How PROS Helped a Fortune 500 Distributor Optimize Pricing for $7.2 Billion in Revenue
Our customer is a leading North American distributor with over 146,000 customers in institutional and government (CIG) markets, construction, commercial, industrial, and utility markets. The company operates 300 distribution centers across the US, Canada, and Puerto Rico. With a product catalog containing around 2 million distinct SKUs from thousands of manufacturers, it faces huge challenges with ensuring it can reliably serve its customers with speed and efficiency.
The distributor has nearly 9,000 employees—25% of which are sales reps. Before switching to PROS, sales reps struggled with a pricing solution that was slow and laborious. The company realized that their quoting process was causing significant margin leakage, holding them back from maximizing profits and making it increasingly difficult to keep pace with competitors.
3 Key Barriers to Profitability
The company found that their pricing solution simply couldn’t keep up with demands for speed, accuracy, and ROI. This was due largely to 3 main roadblocks within the software’s capabilities:
- Failure to optimize the customer experience
Customers are increasingly choosing vendors who can provide them with quick, personalized buying experiences everywhere they shop. With their old pricing solution, the company didn’t have the tools to offer instantaneous and personalized pricing, customized offers, and frictionless buying experience across all sales channels.
- Stagnant and inaccurate pricing
Sales reps struggled to update prices across thousands of SKUs. There was no way for them to quickly adjust prices according to constantly changing market factors like increased costs, competitor influences, and supply chain volatility. Without the means of offering competitive prices in the moment, they were experiencing noticeable margin leakage.
- Poor user experience and low adoption by the sales team
The company’s sales teams lacked faith in a pricing management approach that consisted of manual spreadsheets and various applications in which pricing information was stored. This lack of confidence meant that they were overriding the system’s pricing guidance 60-70% of the time, which also contributed to significant margin leakage. The company was spending money on a pricing solution that the sales team couldn’t—and wouldn’t—reliably use to deliver optimized prices and win business.
Carving a Path to Profit Optimization
When the company realized their pricing solution couldn’t scale with their needs, they began looking for a cloud-based, sales-oriented solution that would integrate seamlessly with their Enterprise Resource Planning (ERP) system. After determining which critical capabilities they required in a tool, they arrived at the PROS Smart Price Optimization and Management (POM) solution.
Every business is different, and this customer wanted a unique approach to leveraging PROS pricing guidance. We worked with them to provide a solution that could triplicate their transactions across numerous segmentations to collect price, margin percent, and cost guidance metrics. With this data, they were able to eliminate margin leakage and simultaneously respond faster to market fluctuations.
We also implemented our Real-Time Pricing Engine (RTPE) to generate personalized, dynamic price calculations quickly, which was a critical challenge the company faced with their previous pricing solution. The RTPE implementation played an instrumental role in the customer’s price book process. When an agreement isn’t found in SAP (the company’s ERP provider), the price book process points the guidance back to the target price.
Lastly, we created a separate cost guidance system, which they could use specifically for negotiating product costs with vendors across hundreds of branch locations, allowing them to manage both sides of the margin equation—both cost and price. Even with the thousands of pricing variables for a single SKU, sales reps can now negotiate prices with greater confidence. With their new system, they can determine which type of guidance to use in all selling scenarios, so they know they’re being pointed in the most profitable direction.
Margin Uplift and Improved Sales with PROS
With its new pricing solution, the company is able to drive pricing guidance recommendations for about 75% of their total business. As a result, they’ve optimized pricing for $7.2 billion in revenue since going live with our software.
Also, for the first time in the company’s long history, they’re seeing margin uplift during times of increased market volatility. Where they had initially projected a 50-basis-point margin decrease due to inflation, we’ve helped them realize a 120-point growth since April 2021. Not only that: They’ve also seen a significant uptick in user adoption, with a 32% increase in usage among sales teams, who now have much greater confidence in their ability to set competitive prices.
Where the company’s pricing practices used to be inflexible, slow, and noncompetitive, they are now able to provide fast and transparent pricing across all sales channels. Armed with instant price calculation capabilities and machine learning algorithms, they can easily segment customers, spot sales opportunities, and offer personalized prices that are optimized to win business. And ultimately, they are now on a strong path to profitable growth.
“This is the first time in our company’s recorded history that we’ve had inflationary pressures and actually been able to increase our margins,” reported the company’s VP of Business Transformation, “and that’s because of PROS.”
For a deeper look at how we help distribution companies achieve profitable growth, check out “The PROS Platform for the Distribution Industry” or connect with a PROS industry expert.