130 THE DISTRIBUTOR’S LINK NELSON VALDERRAMA YOUR PRICING IS THE KEY TO UNLOCKING FASTER GROWTH - PART 1 from page 24 Imagine source: hbr.org/1992/09/managing-price-gaining-profit Naturally, this begs the question: “If improvements in price typically have three to four times the effect on profitability as proportionate increases in volume, why aren’t more owners taking advantage?” That usually depends on who you’re asking. Excuses Come In All Shapes and Sizes As with any major change in a business plan, there are always a thousand reasons not to try something new. I’m oversimplifying a bit here, but one of the biggest reasons in our industry is simply that distributors perceive pricing as too complex to mess with. For example, let’s say a typical mid-sized distributor has 1,000 customers. Let’s also assume they have an average number of active SKUs at around 5000 SKUs and at least 3 quantity breaks (few, medium and many)...when you run the math on that, you get a whopping 15 Million possible combinations that need to be priced properly! Another major reason I hear time and time again from owners, GMs or leaders is simply a matter of allocating enough time to the issue. Let me ask you a question: how many days in 2019 have you invested on pricing, either talking or collaborating with your team? If you’re like most teams I talk to at expos and conferences, your answer is probably something like “not enough”, “we review our margin at the end of the month”, “when we have a few free hours”, or more recently, “thanks to new tariffs, we’ve been reviewing pricing much more”. In fact, a CEO told me the other day that they have been considering bringing someone in to assess their pricing for FOUR years but haven’t gotten around to it…another COO told me “we handle our pricing internally” but when I spoke to his GMs, they confessed it’s been years since anything has happened with their pricing. I don’t know what the perfect answer for your team might be, but at the end of the day, I just urge you to be honest with yourself. Take the time to actively look, engage or provoke your organization to allocate time into pricing. You know the return on that investment has 3-4 times the potential of focusing on volume alone, so don’t let it go to waste. The harsh truth is this: Jeff Bezos and his team wake up every morning believing that your margin is their opportunity, do you have the same passion for your margin and pricing? So How Do You Get Started? In my next article, I’ll discuss strategies for categorizing your current pricing practices and share some simple frameworks for understanding where your opportunities lie as well as the fastest path to profit depending on what type of team you run. First though, you need to take a look inward and take inventory of where you stand today. Ask yourself.... ¤ When was the last time you evaluated your pricing? ¤ What practices do you have in place to categorize your customers currently? ¤ Do you have any automated tools in place to help you better spot inefficiencies? ¤ Does your sales team have the insights they need to communicate price ROI? ¤ Are you REALLY taking advantage of all the data in your CRM to optimize pricing? Take a moment, take a breath, and take the first step toward maximizing your returns through improved pricing. It’s the best decision you’ll make for your business this year. NELSON VALDERRAMA
THE DISTRIBUTOR’S LINK 131 MID-WEST FASTENER ASSOCIATION PO Box 5, Lake Zurich, IL 60047 TOLL-FREE 1-800-753-8338 TEL 847-438-8338 EMAIL mwfa@ameritech.com WEB www.mwfa.net PRINT READING: NECESSARY KNOWLEDGE by Nancy Rich May 16th was the day for MWFA Members to review or receive their first learning experience in print reading. Mike Henry, MKH Sales has taught this class several years and in several locations. He certainly knows how to make, what one might think could be boring, a fun class. Students became more aware of what is involved in prints and the extreme importance of reviewing them carefully. Errors are costly; therefore, it is a necessary task to pay close attention to details in reading prints. After instruction, the students broke into groups to come up with their own print. This was eye opening as they thought their drawings would be presentable to place an order yet they were missing important information. The attention to details was certainly learned that day. ASSOCIATION ARTICLE MWFA Welcomes New Members ¤ National Bolt & Nut - Bloomington, IL ¤ Wyandotte Industries - Wyandotte, MI MWFA Upcoming Events August 19-23 Fastener Training Week August 22 October 17 November 7 Belvedere Banquets, Elk Grove, IL MWFA Mixer Real Time Sports, Elk Grove, IL PPAPs and Corrective Action Seminar Holiday Inn, Elk Grove IL December 12 Holiday Party Scholarship and Elections Meeting Belvedere Banquets, Elk Grove, IL Medinah Banquets, Addison, IL MID-WEST FASTENER ASSOCIATION
in the Summer 2019 issue of 6 DISTR
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