The Top 4 Pricing Features Pricefx Offers Distributors

As a distribution business, your company by its nature must confront some unique pricing challenges that organizations involved in other industries do not need to be concerned about. For years, distributors have pursued greater scale to expand margins by a few percentage points and return on sales in mergers. However, as the opportunities for upscaling dry up, raising margins through automated and dynamic pricing has remarkably been a thing that big distributors have shied away from and simply considered ‘too difficult.’ Instead, they have allowed sales teams to continue to rely on their own manual inputs, knowledge, and experience, rather than the deep and useful insights that modern pricing software can provide. That is why we decided to take you on a journey of the Top 5 pricing features that Pricefx can offer your distribution business. 

At Pricefx, we have spent more than decade assisting hundreds of clients to make data-informed and real-time pricing decisions for their distribution industry businesses, empowering them to protect their profits, and while doing so, assisting them to transform into lean and nimble pricing-efficient organizations.  

In this article, we will examine the Top 5 pricing features Pricefx offers distributors, how those features save you time and money, and if you had to, what your non-pricing software options might be for trying to perform the same pricing functions.  

Pricefx’s Top 5 Pricing Functions for Distributors 

Without further ado, let’s dive straight into Pricefx Top 5 pricing software functions that directly benefits distributors and examine how each may help you in your pricing endeavors. 

(Please note, this is not intended to be an exhaustive list but instead covers the main pricing tasks and pain points that distribution companies are answering daily with the Pricefx solution); 

1. Procurement/Condition Management or ‘Vendor Price Management’
2. Price Optimization –Targeted & Transparent
3. Quick & Easy Adjustment to Cost Changes
4. Simulating Price Settings & Changes

1. Procurement/Condition Management or ‘Vendor Price Management’ 

The Problem  

As a distributor, you need to track the entire supply chain of activity from product sourcing through to the successful delivery of your products to your satisfied customers. While it goes by various names in different distribution businesses, the issue of procurement management (sometimes even called ‘condition management’ or ‘vendor price management) is a vital one to your profitability. 

Whatever the chosen term is for it in your distribution company, the long and short of it is that you to stay on top of ‘vendor price management.’ How much you eventually charge your customers will depend on managing the incoming prices and conditions from your product suppliers.  

For distributors, knowing the conditions of the procurement (how much the goods cost you) of the products you are on-selling is an extra step that companies in most other industries do not need to be concerned with. 

But you do and knowing the incoming prices and conditions will allow you to prevent margin leakage. 

Taking your supplier’s price lists and conditions into account will be your pricing starting point and you will begin your price waterfall from there. 

The Solution 

Vendor cost management is a capability within our price-setting functionality that allows complete visibility into vendor cost changes, the trends over time of those changes, and the overall impact on the business. The functionality also includes an approval workflow, so all vendor cost updates are ensured to be accurate before rolling them out and into your resales.  

In Pricefx, the ability to automatically update your supplier price lists and therefore build them into your real-time pricing makes sure whatever your business objective is (and let’s face it, for most of you, it’s all about maximizing profit), is achieved. 

2. Price Optimization – Targeted & Transparent 

The Problem 

Price Optimization is a much used ‘buzzword’ in the pricing industry right now, but it’s power and practical applications are not always fully understood (particularly for distributors). 

To understand the power of price optimization and what it can do for your organization, let’s imagine your distribution business finds itself in the following scenario with no solution in sight other than spending thousands of labor hours attempting to marry up error-prone spreadsheets across the disparate global regions that your company operates in; 

Having determined your internal business strategy for auto spare parts distribution business, you have decided that you want to:  

• Increase Sales volume on your high performance sportscar parts to lower production costs. 
• Have a standard 30% profit margin on your electric vehicle spare parts as it is still more of a niche market and electric vehicle owners will spend more on parts as their vehicle running costs are lower 
• Have a standard 15% profit margin on all your other vehicle spare parts 
• You want to apply all these rules in every market you sell in except for the United States, where a standard 10% profit margin applies across all your spare parts due to increased competition between suppliers.  
• You want to re-assess and re-set these business outcomes every quarter. 

The Solution 

With the ‘real world’ AI-informed Pricefx Price Optimization capability, you can turn the abovementioned five business outcomes for your auto spare parts distribution company into reality to calculate and set your global spare parts prices accordingly.

Choosing what your business objectives will be is entirely up to you.

 

But the FLEXIBILITY in the Pricefx pricing tool is there for you to make almost any objective possible.

With the implementation of the price optimization function, the following range of pricing benefits will be available to your company: 

• Automated price optimization based on defined business goals and relevant user-defined constraints  
• Simultaneously optimize all pricing elements (list price, discounts, etc.)  
• Account for elasticity in predictions where applicable  
• Predict impact on revenue, volume, margin  
• Perform breakeven analysis  
• Use transaction and rule-based customer segmentation and product categorization  
• Gain full transparency of your results with a clear-box approach to stop bleeding profit and protect your margins. 

3. Quick & Easy Adjustment to Cost Changes 

The Problem 

Your hard-working pricing team is currently spending thousands of labor hours performing manual updates to your price lists. What’s more, given the current extreme rate of price change and market fluctuations, your team is required to spend more time than ever before performing these mind-numbing manual and therefore, error-prone tasks. 

As a result, your pricing team has little to no time to do what they do best and enjoy doing – thinking strategically and solving the ‘big picture’ problems – that confront your distribution business. What’s more, the longer it takes to update your price lists, the more possibility of margin leakage filtering into your pricing.

The Solution 

So, when you switch to automated price list updates – what happens to your pricing team? 

Yeah, you got it. Your pricing team has more time on their hands to work smarter, not harder, and discover new business opportunities and pathways to profit that your distribution company never knew you had. 

The image below paints a thousand words (and a lot more) on how quick and easy cost changes can alter the working lives of your pricing team and your company’s pricing perspective as a whole. 

And as a bonus, by becoming a proactive price list updater, your company will be making a significant saving on potential margin leakages. 

4. Simulating Price Settings & Changes

The Problem 

As a distributor (depending on your business model), you might not even want nor need to be updating your prices in real-time every day (even if the functionality is there). 

What might be more valuable to your company and achieving your unique set of business challenges and objectives is being able to simulate outcomes to theoretical shifts in your pricing to see where those changes could potentially take you in the future. 

For example, do you want to see what impact on your sales, volume, and revenue might look like if you set a margin percentage goal across your multiple jurisdictions of operation?

Or on the other hand, would you like to analyze how that price reacts relative to the price position of your competitors?

Sure, you can do it in an Excel spreadsheet. But do you want to? Or even more relevantly, do you have the staff resources and available hours for them to dedicate to a task that is only a simulation test? 

The Solution 

Within the Pricefx Price Setting module, you can simulate changes in any data and rule that is affecting your price calculation and analyze the outcome on any of your relevant KPIs. 

Sounds like a fun ‘What if’ toy, right? 

Sure, but it is much more powerful and effective than that. 

By simulating your price settings, you can gain deep insights into the sales and profit effects of pricing by controlling internal, retailer, and competitive actions.

 

An accurate view of the effects of your pricing actions will increase your company’s profitability.

For example, you can significantly reduce the risk of poor pricing decisions by simulating the effects on profits of premium brands that are prime candidates for value-based pricing.  

What’s more, you can develop full visibility and understanding of the importance of competitor reactions to your pricing decisions. 

Discovering How to Use Pricefx to Implement Your Pricing Strategy 

Now you know the Top 5 ways that Pricefx can specifically assist your distribution company to achieve your unique set of business goals and transform your pricing strategy into positive outcomes.  

Or maybe you’re at the starting point where many of Pricefx’s clients begin their pricing journeys, and you want to know how to implement a price strategy. 

If you are still in the pricing software ‘starting gates,’ check out this handy article for advice on implementing your pricing strategy: 

On the other hand, if you already have your pricing strategy in place and this article has helped you decide that Pricefx is the pricing solution that your distribution company needs, then you will want to talk to one of our pricing experts to get started today;