Synopsis: Building Materials Supplier – Pricing Strategy
Our client sold through building material suppliers and was concerned that their pricing practices were an impediment to success. Specifically, were they leaving money / contribution profits on the table and were worried that the company’s pricing practices were having a negative impact on market share and sales force behavior.
To help our client answer these questions, QDI consultants conducted in-depth interviews with all the major market players: contractors, distributors, and the manufacturer’s direct sales force and independent reps. To no one’s surprise the finding were centered on the fact that this was a bid market. Multiple contractors bid on jobs and to do that they start with quotes from their suppliers, companies like our client’s distributors. Once a contractor wins the bid he often comes back for better pricing, the larger the job the more likely the contractor will look for better pricing.
Overlaying this dynamic was the fact that the client competed in two categories of products, essentially premium performance and standard performance. Often contractors would bid both, or just bid the price product, so it became evident that “product education” was a key issue to address to keep the channels focused on selling the higher value product.
Using information gained from these interviews, QDI built a systems model designed to provide insight into the role of pricing on each market participant and each type of transaction. The model clearly pointed to a negative impact from the pricing process, information management system and sales compensation formulas.
Based on this new knowledge, QDI recommended changes in pricing processes, data tracking and sales compensation to gain control over pricing and capture a greater percent of the potential profit in each sale.
Historic Note:
At the time of this work technology was just beginning to evolve to enable tracking and analyzing pricing and quotes to most effectively propose and manage bid prices. Today technology allows sales organizations to have a real time view on pricing and be able to propose consistent, but still very competitive pricing to their sales organizations.
