Are Your Prices Right?

Productivity improvements alone are not enough to improve profitability in a challenging environment, according to an expert from a global accounting and business advisory firm. You may need to rethink your pricing strategies.

"If your pricing is driven $olely by your costs, you are definitely missing opportunities where customers are willing to pay more," said Tim Emitt, director of advisory services at Grant Thornton LLP.

He said there are two key strategies that distributors can benefit from: a series of various price differentiation methods and a customer value equation that identifies specific value parameters provided to customers.

"To implement price differentiation, it is important to understand and segregate your customer base, including customers that cost more to service," said Emmitt. "Pay attention to customers who value your unique competitive advantages and are willing to pay for them."

Emmitt noted that distributors face cost increases for nearly every segment of their business, while productivity (cost per order) has remained the same or worsened during the past year. According to a recent survey by The Manufacturing Performance Institute, other increases include a 657o rise in equipment costs, 67Vo information technology costs, 7l7o in labor, 7 9 Vo in logistics/transportation, and 857o for healthcare.

He said that successful distribution centers have adopted value-added activities to maintain positive customer relationships in the face of rising prices. Such activities include exclusive branding, enhanced quality, new technologies, faster delivery, and guaranteed minimum inventory levels, which must be factored into a differentiated pricing strategy.

"Some distribution companies may not know that their existing system probably already includes at least half of the data needed to imorove their pricing strategy." he said.

"The time to utilize value-added strategies and customer value equations is today. It is becoming difficult for distributors to pass certain rising costs onto customers, so creativity in pricing is essential," said Emmitt. "It takes some discipline and a slightly new way of thinking, but the benefits are well worth the effort."

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Fontana Wholesale Lumber, Inc...................(909) 350-1214

Hamoton Distribution...................,.................(949) 752'5910 lnland Timber Co.... ......(909) 783-0470

Kelleher Corp. (Ontario)......,.........................(909) 635-1560

Kelleher Corir. (Rancho Cucamonga) .......(909) 476-4040

Kellv-Wriqht Hardwoods.................,..............(714) 632'9930

North Pa;tic-so. ca. Distribution..................(800) 647-6747 orePac Building Products...,.................... .(909) q?7'1q1q

Pacilic Wood Pieservin9.......,..,.,.. ... ...........(7 14]| 79!'97!?

Parr Lumber C0...........-.,..............,............. (909) 627'0953

Peterman Lumber C0...........,.............. ........(909) 357'7730

Redwood Empire.... ......(909) 296-961 1

Swiner Hardwood.. .....,.(818) 953-5350

Toal Lumber Co...... .......(562) 945-3889

Weyerhaeuser Building Materia|s.,.,.,..,...... ..1877) 235-6873

ORANGE COUNW & INLAND EMPIRE

All-coast Forest Products.............................(909) 627-8551

Anlinson Lumber Sa|es..................,.,............(951) 681 -4707

Austin Hardwoods & Hardware...............,.....(714) 953-4000

Bear Forest Products..........(877) 369-2327 (951 \ 7 27 -1 7 67

BMD (Riverside).....

Boise (O.C.).............

Boise (Riveiside)................(800) 648-e1

Buildino-Products.com

California

C&E

341-0708

255-1949 q$'ggqg

852-1 990

624-2709

Capital Lumber Co. . ......(909) 591 -4861

Reel Lumber (Anaheim).,....(800) 675-7335 (714) 632-1988

Beel Lumber Service (Riverside)..................(951) 781-0564

Reqal Custom Millwork.....,.(714) 776-1 673 (7 14) 632'2488

Reiiable Wholesale Lumber, Inc....................(800) 649'8859

Simpson Strong-rie C0......(800) es9'50ee (Zl1) qZ1-qqZq stone Castle riadins........ .,.,.... .(999) 169-gqqg

Taiqa Buildinq Pr0ducts.,...,..........................(800) 348'1400

We"ber Plvwo-od & 1umber.......,.,.,.................(714) 259'1 100

Weyerhaeuser Building Materia|s..................(877) 235-6873

SAN DIEGO AREA

Anfinson Lumber Sa|es.................................(619) 460'5017

Austin Hardwoods & Hardware.....................(858) 536-1800

BMD (Visalia) ...............(559) 625-3050

Dixieline Lumber Co. .....,....(800) 823-2533 (951 ) 786-91 77

Weyerhaeuser Building Materia|s..................(877) 235-6873