Pricing analytics for distributors: the eight reports that matter

Pricing analytics is the use of your sales, quote and cost data to see how prices perform and decide what to change. For a distributor, eight reports cover most of what matters: where margin leaks after the invoice, how prices vary for the same item, which reps and customers sit far from target, and how fast costs reach prices. Each one points to a decision, which is the test of a useful report.

Three kinds of pricing analytics

• Descriptive

  What happened: margins, discounts and waterfalls.

• Predictive

  What will happen: win chance at a given price.

• Prescriptive

  What to do: the best price for this quote line.

Most distributors run descriptive reports and stop there. The eight below start descriptive and lead toward the other two.

1. Price waterfall by segment

From list price to pocket price, showing every discount, rebate and freight cost. It shows where margin goes after the invoice. The price waterfall guide has a worked example. Action: fix the largest off-invoice leak first, usually free freight on small orders or rebates that reward nothing.

2. Pocket price band per item

Every sale of one item in a year, plotted by pocket price against order size. A wide band of prices for similar customers and quantities means prices are set by habit. Action: bring the lowest prices up toward the middle for customers who do not justify them.

3. Margin by customer, sorted

Every customer ranked by gross profit, with their margin and cost to serve. Usually a few accounts earn most of the profit and some earn almost nothing once rebates and freight are counted. Action: review terms and prices for the bottom group before their next order.

4. Discount by rep

Average discount from the recommended or list price, by rep, for the same customer segment. Large gaps between reps selling to similar customers are rarely explained by the customers. Action: a conversation, and discount limits that hold. See the discount policy guide.

5. Win rate by price band

Quote lines grouped by how far above or below the normal price they were quoted, with the win rate for each band. It shows where customers start to say no. The win rate guide shows how to read it with margin. Action: move prices toward the band with the best expected profit.

6. Cost pass-through lag

For each supplier increase, the number of days until prices followed, and the margin lost in between. On items that sell every day, a 60 day lag can cost more than the increase itself. Action: reprice from landed cost when it changes, not at the next review.

7. Price realization

Invoiced or pocket price as a share of the target price, by segment and rep. It shows how much of the planned price actually reaches the business. Action: find the segments with the lowest realization and the reasons behind them.

8. Stale prices

Items whose price has not changed in 12 months or more while their cost has. These are usually long-tail items nobody looks at, which is exactly why their margins drift. Action: a one-off repricing from landed cost, then rules that keep them current.

What you need to run them

1. Invoice lines with cost

   Price, quantity, landed cost and customer, for at least a year.

2. Off-invoice costs

   Rebates, early payment discounts, freight and returns, per customer.

3. Quotes, won and lost

   With the price offered on each line.

4. Cost history

   When each cost changed, to measure lag and staleness.

Most of this sits in the ERP already, spread across tables and modules. The work is in joining it and allocating the off-invoice costs to the right lines.

From reports to prices

Reports tell you what went wrong last quarter. The bigger gain comes from using the same data at the moment of pricing, so the quote line is priced with the waterfall, the segment and the win curve already in view. A pricing system runs these analyses continuously and feeds them straight into the prices it recommends.