Mark Cuban and his friends on Shark Tank dramatize the harsh reality that nobody will invest much in an unprofitable business. The noisy moguls on the show didn’t get insanely wealthy by a quirk of fate: they inherently perceive the crucial need to control their margins, their costs and the profitability of their customers.
The profit sharks are not profit “dilettantes”, that is, investors who engage in business without serious intentions and who pretend to have deep knowledge. In other words, dabblers. Profit sharks don’t dabble, they play to win.
The distributor pricing function is undermanaged at many of the best wholesale distribution businesses. Pricing is usually delegated to the sales team who must undertake this difficult and time-consuming job without market pricing information and with little time available to do it.
Evergreen Consulting’s holistic approach to distributor pricing, SMART Pricing, is based on our belief that routine pricing for smaller customers is not the highest and best use of a sales professional’s time. A true sales executive must delegate routine pricing to the company’s system and support staff. When negotiating larger pieces of business, sales pros need market pricing data and guidelines to make (and get) concessions that lead to win-win results for the customer, the sales rep and the distributor.
Market pricing information is derived from the transaction database using sophisticated data analysis techniques. Bracket pricing (pricing matrices) are built for each customer segment and product line, and are adjusted to account for customer pricing sensitivity and other factors.
Pricing strategy is important although “culture eats strategy for breakfast” (attributed to Peter Drucker). Evergreen Consulting’s SMARTPricing philosophy is that each account executive must have a customized and detailed implementation plan for the territory, and that each person must have reasonable latitude changes affecting his or her customers. A good pricing strategy, poorly executed, will not achieve its purpose.
Sustainability is assured through ongoing monitoring of variables such as deviations from matrix pricing and periodic reevaluation of the pricing matrices. Pricing updates are seamless and dependence on special pricing agreements is minimized.
SMART Pricing is a holistic process, carefully integrated with customer profitability (SMART CPA) to assure that high profit customers are protected and that above-market pricing recommendations are avoided.