2012

January

Unit Price Audit

Consistent unit price auditing is critical to driving improved margins. Our ERP (accounting systems) systems will have a price that we would like our salespeople to adhere to. The reality is that often this price is overridden or changed.

 

Managing unit price fluctuations can have various  benefits

 

1. Are we selling the same product to the same customer or customer group at different prices? (yes I have seen that happen)

 

2. Are we lowering prices to the right customers? I have witnessed small low volume customers with lower prices that the good A grade customers

 

3. Which salespeople are capable or maintaining the right selling prices.

 

4. Which customer groups or market segments are less price sensitive and are we growing in these segments or are we declining.
 
The audit steps are:

Step 1. Products by Period - Identify high volume products. Your sales analytics show all customers that have purchased this product
 
Step 2. Customers by period for the selected high volume product- Westgh SPC price
 
Step 3 - Select the selling price for this product for all customers

Sort best selling price to worst selling price. Observe the wide price range, certain customers are charged a prices far greater than others. you may be surprised that these high priced customers do not fall in the "D" category and yet some of the customers that should be charged higher prices are not.
Step 4 -Sort worst selling price to best selling price …. Are these the right customers that should be receiving the best prices?
The sales analysis by product price shows all the customers that are attaining pricing preference. The check here is to determine if these are the right customers that should be receiving the lower price.
Step 5 - Define the market segments and how the prices vary between the market segments.
Can we grow the cooling segment?
This is where good sales analysis capabilities can be most effective. The individual product is summarised into the various markets that it is sold into based on the average selling price attained within each market segment. If our goal is to optimize the price of a specific product the market segment analytics informs us where the best average unit selling price is achieved. The next step would be to identify the tactics that can allow the growth in that market segment.
 
 
Unit selling price analysis is one of the many ways we can create good growth in the distribution business without actual price increases. That does not mean that price increases is not an appropriate strategy. We will be talking about where are the best opportunities to increase price.
You comments and experiences would be most appreciated.