Video: Building Material Distributor Gains 540 Basis Points

The executive team at this £3 billion distributor of building supplies and associated products knew there was a significant opportunity to improve pricing and gain margin dollars on negotiated transactions.

These negotiations, or spot bids, accounted for 70 million line items each year, yet some deals were sold with a margin 70 percent below the target margin! Ultimately, the company was able to empower sales reps to make better price decisions on negotiated bids, resulting in a 540 basis-point improvement in margin rate.

Watch this short video now and learn how they did it.

Forget the Economy: Here’s How Building Material Distributors Can Still Grow

Many building material distributors have been playing a game of cat and mouse when it comes to the ups and downs of the economy. Market goes up, let’s focus on new business. Market goes down, time to be less profit aggressive. Even in a difficult economy, it is still possible to grow revenue and profits at the same time.

construction economy

This blog post digs into the factors that are holding the construction industry in a state of fluctuation and offers up a fresh perspective on staying profitable in uncertain times.

Building Material Distribution Dynamics: Construct a Plan for Profitable Growth

Recovery in the building material distribution market from “The Great Recession” has been relatively slow, with the industry still feeling the effects. Leading economic indicators for the market projected 2014 to be a growth year, with total industry sales expected to increase by 7.5 percent. Yet, winter-weather challenges have hit the industry with delayed projects and transportation setbacks. As a result, housing start figures have been on a three-month slide and builder confidence numbers are a mix of positive and negative expectations for the next six months. [Read more...]

Dynamic Pricing a Win-Win for Companies and their Customers

Recently, a New York Times article explained how the Broadway musical “The Lion King” has used dynamic pricing to become the top grossing show on Broadway. This story demonstrates two important benefits of price optimization that are usually overlooked or misunderstood. First and foremost, dynamic pricing is good for customers and consumers. When prices are aligned with customer price sensitivity, markets work most efficiently in serving demand. Second, optimization can increase both revenues and profits, seemingly in defiance of price elasticity. The trick is balancing the price-demand tradeoff across a more dynamic, customized range of prices.

Aligned Pricing Sells More Tickets

Based on some vague notion of “fairness,” some people think that differentiating prices using sophisticated algorithms like Disney’s harms customers. But in fact, by aligning prices with the relative value customers place on the tickets, Disney achieves the optimal balance of pricing and demand. This alignment means more customers get the seats that they want at a price they’re willing to pay. Twice as many people per week are seeing “The Lion King” as Jersey Boys, so it must be true that Disney’s dynamic model does a better job of meeting customer needs than a more static approach.

Image sourced from the New York Times

Image sourced from the New York Times

Price Optimization Can Grow the Top and Bottom Line

Disney’s audience algorithm is using historical sales to measure the relative price sensitivity of different customer groups across varying demand dynamics. Based on that sensitivity, it adjusts prices such that they sell out every night while maximizing the average ticket price for peak and off-peak dates. Doing one or the other is easy: If they simply offered $50 tickets every day for every seat, the [Read more...]