FALL 2024

114 THE DISTRIBUTOR’S

114 THE DISTRIBUTOR’S LINK NELSON VALDERRAMA STRATEGIC PRICING STRATEGY: THE ONE THING DISTRIBUTION EXECS MISS ABOUT PROFITABILITY AND PRICING from page 48 I really think it boils down to two things: leadership and mindset. It all starts with leadership. Executives must build and model a culture invested in effective margin management. So, can you leaders out there— owners, CEOs, CFOs, GMs, owners, CEOs, CFOs, and sales managers—answer these burning questions? “How many hours are you dedicating each month to price strategy or execution? Are you truly understanding how prices are set, what’s working, and what’s not?” The answers must cover more than customer feedback or checking out the competition. The discussion must pursue a strategy where you leverage data to call the pricing shots. If you’re not putting in 5–10 hours a month to focus on this, I reckon you might be missing the mark. Affecting Margin Management It takes a holistic approach to empower effective margin management through all levels of the organization. ¤ Clear expectations and goals. Every speech, email, and newsletter must repeat how margins impact growth, investment, employee benefits, and long-term sustainability. You have to draw a picture showing how each employee’s role and action link to customer satisfaction ¤ Psychologically safe environment. Employees should feel comfortable offering feedback. If you want meaningful feedback, you must share financial data on margins and bottom-line impacts. ¤ Training and development. Margins increase when employees can upskill. Distributors succeed if employees are financially literate. They need access to the data and analytics that track performance, identify trends, and make data-driven decisions that support margin goals. ¤ Celebrate performance. With marginrelated metrics in place, you can incorporate them into job descriptions, performance assessments, and compensation structures. This sets up a foundation for acknowledging the achievements of teams, managers, and individuals. We can talk about leading by example, but success requires a mindset change. Throughout my distribution career, I’ve always felt we undervalue the worth we bring to our customers. It’s not just about prices; it’s recognizing our strengths, services, and customer journey. Changing Your Mindset Do you ever consider your mindset in this role? When did you last conduct a customer satisfaction survey like NPS (net promoter score) to understand what your customers truly value? I recently saw the NPS results from the end users of a customer of ours, and it was eyeopening how much customers appreciate the company’s after-sale services and are willing to pay for them. On the flip side, some customers are just bargain hunters, always chasing the lowest price. Some customers are more sensitive to price changes. Some willingly pay increased prices if the product meets their needs and preferences. Others buy when pricing ensures quality and extended service. So, let’s talk about a sales professional’s mindset. In my discussions with many salespeople, I’ve noticed they’re often fixated on pricing as the key factor. They have a set percentage in mind, often based on their market perception. This fixation can become an obsession. A good way to test this mindset is by reviewing a sales report, selecting a transaction, and asking why they set that general margin percentage. For instance, if it’s 33%, you could inquire about their range based on market knowledge, and why not 33.25% instead. Human psychology tends to shy away from fractions, but they can be powerful tools in pricing strategies. Distribution leaders drive strategic margin management by influencing the sales team’s mindset. ¤ Share the vulnerability. Let sales pros know how you have wrestled with adopting and adapting to a new mindset on pricing. CONTINUED ON PAGE 115

THE DISTRIBUTOR’S LINK 115 NELSON VALDERRAMA STRATEGIC PRICING STRATEGY: THE ONE THING DISTRIBUTION EXECS MISS ABOUT PROFITABILITY AND PRICING from page 114 ¤ Coach and mentor. Leading by example requires self-awareness and emotional intelligence. Training and development opportunities are also necessary to improve a current sales mindset. ¤ Redefine success. Making success personal, tying individual roles to client buying decisions meets and exceeds margins. Sales professionals like sales targets, but they also need goals related to mindset improvement. ¤ Share success stories. It’s one thing to recognize sales outcomes but to change the sales mindset, you must emphasize the sales journey, the challenges overcome, and the lessons learned. ¤ Review the data. Data follows every sale. But pricing is dynamic; you shouldn’t follow straight lines. Leaders must model a pricing strategy mindset that prizes data-driven flexibility and resilience. Lead A Pricing Strategy By Example My long and deep involvement in wholesale distribution has convinced me that profitability really boils down to smart growth, optimized productivity, and the right pricing strategy. Getting there takes a growth mindset. Success requires a willingness to learn and adapt, even as a leader. It’s smart to share your own experiences with overcoming challenges and setbacks. And you’ll profit from performance in a culture where it’s okay to make and learn from mistakes. By consistently reinforcing the importance of mindset awareness and providing the necessary tools and resources, leaders can empower sales professionals to actively acknowledge and address their current mindset. This can lead to improved self-awareness, resilience, and overall sales performance. NELSON VALDERRAMA