based Distributors Save Santa
Read part two of a two part series of fun articles that highlight how important it is for customers to focus on the value added by distributors to their operation’s supply chain efforts and why paying a premium is worth it to Santa and his executive team.

Why do they buy?
Read our article about the keys to effectively communicating the value of your products and associated services and pricing them accordingly.

What do your people believe about your company’s profitability?
Read our article about the importance of educating your sales reps on the actual profit margins your company makes and the value you provide to your customers. This will go a long way towards reducing their inclination to offer discounts as a matter of course.

Click here to read more articles.

Case Studies

Torrington Supply Company, a successful New England plumbing/ HVAC distributor, selected Strategic Pricing Associates to help retain and improve margin in an increasingly competitive market.
“For us, Strategic Pricing was the most effective, systematic way to improve our margins.”

          – Joel Becker, President/CEO | TSC Distribution Group

Philip Rosenau Co. Inc. selected Strategic Pricing Associates to save time in managing manufacturer price increases and provide flexibility to modify and customize forms, screens, and fields in the system.
“…The Strategic Pricing module essentially paid for the whole Prophet 21 implementation process in about a year.

      – Scott Holland, Executive Vice President | Philip Rosenau Co. Inc.

General Electric’s Consumer, Commercial and Industrial Channels selected Strategic Pricing Associates to lead them away from an undisciplined, non-strategic “cost-plus” approach to a market value-based, strategic architecture with improved internal processes and controls.

Click here to read more Case Studies.

Upcoming Events

June 12

SPA Strategic Pricing Conference | Las Vegas, NV

Equal parts strategy and practical tactics, this full-day complimentary Strategic Pricing Conference in Las Vegas, NV will address key topics that are particularly relevant in a recovering economy. This seminar will bring together an outstanding group of industry experts that will offer strategies on driving shareholder value – register soon as space is limited.

This big-picture seminar is focused on strategic topics of importance to the owners, CEOs, CFOs, and general managers of distribution and manufacturing companies. Experts will address the topics essential to accelerating the customer value proposition, competitive positioning and market value of any distribution or manufacturing business. The seminar addresses the strategic, analytical, process and cultural issues that are fundamental to maximizing shareholder value. The seminar will focus on the high-level, strategic and structural issues that are easily neglected in the hustle and bustle of daily business demands. It will help you to re-focus your organization on the drivers of economic value.

David Bauders of SPA, Dolores Bauders of SPA, Jonathan Bein of Real Result Marketing and Frank Hurtte of River Heights Consulting will lead presentations and best-practices panels with executives of leading manufacturing and distribution businesses.

Space is extremely limited for this event. It is not necessary to stay at Vdara Hotel and Spa at Aria, as there are many other fine hotels in the area. There is no fee to participate in this event.

Presentation Topics

  • Introduction: Driving Change That Matters in a Rebound Economy
  • Best Practices Panel Discussion: Strategic Pricing in a Rebound Economy
  • The SPA Pricing Cube™ Reporting Tool
  • Making Money with E-Commerce in a Multi-Channel World
  • Best Practices Panel Discussion: Change Management and Sales Culture – Execution on the Drivers That Matter
  • Six Sigma Pricing Process and Reporting
  • Summary: Execution Excellence in a Rebound Economy

Click here for complete agenda

Click here to register

July 15

Webcast: Improving Margins Through a More Strategic Approach to Pricing

A SPA client will share their journey to pricing excellence and how they are leveraging science-based strategic pricing tools to improve margins through a more strategic approach to pricing.

August 12

Webcast: Increasing Prices and Margins Without Sacrificing Sales Volume

A SPA client will share their journey to pricing excellence and how they are leveraging science-based strategic pricing tools to increase prices and margins without sacrificing sales volume.

September 23

Webcast: How to Change the Pricing Culture in Your Company

A SPA client will share their journey to pricing excellence and how they are leveraging science-based strategic pricing tools to change the pricing culture in their company.

Featured Content

SPA Videos

The following videos provide valuable perspective for all companies that would like to improve their performance through strategic pricing. We work with your team to think strategically about pricing; segment your markets; analyze your invoice data; and rebuild your pricing structures to maximize your profitability. We help you build the guidelines and process metrics to ensure effective execution. We help you train your sales force in the practical and cultural dimensions of this process.

SPA Overview

 Inside the SPA Program

Click here to watch these videos on our YouTube Channel

Archived Webcasts

You can sign in or click here to register on our website to view our library of past webinars which covers a variety of strategic pricing topics.

About SPA

SPA is the leading provider of pricing analytics to complex companies of all types: manufacturing, distribution, equipment, services, and software/technology products. Since 1993, we’ve built a strong platform of proprietary analytics to quickly and efficiently help companies convert their own invoice data into pricing architectures that maximize their pricing performance and competitive position. Our typical client applies our pricing architecture and improves profitability by two to four percent of sales: $2 to $4 million per $100 million of affected revenue. The benefits are staggering; and they are typically accomplished in less than 90 days.

SPA Clients include over 200 manufacturing companies including Parker Hannifin, Rockwell, GEExxon Mobil, Caterpillar as well as over 400 distributors including Harry Cooper Supply Company, Industrial Distribution Group, AH Harris, and ThermoFisher Scientific.

Click here to read SPA Client Testimonials.

Follow SPA

To easily keep up with the latest SPA announcements, events and resources you can subscribe to our Strategic Pricing Pays blog or follow us on LinkedIn or on the following major social media channels and file sharing platforms: Twitter, Google+, Facebook, SlideShare, and YouTube.

We also encourage you to join the Strategic Pricing discussions in our LinkedIn group and to sign up to receive our Strategic Pricing Newsletter by clicking here.

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