“We don’t have a very good process for pricing,” says Brent Grover while kicking off his educational presentation Tuesday at Heavy Duty Aftermarket Week (HDAW) in Las Vegas.
A self-described “recovering distributor,” Grover says the wholesale distributors are experts in a lot of areas — but pricing is not one of them.
Quality pricing can go a long way in the aftermarket, and Grover says distributors who understand their customer base and their willingness to spend can create a pricing model that encourages and cultivates long-term business.
“The market for heavy-duty [distribution] is not efficient,” he says. “Margin is not the only reason that customers are not profitable.”
Grover says there are three fundamental causes of pricing weakness: insufficient monitoring, lack of pricing know-how and poor pricing strategies.
Distributors can — and do — blame these causes on a variety of factors, he says.
But Grover says blaming external factors for poor pricing is more likely the result of an uneducated pricing strategy.
To build a strategy, Grover first recommends distributors focus on profit, not volume or share. He also recommends following a constant pricing structure plan.
The first step in the plan should be to measure customer operating profit and CTS, then find and fix pricing outliers, build a value-driven matrix, put a manager in charge of pricing, track territory versus pricing potential and monitor results and take corrective actions.
Grover adds that giving an employee the autonomy to set pricing is incredibly important. Setting quality prices is too important to be decided through poorly researched group-think.
“Someone has to be in charge” and be responsible for constantly measuring and setting prices, he says.
He also recommends bracket pricing by product class, customer segment, customer size and sensitivity. This can be done through computer software and is invaluable for salespeople who have to implement your price decisions, Grover says.