According to Modern Distribution Management, the last five years have been rough and price pressure and intense competition have resulted in tight margins. As a result, many distributors have begun giving away value-added services in hopes of gaining trust among customers. Reports indicate, though, that these services have driven up prices to historic heights and the only solution is to revamp pricing based on the value provided.

According to the article:
"The solution is to develop products and services that target unique segments with very specific offers. For most distributors, this involves developing a range of offers from the high end (with all the bells and whistles) to the low end (no frills).

"The key is to segment the market and build specific offers based on your unique ability to drive economic value (e.g. revenue growth or cost reductions) for each chosen market segment."

There are four steps that distributors should take to make this work:
• Develop a deeper understanding of the value drivers for each market segment
• Determine costs to serve those segments
• Design specific offer and pricing structures specifically for those segments
• Create organizational alignment and communicate value to the market

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