If your winning pricing model is still being led by just your experienced sales team, it is probably time to make changes for the future.
I had the opportunity to sit in on the excellent HARDI Pricing certification session that kicked off recently with my friends and colleagues leading the session from ACTvantage: Senthil Gunasekaran and Pradip Krishnadevarajan. Senthil and Pradip literally wrote the customer segmentation book for distribution close to twenty years ago on pricing, sales, and inventory segmentation, so I was very excited to be a silent observer.
As the pricing certification participants from many of the leading HVACR distributors shared their challenges and goals I started to take general notes on what I was hearing. Three key themes seemed common that I jotted down.
- They have very experienced sales teams that decide the price levels….Experienced relationship selling Cowboy and Cowgirl sales teams
- The Pricing team leaders are often stretched with lack of resources with many having multiple roles – Some participants have both “Buy Side” (purchasing) and “Sell Side” responsibility (Set System Prices)
- All the great companies on the call want to build better systems and processes to improve profits and reduce risk
I’ve been fortunate to work for six great distributors over my career as a pricing, inventory, marketing and sales leader for large public, private equity, and family-owned distributors. In each case, we had our own culture and way of doing things, and had experienced field sales teams who led the pricing decision making.
So, as I was taking notes as a silent participant, I started to write and do some doodling (those grade school habits are hard to break, I guess) The general thoughts were as follows:
- Hire good salespeople and give them the autonomy and training to make good commercial pricing decisions
- Our sales teams have great relationships and make good pricing decisions
- Our margins could be better, but our sales teams use their knowledge and experience to win orders at acceptable profit level
It really is the 1-2-3 of distribution pricing that has been used for the past 100 years that was based on face-to-face selling and relationships. I believe that same 1-2-3 foundation is still the bedrock of the business, but it is showing some cracks.
The great companies that were in the one session I attended (12 in the call I was on, and there are multiple sessions) as they were sharing their sales structure I started to check mark as Cowboy Sales and or Non-Cowboy Sales organizations. Of course, as no surprise the majority of marks were for cowboy sales teams. Please do not interpret that as a negative comment at all. That is not a negative as many great distributors are very successful using that same approach since their founding. If it isn’t broke why fix it, but….
The pricing and inventory challenge with Cowboy Sales teams that many distributors count on today is that about 80% of them are riding off into the retirement sunset in the next 10 years.
At these sessions that Pradip and Senthil are leading for HARDI, I predict the attendees will learn two critical lessons–
1. We were doing a lot right, and I will take what I learn through this certification program back to my business.
2. There were other distributors doing things that we could learn from that we could take back to our business and implement. Process improvement will help us build better pricing systems in the future to win more often.
In HVACR distribution having the right “Same Day” inventory at the right market price levels is EVERYTHING. When that HVACR system goes your customers need the right parts to fix it – NOW. The service rates of the business require that you have to have the material as close to the customer as possible at a fair price.
If you do not have proper customer and supplier segmentation it can limit having the right “same day” inventory on hand for the “need it before I even call you customers” that you serve. The HARDI certification courses for Pricing and Inventory are designed to help your business build a better mousetrap before the cowboy sales team that you count on rides off into the sunset. It is a great program and I would encourage you to learn more about how you can participate by reaching out to HARDI or the ACTvantage team.
As always, if you have any feedback please comment below or contact me ay john.gunderson1217@gmail.com
