Harry Cooper Supply
- Location: Springfield, MO
- Industry: Plumbing
- Number of Employees: 165
- Website: www.harrycooper.com
- Implement a solution that will enhance profitability, develop pricing discipline, and remove emotion from the pricing function
- Fast payback in the form of increased profit
- More disciplined, less emotional pricing process
- Prices that are the same across the board
- Better insight into the customer base
"The results are as predicted...Strategic Pricing works! As long as you spend the time to analyze the data properly, there can be a fast payback."
Larry McMullin, Chief Financial Officer | Harry Cooper Supply
Harry Cooper Supply Co. of Springfield, Missouri, is a plumbing/electrical/HVAC distributor with 165 employees in three locations; its customers include plumbing, heating, electrical, and mechanical contractors, commercial and industrial companies, electrical co-ops, and municipalities. The company uses the Epicor® Eclipse™ platform to help manage its 20,000 product SKUs.
Although Harry Cooper was using some statistical analysis, such as a built-in matrix with velocity pricing, they had many people making pricing decisions and needed better tools, which led them to investigate Strategic Pricing.
Strategic Pricing: The Basics
For every product, for every customer, there is a price that produces the optimal gross margin-the highest margin a distributor can obtain while retaining the customer's business. Strategic Pricing is a pricing architecture based on this principle, combining invoice analysis with market knowledge. It involves detailed segmentation of a distributor's customers by size (from "tiny" to "huge") and type ("core" and "non-core"), profiling of their price sensitivity, analysis of past pricing performance, definition of new pricing standards, and development of metrics to support pricing processes and compensation.
Recognizing the value that strategic pricing would provide to distributors, Epicor formed an exclusive relationship with Strategic Pricing Associates to seamlessly integrate a strategic pricing module into its Eclipse and Prophet 21® products. For Epicor customers, the data already exists in their Epicor ERP system; they can easily export the data for analysis and then load the resulting pricing structures/files into the system.
To take profitability to the next level, Harry Cooper Supply Co. set out to achieve an incremental implementation of Strategic Pricing, from "tiny" to "huge" customers. The initial data extract was started in April 2010. By August 2010, the company was live with its first set of customers.
Gathering Data and Training the Sales Force
According to Larry McMullin, Harry Cooper Supply Chief Financial Officer, "We needed to develop discipline and remove emotion from the pricing function. We liked the tie-in of Strategic Pricing to Epicor Eclipse, knowing we had the tools available. Gathering the data for Strategic Pricing from the Eclipse system was the easiest part."
To be effective, a pricing program needs to be data-driven to translate strategy into actionable plans. McMullin observes, "It's important to study the reporting mechanisms in Eclipse in order to be able to accurately measure all aspects of Strategic Pricing. We used simulation, explanation, and training to show the sales force how to use the reporting tools. As a result, the sales team has a much better understanding of Strategic Pricing."
He further notes that the Strategic Pricing implementation leader must understand it requires cultural change, and the training of salespeople is key. "You can never do enough training," he says. "Everyone needs to get on the bandwagon. The most difficult task is to convince the sales force it will work and overcome internal resistance."
McMullin enthuses, "The results are as predicted...Strategic Pricing works! As long as you spend the time to analyze the data properly, there can be a fast payback. We are more disciplined and not as emotional in our pricing process, so there is more consistency. Prices are the same across the board, and there has been very little customer pushback."
The benefits were both quantitative and qualitative, according to McMullin. "We see real potential for increased profit, and better insight into our customer base. We learned that some customers were not as profitable as we thought," he says.
McMullin concludes, "Strategic Pricing has had a significant impact. Executive management is very pleased; we had training sessions for them as well as the sales force. We now measure sales statistics regarding overrides, etc., and make the results public internally."