The 4 Profit Levers Distributors Need to Master

Apr 5, 2021

By David Gordon

Electrical distributors are at a unique moment in time where they have an opportunity to leverage technology to utilize the data it can unleash to accelerate profitability and sales cost-effectively.

Being in an information age is only beneficial if the information is utilized. Enhanced sales models, sales opportunities and servicing systems are combining to help differentiate distributors. Aside from a distribution divide being created by digital and supplier selection, analytics can either widen or tighten the divide.

SPARXiQ, a leader in helping distributors improve profitability, is working with companies to help them gain deeper insights into the drivers of their profitability and generating insights that can accelerate sales growth. According to SPARXiQ, industry-leading distributors are continuing to find more ways to integrate data and analytics into strategic plans and daily decision making. This is, in part, a response to unpredictable economic and market forces shifting buying behavior in our industry. With more technology and innovative tools available than ever before, it’s a great time to discover opportunities for refining and optimizing your business.

• Deploy data-driven sales recommendations that help grow new and existing accounts
• Use analytics to set price points that optimize margin while staying competitive
• Uncover operational and cost-to-serve issues that are draining profitability
• Optimize vendor costs and rebates to boost margins on the purchasing side

Sales  

Top line revenue numbers are dependent on your sellers’ ability to grow revenue in new and existing accounts. 

• Why aren’t we adding more new accounts?
• Where can we grow existing customers?
• What critical skills are lacking in our sales team?

Pricing

Rich data can help answer critical pricing questions that significantly impact profitability.

• Are we strategically pricing items based on true market sensitivity?
• Does our sales team have flexibility where needed while still maximizing margins where possible?

Cost-to-serve

Your optimal bottom-line profitability depends on a lot more than just gross margin.

• Do we know our customers’ true cost to serve?
• Which accounts and products are draining profits?
• What is causing specific accounts and products to be unprofitable?
• What is our remediation playbook for unprofitable accounts and products?

COGS

Data analysis helps answer critical vendor costing (COGS) questions that aren’t asked often enough.

• Are we strategically getting optimized vendor cost based on project- or end-customer pricing and cost-to-serve?
• Have we identified profit-drain customers per key vendor?
• Have we optimized vendor price supports and back-side rebates?

David Gordon is President of Channel Marketing Group. Channel Marketing Group develops market share and growth strategies for manufacturers and distributors and develops market research. CMG’s specialty is the electrical industry. He also authors an electrical industry blog, www.electricaltrends.com. Channel Marketing Group does not engage with clients on detailed pricing strategies, however, given that pricing is a critical element of sales, marketing and growth planning, we do get asked about the topic and can share opinions and refer to those who focus on the area as well as share anecdotes. David Gordon can be reached at 919-488-8635 or dgordon@channelmkt.com.