How do you pass on supplier increases across thousands of lines when every branch can discount?
Unlock annualised EBIT equal to 1.75–2.5% of revenue within 90 days
You carry the range, the stock, the technical advice and the delivery your customers rely on. Then a supplier increase lands before the price file catches up, a customer shows a rep a cheaper quote, and a special price set for one order quietly becomes permanent. Margin seldom goes in one decision. It drains away through eight familiar habits: value that is never defined, prices built up from cost, a commodity mindset, discounts given to win or keep business, procurement out-negotiating the sales team, increases that never reach the invoice, price structures too tangled to manage, and leaders pulling in different directions.
Eight disciplines win it back: list prices, customer discount levels, overrides, rebates, channel pricing, price optimisation, volume and mix. You know your customers and your suppliers better than anyone. We bring 30 years of real-world pricing experience, including our work with distributors in trade, office, rural and hardware supply, and practical, step-by-step techniques that improve revenue, margins and profitability.
Distribution clients include Bunzl, Staples, Tradelink, Mitre 10 and Farmlands. 160+ clients since 2007 in Australia, New Zealand, Asia, India, the US and the UK.
Three pressures that squeeze distribution margins
None of them is new. What has changed is that they now arrive together, and each one is a pricing decision as much as a market condition.
Supplier increases that outrun the price file
- Suppliers give notice of increases through the year, and each one changes the cost of hundreds of lines.
- Where nobody owns the update, the branch buys at the new cost and sells at the old price until the file catches up.
Customers who compare line by line
- Trade customers see their account prices online and check the lines they buy most against other suppliers.
- The visible lines are pushed down, while thousands of slow movers keep a price nobody has reviewed.
Discount authority spread across every branch
- Branch managers, counter staff and reps can all discount, often without a written strategy or a floor.
- Specials are added on request and rarely expire, so the exception becomes the price.
Eight ways margin erodes, and eight ways to win it back
Our 16 margin techniques set out where margin leaks and where it can be recovered. In distribution, each one takes a familiar form.
Eight ways margin erodes
Undefined value drivers
Reps cannot put a dollar figure on stock availability, range, advice or reliable delivery, so they lead with price.
Cost-plus pricing
Category mark-ups on supplier cost set thousands of prices, whatever the market will pay for each line.
Commodity mindset
“They can buy it anywhere” becomes the sales story, and price matching becomes the policy.
Discounting to win or keep business
Counter discounts and specials given because the customer asked, not because the account earns them.
Out-negotiated by procurement
Buying groups and national accounts negotiate with trained buyers; branches negotiate with habit.
Price increases that do not stick
Supplier increases reach the price file late, and contract and special prices miss them altogether.
Tangled price structures
Customer levels set at account opening, layered specials and stacked rebates nobody can explain.
Management misalignment
Sales are paid on revenue, finance targets gross margin, and the price falls between them.
Eight ways to win it back
List prices
One list price per line, with key lines priced to the market and the long tail priced to its worth.
Customer discount levels
Customer levels earned by annual spend, with entry and exit rules reviewed each year.
Overrides and tactical discounts
Authority bands by role, with a floor in every quote and a reason code for every exception.
Rebates
Customer rebates paid against growth or range hurdles, and counted in the margin by account.
Channel pricing
Separate price levels for trade, cash, key accounts and resellers, so no small account pays less than a major one.
Price optimisation
Supplier increases, exchange rates and freight passed through on a set timetable, with each line priced to its role.
Volume management
Margin by customer and line after rebates and freight, so volume targets stop rewarding unprofitable accounts.
Mix management
Sales targets that move customers towards higher-margin ranges, private label and services.
A 1% price rise on $100m of revenue adds $1m to EBIT, with the same volume and the same cost base.
From and towards: nine elements that decide margin in distribution
The Pricing Periodic Table sets out 61 elements of pricing capability in nine domains, across Value, People and Structures. In distribution, our work most often starts with these nine.
Value
What the customer gains and how you charge for it
Written pricing strategy
A published strategy for each person allowed to discount, with floors and no-discount zones.
Segment and channel strategy
Cash buyers on their own level, trade levels earned by spend, resellers priced in proportion.
Service value
Freight, small orders and urgent picks priced, with a minimum order for free delivery.
People
Who decides price and how well they are equipped
Pricing function mandate
A named owner for supplier increases and same-day price file updates.
Commercial numeracy
One definition of margin across the price file, rep screens and targets.
Sales incentives
Margin weighted in incentives, with authority bands by role.
Structures
The analysis, price architecture and systems pricing runs on
Discount structure and tiers
One list price less a discount that deepens with annual spend.
Price corridors and exceptions
Deeper discounts opened only on the lines customers compare.
Buy-price and cost management
A pass-through rule for supplier increases, exchange rates and freight.
From and towards
How we make it happen
Four stages take a distributor from the size of the opportunity to prices that hold at the counter, on the phone and online.
Diagnose
We analyse the price file, customer levels, special prices and invoices by branch, customer and line, size the margin opportunity in dollars, and rank the quick wins: expired specials, under-levelled large accounts, tail lines and increases not passed through.
Optimise
We set prices by customer group and line, rebuild customer levels with entry and exit rules, separate key lines from the long tail, and design the supplier pass-through rule.
Embed
Category managers, branch managers and reps get authority bands, a discount policy they can explain, margin floors in the quote and training in value selling, so new prices hold.
Review
We track price file currency, special price expiry, overrides and margin by customer level each month, and adjust the rules as suppliers and customers move.
Distribution client results
Each result is labelled. Realised: measured after implementation. Identified: opportunity sized in the diagnostic, before implementation. Figures in Australian dollars.
Cost-plus pricing replaced across 18,000 SKUs. Gross margin on targeted SKUs up 800bps, with 98.3% of customers retained.
Read the case studyRealisedAlgorithmic optimisation of more than 5,000 prices on A$80m of addressable revenue.
Read the case studyIdentifiedPrice floors, delegated approvals and a national quote playbook across more than 200 branches.
Read the case studyIdentifiedStore autonomy balanced with consistent pricing discipline across more than 80 stores.
Read the case studyIdentifiedPricing to members and trade customers across a rural supply co-operative.
Read the case studyIdentifiedRebates, promotions and margin rules in pharmaceutical and healthcare distribution.
Read the case studyPrice optimisation programs return between 5 and 10 times their cost in year 1.
Four questions distribution executives ask
Can we lift margin without losing our biggest customers?
Often, yes. In many distributors the largest customers are also the most loyal, and some pay well below what similar customers pay. An account-by-account review led by your key account managers closes that gap with customers you are unlikely to lose.
Can we pass supplier increases through faster?
Yes, with a standing rule. A set trigger and timetable covering the price file and contract prices brings increases to the invoice within weeks of the supplier’s notice, without a separate negotiation each time.
Is there margin in the long tail?
Often, yes. Customers check prices on the key lines they buy often, and pay less attention to thousands of slow movers. Pricing the tail to what it is worth adds margin, and customer response is tracked line by line.
How do we keep customer relationships strong through the change?
Changes are piloted first, segmented by customer, and briefed to your sales team with the reason and the answer to the first objection. Volume and retention are tracked alongside margin. Bunzl retained 98.3% of customers through its rollout.
Ron Wood, Founder and Managing Director
Ron began his career as a pricing and commercial manager in industry, including building materials, FMCG and capital equipment. Since founding Pricing Insight in 2007 he has worked with more than 160 clients in Australia, New Zealand, Asia, India, the US and the UK, among them the distributors Bunzl, Staples, Tradelink, Mitre 10 and Farmlands.
He leads each engagement with a senior associate, working alongside your category managers, branch managers and reps on the price file they use each day. Your team knows the customers. We bring the method, the evidence and the discipline that make new prices hold.
Discover your margin improvement opportunity
Talk to Ron Wood about the pressures on your price file: the supplier increase still waiting to be loaded, the customer with a cheaper quote, the special price that never expired. In a 30-minute call he will work through where margin is made and lost in your business, and the first steps to capture more of it. Call +61 410 534 099 or email info@pricinginsight.com.au.
Discuss your margin opportunities