With the adage “right tool for the job” firmly in mind, we wanted to understand more about the ordering customers companies and more specifically, the type of sector / trade they worked within. Identifying upwards of a dozen different trade types across the customer portfolio, we looked into purchasing patterns. What types of tools, protective equipment and fixings did they buy? Was it seasonal? Specialist applications? So on and so on.
What was identified was that within these customer sectors, similar purchase patterns allowed for grouping into 4 distinct categories. Reviewing this with the client, we collectively came to the notion of ‘known and unknown’ products.
Customers were also grouped or segmented into categories based on multiple criteria during this process meaning that through implementation the pricing strategy had progressed from a single price per item to price brackets based on unit volumes and finally into a pricing mechanic that considered the relevant market sector, known or unknown products, order volume, customer potential to name just a few.
All of these metrics were agreed with the client with input from both the internal and external sales team.
To trial the pricing tool, a bespoke workbook was created in excel which allowed for customer, product and volume entry. All other fields would then auto populate with the ability to override either price or margin aspiration.
Within three weeks the sales team had secured a 3% increase on their gross margin. Following the trial, the pricing rationale was loaded into their sales system further enhancing the adherence to the new policy.