Who Knows the Real Price?

A topic that is near and dear to all distributors’ heart is their “unique” pricing to their customers, especially over the past 18 months.  For some distributors it is the only way they know how to “market” their company.  And for some who actively manage it, it is a constant source of incremental profit generation.

Developing your pricing philosophy, your pricing processes and more importantly managing those processes is critical to achieving your profitability objectives.  Understanding your marketplace is also important … both geographically as well as by market segment.  Your price is a reflection of your buying power, your operational costs and the premium you assign to the services that your organization provides.  And hopefully your customer agrees that the value you assign to the products you sell them is appropriate.

And competitive intelligence is important, especially with many customers knowing that they can play off one distributor vs. another.  How you ask the questions is a direct correlation to your relationship you have with your customer.

Now comes a service, with data from “participating” distributors, that purports to “instantly determine up-to-the-minute pricing, including average and median as well as high and low prices on tens of thousands of electrical items.”  RealPricer, a service from Material Express, which also offers Invoice Connection to distributors, according to this press release is in a beta mode.

Unfortunately, all we can do is read a press release and view a website.  If you are a “beta / participating” distributor, or who have seen the site (or can get a demo), we’d be interested in your thoughts.

Some thoughts and observations:

• The idea of a tool that provides marketplace pricing trends (and we question the ability to get geographically granular enough to be effective) could be helpful if “low” pricing distributors used it to migrate their pricing upwards (but we know that much pricing is opportunity-specific.)
• Many distributors, unfortunately, may view the pricing as “this is where the market is, if I price at x minus a %, then I can take some share.”  That would pull many down and further erode industry profitability.  We know, and have seen, that a few distributors can quickly erode market pricing, hurting everyone in the process.
• Presumably the system will include some customer segmentation … industrial and contractor pricing is different, let alone custoemr relationship and volume.
• If “everyone” in a market adhered to a market average / median, and customers learned of the service, coudl there be the perception of “price management”? (We don’t know the legalities as this is different than MSRP.)
• From a manufacturer perspective, does this create some consternation?

We recognize that anyone with a good concept should test the market to see if there is an opportunity.  The question becomes, is this a good concept that the industry should support?

Last year Material Express rolled-out Real Pricer.  At that time we reported on it, and eventually were told that it “wasn’t read to be introduced to the industry.”  What do you think of the concept and the service now?  Is more information good for everyone? Would this be beneficial for you?