The Ultimate Pricing Strategy for Wholesalers

Stressed out by pricing? Choosing the right prices for your products can be challenging, especially when you’re a wholesaler or distributor. From profits to market demand, you’ll need to keep several key factors in mind.

If you’re struggling when it comes to setting profitable prices, this is a sign you need a clear strategy. But where should you start? Fortunately, that’s where we come in. In this guide, we’ll cover everything you need to know – including the best pricing strategies for wholesalers and distributors, and how enterprise resource planning software can help.

What is a pricing strategy?

Put simply, a pricing strategy is a plan for selecting the right prices for your products. This strategy should not only aim to maximise your profits, but also optimise your pricing for the long-term goals of your business. Naturally, it should also reflect the unique challenges faced by wholesalers and distributors.

Whilst it can be tempting to pick an arbitrary price or copy competitors, this is usually not the best option. Planning out your pricing strategy more carefully can help to boost sales, improve your brand’s reputation and make your business stand out.

The right pricing strategy will vary depending on your business. That’s why we’ve chosen a selection of the best pricing strategies to help you find the right option for your business. You may even find that a mix of methods is the best solution.

Best pricing strategies for wholesalers and distributors

Wholesalers and distributors supply to a wide range of industries, so their pricing strategies need to reflect their products and customer base. Here are some of the best pricing strategies to consider...

Cost-plus pricing

In this pricing strategy, you’ll add together any costs associated with the product, then add a percentage markup. So, for wholesalers, costs might include the price you paid for the product, as well as delivery costs.

Pros

• Simple and easy to calculate, but you’ll need to be consistent
• Takes expenses into account, so you can be assured that you’ll achieve a profit

Cons

• Doesn’t take competitors or wider market demands into account

Volume pricing

With volume pricing, the price per unit increases or decreases depending on the quantity ordered. This encourages customers to purchase more to obtain lower overall costs.

Pros

• Draws in more customers through competitive pricing, whilst still providing great profits
• Encourages bulk buying to sell more products

Cons

• Customers may associate the low cost with the products being cheaply made
• Lower costs for bulk purchasing also means lower profits on these orders

Key value item pricing

With this strategy, your business will offer popular, high-value products at a lower price, with less popular items at a higher markup. This helps to draw in customers with great deals, after which they’re more likely to purchase other, more expensive items.

Pros

• Draws in new customers, whilst also encouraging sales on more expensive items
• With reporting and inventory data, it’s easy to make accurate decisions about the best key value items to choose

Cons

• The value of products is likely to change over time, so this strategy is not always suitable for long-term use

Competitive pricing

One of the most popular pricing strategies for wholesalers and distributors is competitive pricing. This involves examining competitor pricing, as well as broader market trends, to determine the right prices for your stock.

Pros

• Balances profits with competitive pricing, so you can develop a strategy that suits you and your customers
• Utilises reporting and industry trends to find the best solution

Cons

• Needs to be developed carefully, as certain competitors may be less relevant than others
• Doesn’t always reflect value-add services such as great customer service, faster delivery which you may offer and your competitors don’t

Penetration pricing

This is a short-term strategy that involves offering lower prices initially to draw customers away from more expensive competitors. It’s generally used to promote new products – or a new business, if you’re just setting up.

Pros

• Penetrative pricing can be a great way to build long-term custom and boost your brand’s reputation

Cons

• Offering lower introductory prices means an initial dip in profits, which is often unsustainable for smaller companies

Key factors to consider

So, how should you decide which pricing strategy is right for your business? There are some factors you’ll need to consider...

Visibility of profits

To gauge how well your strategy is working, you need to have a clear view of your profits on both a small and large scale. With ERP software like Profit4, you’ll have easy access to your finances, which are updated in real-time. You can also drill down to see your profit margins for each individual product within your stock.

Respond to supplier changes

Markets and suppliers change all the time, and your pricing strategy needs to be ready for them. Fortunately, supplier relationship management software puts you back in control. When suppliers’ prices change, you’ll be able to import them quickly – and see how the changes will impact your profits.

Sales leakage

When you’re implementing a pricing strategy, you’ll also want to keep an eye on your sales data. This invaluable information will highlight what’s selling and what isn’t. You’ll be able to look closely at sales leakage to discover products and categories where sales have reduced, so you can make more informed decisions going forward.

Bespoke pricing

Wholesalers and distributors manage a wide variety of customers and products. This often requires many different pricing structures. Unfortunately, that can get confusing quickly without the right tools. Sales order management software contains your entire pricing strategy in one place, streamlining the process for you.

Software, like Profit4, can also empower your sales staff to make decisions on pricing that best fits the customer needs or situation whilst ensuring they remain within your agreed profit margins so they don’t sell at a loss.

ERP software for wholesalers and distributors

Developing a robust pricing strategy can be challenging, especially when you have thousands of customers to consider. Enterprise resource planning software, like OGL’s Profit4 software, can streamline and simplify your processes – and give you full visibility of your pricing and sales.

From order management to supplier relationship management, Profit4 gives you complete control of your business. That means no more guesswork when it comes to creating a pricing strategy – you’ll have all the information you need at your fingertips.

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