Pricing is an important element of a distributor’s go-to-market approach. If you’re not, at least, competitive, you know what will happen to sales. But if you are too low, getting a reputation for that isn’t good, nor does it help your bottom line.
The past few years, inflation and product availability enabled HVACR distributors to, hopefully, optimize pricing (and net profitability). But now, with rising costs, a slowing / stagnant market, you need to consider how to use pricing as a better sales and marketing tool … strategically.
Periodically we enable guest columnists to share thoughts to help distributors and manufacturers. Today, Nelson Valderrama, CEO of Intuilize, shares his thoughts on pricing.
“HVAC businesses, buckle up! Inflation rates have plateaued. The Fed seems poised to reduce prime interest rates. But new challenges offer heightened risk and rich opportunities.
Eco-friendly mandates, “smart” products, talent shortages, and an informed customer base present new challenges to HVAC planning. Among all these distractions, stabilizing operations and finding growth opportunities can be a struggle.
It’s time to revamp pricing strategies and embrace advanced technology.
Can you ride this out?
So. what’s the plan? Can you weather the storm when inflation makes setting HVAC prices and forecasting profits difficult? Riding out this storm without an adaptive plan could prove risky.
This is no time to wait for a return to “normal.” HVAC must break free of legacy pricing practices to unlock new opportunities. You can no longer rely on “tribal” wisdom and gut feelings.
It’s time to embrace transformative change, especially when AI and machine learning can be your sidekicks, making proactive decisions in marketing and sales.
Salespeople want a change!
Salespeople are itching for a change! Sales meetings, research, and administrative tasks consume their hours.
They crave easy access to real-time info on inventory readiness, past transactions, and current customer and competitor trends.
It’s time for HVAC distributors to give their sales model a facelift.
Are you ready to move?
Every business needs a dynamic pricing framework to manage customer and competitor trends ahead of the curve. Pricing strategies must be nimble and quick to adapt to shifting economic indexes.
If you haven’t hit the ground running in Q1, you have lost traction on your way to Q2. You can’t wait six months to generate results.
HVAC distributor, it’s time to embrace agile sales strategies invested in a framework that allows you the ability to pivot as customer demand shifts.
You need an agile pricing framework!
Could an extra 2% gross margin help you alleviate increased costs?
Legacy pricing plans won’t cut it. An agile pricing framework is your ticket to staying ahead, especially in a market where customers hold the cards.
Legacy sales plans don’t encourage dynamic, adaptive, and agile responses to shifting customer and competitor trends. HVAC businesses can only squeeze so much from inventory and operations in uncertain times. Eventually, you must recover the profit margin sacrificed while you hold the pricing tight.
It’s smarter to adjust your pricing before that shoe drops. HVAC distributors need a strategic approach to change and uncertainty. You want a framework with the flexibility to pivot when necessary and the resilience to respond to the unexpected.
And you need to act now!
How agile is your pricing?
Most HVAC businesses adopt a hybrid pricing strategy to cover operating expenses and profit expectations. The strategy keeps prices consistent and constant. A clear view of the future sure would make pricing easier. But staying the course in turbulent economic waters will backfire.
Look at how markets have changed! Shoppers who buy B2B or B2C have learned to research product quality, utility, and service. The Internet offers all the information (and disinformation) they want. The customer’s perception of value shapes their shopping decisions.
The customers’ perception of value also gives them leverage to move their business or negotiate lower prices, packages, and terms. Instead of building price upon the cost of goods procured from suppliers, successful pricing is agile and able to anticipate and respond to customer expectations.
You’ll find the business unprepared for the economy’s next turn when your salespeople rely on their notes or gut feelings about how to price bids, offer discounts, or take on the competition.
HVAC distributors need a “go-to-market” sales strategy instead of driving an “order-taking” sales and service desk. To make this shift, HVAC providers need real-time, accurate, and actionable information to boost GMROII (gross margin return on inventory investment).
An indispensable tool
Solid data drives good decisions, and effective pricing depends on accurate and timely information. The better the information, the better the forecast on market and economic trends.
HVAC distributors need AI and machine learning to explore your transaction history, market trends, and competitor pricing practices. These cutting-edge, high-speed technologies transform the data into information salespeople can leverage for solutions to customer needs.
Innovative predictive analytics prompt sales reps on the time, type, and price specific to customers and prospects. It anticipates customer needs, creates customer value, and builds and sustains relationships.
Take the success story of one HVAC distributor as an example. They invested just four months in deploying dynamic price guidance in 2019. It proved to be a game-changer during the challenges of COVID-19 and the post-COVID era. By fine-tuning their pricing every quarter, they achieved a remarkable 11X ROI. This strategy positioned them to respond effectively to market changes, even as sales declined in the fourth quarter of 2023.
HVAC businesses can manage the changes that threaten them with these indispensable AI and machine learning tools. You’ll gain a first-mover advantage with the right product at the right time and a price based on accurate forecasting. They ensure your organization has the flexibility and resilience to offset current and future threats. And they help HVAC enjoy certain success in uncertain times!
As a friend of mine said: “What would be the effect on your salespeople if your agile pricing model could bob and weave with the client/situation”?
Nelson Valderrama, CEO of Intuilize, is a skilled data-driven strategist focused on boosting profits for mid-size distributors. With 25-plus years of experience in all aspects of the wholesale industry, Valderrama continues to support businesses in discovering hidden competitive advantages and leveraging data’s potential in the modern Digital Economy. Nelson has pioneered AI-driven pricing and inventory optimization, providing decision-makers with accurate, visible, and real-time-ready data. He is ready to help HVACR distributors thrive. You can reach him at email@example.com or visit www.intuilize.com for more information.