Well-managed distributors put seasoned managers in charge of critical functions such as inventory, receivables, credit and customer service. Yet most companies don’t designate a specific manager to be responsible for pricing.
The sales representatives and sales leaders generally are responsible for day-to-day pricing. Less experienced sales reps sometimes confer with their peers and sales leaders but they are pretty much on their for own when pricing smaller orders. Busy sales managers get involved when asked or if a large order is at stake. Management review of the reps’ pricing is mostly on an exception basis.
The lack of a clear pricing process is usually the culprit for this oversight. Sales people, being closest to the customers, are thought to have exclusive access to market pricing information. This assumption is faulty for two reasons:
- The company already has a rich database of reliable competitive pricing data.
- Much of the pricing information the sales reps receive from customers is inaccurate, out of date and often otherwise undependable.
Distributors need a well-defined pricing process to analyze and harness the market pricing information in their transaction database. A qualified pricing manager is essential to manage the company’s pricing processes and take responsibility for consistent pricing, prevent margin slippage and achieve ongoing margin improvements.
SMART Pricing provides a strong pricing foundation and analytical tools to build market-driven pricing matrices and to identify pricing outliers. Continuous monitoring of pricing exceptions and periodic updating of the matrices assures sustainable margins.