As you know, we’re big proponents of using price optimization solutions to keep your pricing continuously updated and optimized. But there are many reasons why distributors might go through occasional mass price updates: e-commerce platforms, catalog publications, new product line introductions and more. Here is a big guide filled with factors you should consider along with insights into how to determine frequency around mass price updates.

Market Dynamics and Pricing Factors

When determining the ideal frequency for mass price updates, it’s important to delve into the realm of market dynamics and external pricing factors. How well do you really understand the economic conditions you operate in, your competition and your cost structure? More knowledge means better decisions and a better competitive position. Not to mention the fact that you’ll be positioned as a well-rounded strategist on your team by bringing in external data to the pricing conversation.

Economic Conditions

As we mentioned above, pricing managers need to understand how inflation, exchange rates, and other economic factors can affect your pricing strategy. Here are some key aspects to consider.

• Inflation: Inflation is unpopular for a very good reason – it erodes purchasing power and thus raises your costs. Many pricing managers are responsive to inflation but with more study you can be proactive. Monitor inflation rates and adjust your pricing strategy accordingly to maintain profitability and keep up with rising costs. Some companies have had success with different bundling strategies during times of inflation, increasing or decreasing unit counts or combining less profitable SKUs with more profitable SKUs.
• Exchange Rates: If your business relies on importing products or raw materials from other countries, fluctuating exchange rates can significantly impact your costs. Monitoring exchange rate fluctuations and adjusting your pricing strategy in response will help you maintain healthy profit margins while remaining competitive in the market.
• Interest Rates: Changes in interest rates may affect the cost of borrowing for businesses, which in turn can influence the cost structure of your company. Keeping a close eye on interest rate trends can help you anticipate potential increases in operating costs and make proactive adjustments to your pricing strategy.
• Government Policies: Economic policies, such as changes in taxation, import duties, and regulations, can directly impact your business’s bottom line. Staying informed about any upcoming policy changes and adapting your pricing strategy accordingly is vital to safeguarding your profit margins and staying ahead of the competition. Trade associations can be a valuable source of information as many provide reports and even have policy lobbying programs.

Competitive Landscape

It should go without saying that you need to be keenly aware of your competitors’ pricing. Keep an eye on competitors’ pricing strategies and adjust your approach accordingly. There may be no bigger factor that shapes your pricing strategy than your competition. Certainly, competitive pricing situations are evident any time you see increases in price overrides. That can signal that you need to dive in deeper into your pricing strategy. Here are some key aspects to consider when analyzing your competitive landscape:

• Competitor Pricing: Regularly monitoring the prices of your competitors allows you to identify trends and potential gaps in the market. By staying updated on their pricing strategies, you can make timely adjustments to your own prices, ensuring that you remain competitive and attractive to customers. It’s important to use a solid distribution CRM package to track competitors in every deal.
• Market Share: Understanding your market share and the market share of your competitors can provide valuable insights into your pricing strategy. Many pricing strategies that distributors implement are solely aimed at gaining market share, investing in new markets and products or shutting down new competitors. Market share can be difficult to track. For larger companies, MDM provides interesting data. For smaller companies, looking in your CRM system for purchasing trends and complementary sales can be helpful.
• Competitor Promotions and Discounts: Keep an eye on any promotions or discounts your competitors are offering. To source this information, you should frequently “shop” your competitors and ask loyal customers to share flyers, emails and other marketing they’ve seen.
• Product Differentiation: Assess how your products and services differ from those of your competitors. If your offerings provide added value, you may have more flexibility in your pricing strategy. However, if your products are similar to those of your competitors, it’s crucial to stay competitive with your pricing and consider more frequent updates.
• Customer Perception: Be aware of how customers perceive your brand compared to your competitors. The more you are valued the more flexibility you have in raising your prices. However, if customers view your offerings as comparable to your competitors’, it’s essential to stay competitive with your pricing. Most distributors do a very mediocre job of understanding their customers’ loyalty and satisfaction. We recommend working with Boston Turner Group for regular surveys and loyalty measurement as well as strategies for improving customer satisfaction.

Editor's Note: If you’re interested in learning more about how distributors can react to competitive pricing, please read: Tips for Understanding Your Competitors’ Prices and Staying Ahead of Your Competition. In that article, we asked Daniel Cakora, Business Consultant at Vendavo, a global market leader in B2B price management and commercial excellence solutions, to provide some of his insights on competitive pricing scenarios.

Cost Structure

Regularly review your cost structure, including raw materials, labor, and overhead costs, to determine if price adjustments are necessary. This is particularly true during uncertain times of inflationary pressure and supply chain disruption. You know, like right now. It’s great opportunity for pricing experts to work with purchasing and finance to broaden your knowledge, influence and exposure in your company.

Here are some key aspects to consider when reviewing your cost structure:

1. Into-stock Costs: The cost of your actual stock and raw materials is often subject to fluctuations due to factors such as supply chain disruptions, changes in demand, or geopolitical events. Regularly monitoring purchasing and replenishment trends can help you identify trends and make timely adjustments to your pricing strategy. You purchasing department is your best friend here. If you’re company is using any kind of demand planning solutions working together may help you get ahead of trends.
2. Labor Costs: Labor costs can vary depending on factors such as wage rates, employee benefits, and productivity levels. Keep track of these costs and ensure that any increases in labor expenses are accounted for in your pricing strategy. This may require more frequent price updates to maintain profitability. Labor trends have fluctuated more in the last two years than in the last ten.
3. Overhead Costs: Overhead costs include expenses such as rent, utilities, insurance, and administrative salaries. Most pricing managers operate without a clear knowledge of overheads, it’s just not in their area of management. Failure to account for increasing overhead costs could result in reduced profit margins and in ways that a lot of pricing managers are not used to tracking. Work closely with your CFO and controller to help stay ahead of changes you that aren’t in your data sets.
4. Economies of Scale: As your business grows, you may experience economies of scale, which can lead to reduced costs per unit. Be sure to factor in these cost savings when determining the frequency of your mass price updates, as they provide an opportunity to increase profitability without raising prices. You might count volume rebates in this category as well and of course inventory turns matter.

The Role of Technology in Pricing Decisions

The biggest issue that keeps distributors from updating their pricing on a regular basis is that manual processes in pricing are fraught with problems. These include things like:

1. Human error: Manual pricing updates are prone to mistakes, such as incorrect data entry or calculation errors, which can lead to significant financial losses or customer dissatisfaction.
2. Inefficiency: Manually updating prices is a time-consuming process that requires significant effort and resources, taking away valuable time from other important business tasks.
3. Difficulty in maintaining consistency: Manually updating prices across multiple channels, products, and locations can result in inconsistencies and discrepancies, leading to confusion for customers and potential lost sales.
4. Lack of real-time data: Manual pricing updates do not consider real-time market fluctuations, competitor pricing, or changing customer demand, making it difficult to stay competitive and responsive to market changes.
5. Inability to scale: As businesses grow and expand their product offerings or enter new markets, manually updating prices becomes increasingly complex and unmanageable.
6. Limited analytics: Without pricing software or AI, businesses lack the ability to analyze pricing data effectively, making it difficult to identify trends, optimize pricing strategies, and make data-driven decisions.
7. Inadequate price optimization: Manual pricing updates may not consider factors such as price elasticity, customer segmentation, and seasonality, resulting in suboptimal pricing strategies that fail to maximize revenue or profit.
8. Difficulty in managing promotions: Manually updating promotional pricing can be challenging, especially when coordinating across multiple channels or locations, increasing the risk of errors and inconsistencies.
9. Delayed response to market changes: Manually updating prices often results in slower reaction times to market changes, allowing competitors to gain an advantage by adjusting their pricing more quickly.
10. Increased risk of non-compliance: Businesses operating in regulated industries may face increased risk of non-compliance with pricing regulations if they rely on manual processes, potentially resulting in fines or other penalties.

By using pricing software or AI-powered solutions, businesses can overcome these challenges and benefit from increased efficiency, accuracy, and data-driven decision-making, ultimately leading to more optimized pricing strategies and improved profitability. You can also take advantage of simulation and modeling to make sure your pricing strategy is optimized.

Determining the Optimal Frequency of Mass Price Increases

There are many factors that determine when and how often you should conduct mass prices increases. The three most common considerations we’ve seen include industry standards, customer impact and the availability of internal resources.

Industry Standards

Industry standards are an important consideration when deciding on how frequently to update your pricing because they provide valuable insights into the market dynamics and competitive landscape. For example, if you primarily sell to landscaping companies who are planning a lot of spring purchasing, they may expect you to publish and stick to one catalog each year for consistency. Alternatively, if you support repair operations you may want to be as up-to-date as possible to guarantee availability, profitability and customer coordination. Researching industry benchmarks and best practices for the frequency of mass price increases can have several benefits:

1. Understanding customer expectations: Familiarizing yourself with industry standards and practices helps you understand what customers expect in terms of pricing changes. This, in turn, allows you to align your pricing strategies with customer expectations and minimize any potential backlash or dissatisfaction. Many price managers forget that they are actually holding the keys to the most important aspect of their customers’ experiences. Try to create opportunities to spend more time with customers to understand their patterns and needs. How often do you help at the counter or go along on sales calls? There are a lot of opportunities around you to learn more about the voice of the customer.
2. Maintaining competitiveness: By staying informed about industry benchmarks, you can ensure that your pricing changes are in line with those of your competitors. Many distributors are reactive to industry changes and this results in their lines being either overpriced or underpriced. If you become the proactive company with regard to trends, you can grab market share and profitability that is hidden to other companies.
3. Adapting to market trends: Industry standards often reflect prevailing market trends and conditions. Regularly updating your pricing in accordance with these standards ensures that your business remains responsive and adaptable to changing market dynamics. Vendors may be able to help share trends that you can take advantage of before your competitors. This is why distributors should always include price managers in market planning with top vendors.
4. Optimizing pricing strategies: Researching best practices in your industry can help you identify optimal pricing strategies and techniques, such as dynamic pricing, promotional pricing, or value-based pricing. This knowledge can help you maximize revenue and profit while maintaining a competitive edge. Pricing managers cannot know all the various strategies out there and the market is constantly evolving. Don’t be afraid to borrow from your competitors or companies in other industries.
5. Ensuring compliance: In some industries, there may be regulations or guidelines governing pricing practices. Being aware of these requirements and adhering to industry standards will help you maintain compliance and avoid potential legal issues or penalties.
6. Building credibility: Following industry benchmarks and best practices demonstrates to customers, partners, and competitors that your business is professional, reliable, and knowledgeable about the industry. This can enhance your brand reputation and foster trust among stakeholders.
7. Facilitating performance measurement: Comparing your pricing practices to industry standards allows you to assess your performance relative to your peers and identify areas for improvement or opportunities for growth.

Customer Impact

Price is the most important aspect of your customer experience. Price changes can significantly impact your customers, and understanding these effects is crucial when determining how often to adjust your pricing. Here are some ways price changes can influence your customers:

1. Price sensitivity: Customers may be sensitive to price fluctuations, particularly for commoditized, non-essential (non-urgent) or highly competitive products. Frequent price changes could lead to customer dissatisfaction or drive them to seek alternatives. Each industry has varying price sensitivity and each product in each line you sell has varying price sensitivity. For example, just because a particular product line may be less price sensitive, it doesn’t mean that every product in that line shares the same demand curves. For example, a known big name brand that is popular with end users like Kohler could demand higher pricing more consistently than an unknown brand; however, that is probably more true for their fixtures than their shower rods.
2. Perceived value: Price changes can alter customers’ perception of the value of your products or services. Sudden or frequent price increases may create a perception of reduced value, while frequent price reductions could signal lower quality.
3. Budgeting and planning: Customers, especially seasonal contractors or other businesses, often plan their budgets and spending based on expected costs. Frequent price changes can make it difficult for them to budget accurately, potentially causing frustration and negatively impacting their purchasing decisions.
4. Customer loyalty: Consistent and fair pricing can contribute to building customer trust and loyalty. Frequent price changes, especially without clear communication, can undermine that trust and lead to customer attrition. Many distributors rely on pricing contracts for their best customers, so don’t forget to review those contracts regularly as well.
5. Promotional fatigue: Regularly changing prices through promotions or discounts can desensitize customers to these offers, reducing their effectiveness over time.

Internal Resources

Price changes can also significantly impact your internal users, such as employees and sales reps. Here are some ways price changes can affect them and why it should influence how often you change your pricing:

1. Complexity: Frequent price changes can increase the complexity of managing product catalogs and pricing structures, making it more challenging for employees to stay informed and up-to-date. There is nothing more confusing to a customer than calling two employees and getting a different price.
2. Sales performance: Changing prices too often may create confusion and uncertainty among sales reps, which can hinder their ability to effectively negotiate deals and close sales. Keep an eye on your overrides.
3. Customer relationships: Price fluctuations can strain the relationship between sales reps and their customers, especially if reps are unable to provide clear explanations for the changes or if customers feel that they are being taken advantage of.
4. Training and onboarding: Frequent price changes require additional training and support for employees to ensure they understand the new pricing structure and can communicate it effectively to customers. Having standards for when you do mass price updates can ease the training burden.
5. Incentive alignment: If prices change frequently, sales reps’ incentives, such as commissions or bonuses, may be misaligned with the company’s objectives. One of the most common complaints we hear about a lack of alignment between pricing and sales isn’t overrides, it’s a focus on short-term gains instead of long-term growth and customer satisfaction.
6. Administrative workload: Regular price adjustments can increase the administrative workload for employees, who must update systems, marketing materials, and other documentation to reflect the new prices.

The Rest Is Up To You

No two distributors are exactly alike, so determining the optimal frequency for mass price increases is a complex and multifaceted decision that cannot be universally prescribed. This guide is really just a starting point. We gave you some of the blanks you need to fill in and gave you some ideas where to look for data. But in the end, only you can gather the pieces together to make informed decisions.

Market dynamics play a significant role in guiding pricing decisions. Factors such as supply and demand, competitor pricing, inflation, and changing customer preferences all contribute to how frequently distributors should reassess and adjust their pricing strategies. Staying attuned to these market shifts enables distributors to respond proactively and maintain a competitive edge.

Leveraging technology is another crucial aspect of optimizing pricing strategies. Distribution-specific price optimization solutions, including advanced analytics tools, artificial intelligence, and machine learning algorithms can help distributors gain deeper insights into their customers’ behavior, preferences, and willingness to pay. You need to become more data driven and take advantages of the efficiencies and agility the latest technology can bring.

Implementing best practices is also essential for striking the right balance in pricing strategies. Distributors should establish a structured process for monitoring and reviewing their pricing decisions, including setting clear objectives, gathering relevant data, and conducting regular evaluations. This systematic approach ensures that pricing decisions are grounded in sound reasoning and are continuously refined based on the latest market trends and company performance metrics.

So the rest is up to you. By staying responsive to market dynamics, embracing technological innovations, and adhering to best practices, distributors can strike the right balance and ensure their pricing strategies drive sustainable growth and profitability.