Software Simplifying Customer Pricing
In recent years price increases from manufacturers arrived in droves almost every other week and jan/san distributors could barely keep up with them. As a result, distributors were forced to spend a greater part of their days adjusting prices just to meet their expected profit margins.
While price increases have slowed down, keeping pace with price adjustments for thousands of products is still a laborious and tedious process. However, enterprise resource planning (ERP) software providers are making life simpler for today’s distributors with the addition of customer pricing software.
This software is allowing distributors to move from the traditional manual process of setting and modifying prices to a much more streamlined approach where they are able to update pricing with little labor required.
A key feature of today’s customer pricing software is that distributors are able to set up personalized pricing for each individual customer. For example, Belleville, Ill.-based Dutch Hollow Janitorial Supply uses this feature to apply time-sensitive discounts to select customers, says Eric Cadell, the company’s vice president of operations.
“Personalized pricing can be either done on an individual item, by a product line, by a product group or just general discount structures,” he says. “Every item is keyed with a generic MSRP cost into our system and then from there it gets floated in between what the customer is actually going to pay based on their sales rep, volume and a bunch of different factors that all go together to determine their price tier.”
This personalized pricing feature proves beneficial for distributors like Dutch Hollow as it allows them to provide customers of different sizes and needs with customized pricing that in turn helps increase sales and ensures repeat business, says Cadell.
Distributors can either manually key-in customized pricing for each individual customer or let the software take over. As each customer orders something, the software system is continually tracking their purchases and determines their pricing based on past purchases and volume.
Today’s pricing software also gives distributors the flexibility of price grouping by customer category, price group and product line.
“We can pair products by a commodity group, brand name or customers according to market segments and track the cost and sell price to ensure we are getting the best deal for our customer and at the same time not losing track on our bottom line,” says George Abiaad, president of Royal Corp., Santa Fe Springs, Calif. “Our system also allows us to set pricing for a group of customers and bundle them according to different market segments and set any incremental pricing structure that can be modified.”
These pricing features, Abiaad says, are time savers and allow distributors to stay on top of any cost or price variations.
Another important feature for distributors is that they also are able to go into the system and set future prices to go in effect on a certain date. With this function, distributors are able to define the items, prices and the future date of the increase, says Cadell.
“The system is designed to hold future prices so you can attach a date and update all these items and say, ‘OK, on the 20th of the month, make all these prices change,’” he says.
Modify Prices With Ease
Customer pricing software is also saving distributors like Jessup, Md.-based City Group valuable time by eliminating the labor and errors associated with manually keying in pricing information when modifying product prices. In fact, the company is able to quickly and easily import thousands of products and update list prices and costs.
Every year, the distributor, which has a large focus on equipment repair, receives updated pricing from its equipment manufacturers on all their equipment and miscellaneous parts. Instead of having employees key in all these products and update prices manually, the pricing software does the work itself, says Rick Silber, the company’s president.
“What we do is run manufacturer discs against our computer and what the system does is it goes in and finds our SKU numbers which are unique to each manufacturer and modifies the pricing automatically,” he says. “So what would take us days if not weeks to do manually, now takes us seconds.”
By having the pricing software modify product prices, distributors are also able to eliminate internal inefficiencies — especially overlooked dates.
“The system is updating and monitoring constantly,” says Cadell. “When a contract expires, it notifies you that the expiration is coming.”
When a price contract for a particular product or product line is set to expire, distributors are notified by the system ahead of time and are given ample time to notify their salesmen and their customers who would be affected of a pricing change to avoid any confusion or complaints.
The software system also doesn’t let pricing errors go unnoticed. When the system recognizes an error, such as an expired contract price for a certain product for a customer for instance, the system will notify the distributor employee who is entering the order.
“If the contract has fallen off, in order entry, whoever the user is entering it will see that the whole item becomes red and it notifies them at that point this price
contract has expired,” says Cadell. “The price may be the same, but if there was a cost increase in between from when it got set up and at the time of purchase, the system will take over and say it needs to be at a certain margin and it will adjust the price right away.”
The software is also going a long way in helping distributors maintain their profit margins. Built into the software is a tool that automatically recalculates each distributor’s expected profit margin for each product sold.
For instance, if a case of toilet paper is $10 in cost and a distributor places a predetermined 50 percent gross profit on each item, the system will price it at $20 to sell to customers. But if that toilet tissue goes up in price to $12 a case, the system will automatically adjust the price to meet the 50 percent margin and the price of the case would be $24.
This pricing structure gives distributor salespeople the peace of mind that pricing for each individual customer is accurate, says Collin Carney, president of Great Western Supply, Davenport, Iowa.
“This allows them to concentrate on servicing our customers with custodial procedure training, inventory requirements and any other end user special needs,” he says.
Also, by having this feature do the work for distributors, it takes away the concern that often plagues salespeople who are guilty of not paying attention to what prices a particular customer is purchasing at.
“It prevents you from the old fears of not paying attention to a customer and then three months down the road the customer is paying less for the product then what we pay to buy it,” says Cadell. “It prevents that and really holds and locks in your margins so your margins stay a lot more steady.”
Notification Of Price Increases
Unexpectedly charging more for products without notice doesn’t go over all too well with customers.
Software allows distributors the option to e-mail or fax customers to notify customers of a price change or increase that will be going into effect. Distributors have the option to send these pricing notifications to customers on an automated level through their software system. However, most distributors that have this capability with their pricing software are not using it to their full potential.
“Most price increase information is funneled through our sales force, which then communicates that to the customer base,” says John Eastes, director of information services, Flex-Pac Inc., Zionsville, Ind. “Our sales management believes that they want the salesperson remaining in that loop to convey that level of communication.”
But as more distribution operations become automated, electronic notification of price increases may be down the pike.
As software manufacturers continue to dedicate their time to helping streamline distribution operations, distributors must stay abreast on technologies such as pricing software. Overlooking relatively inexpensive technology that saves time and money and helps maintain profit margins is not a wise choice in an era of manufacturer price increases.
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