Product pricing is an integral part of any business. Set the price too high and you risk losing customers, set the price too low and you risk losing money. Do you need to have different pricing for different customers? What about running promotions and offering discounts? Setting margins and determining product pricing can be a complicated process – especially when you don’t have a sophisticated accounting ERP solution to help track the numbers. Your company’s strategy for product pricing will depend on several different factors and needs to be monitored on a regular basis to account for changes in the market such as production costs, shipping costs, tariffs and the competition. For many wholesale distribution businesses, pricing contracts dictate how much specific items cost and the price paid by different customers. These contracts can be based on a variety of criteria such as timeframes, purchasing volumes and specific product types, and with robust accounting ERP software, you can have multiple contracts set-up at the same time based on different hierarchies. One example of a pricing contract is for mix and match inventory which we will explore below using one of Blue Link’s customers as an example.
Introducing Creager Mercantile
Creager Mercantile, located in Denver, Colorado, is a wholesale supplier and one-stop-shop for everything beverage, candy, Mexican candy, Mexican products, vaporizers, tobacco, automotive products, gift shop supply and more. With a focus on superior customer service, Creager provides its customers with a wide variety of products from top sellers to hard-to-find items. In 2016 Creager decided to replace its existing solution and manual processes for managing operations with Blue Link ERP; an all-in-one inventory and accounting ERP solution to automate processes, better serve customers, gain insight into business health with better reporting and grow the business. One of the specific benefits of implementing Blue Link ERP is around Creager’s Mix & Match Quantity Discount pricing contract.
As a cash and carry business in addition to managing wholesale orders, Creager Mercantile operates slightly different from common wholesale distribution businesses. While customers can place wholesale orders for product, they can also visit the warehouse to shop for their own items much like you would at any retail brick and mortar store. Serving the wholesale convenience and grocery industry, Creager has a lot of inventory items that are quite similar, and the average order could include anywhere from between 30-100 items. To best serve its customers, Creager has always provided Mix & Match Quantity Discounts to help reduce the overall cost of any given order. However, prior to using Blue Link, the process for maintaining these quantity discounts was manual and time-consuming. With the help of Blue Link ERP, Creager has been able to completely automate this process, significantly reducing the time it takes to create an order and the associated admin time with managing pricing contracts.
Mix & Match Quantity Discounts
Quantity breaks are a type of pricing where the customer receives a discount based on purchasing a certain volume of a specific product. This type of pricing works well for wholesale distributors who typically sell in large volumes. However, since Creager also operates as a cash and carry business, they decided to set-up a slightly modified version of traditional quantity breaks known as Mix & Match Quantity Discounts.
Working together with Blue Link’s team of in-house experts, Creager designed a specific pricing contract for Mix & Match Quantity Discounts. The first step was to determine which products or product groups would be eligible for this contract. Once that was determined, Creager then decided on a quantity break that would apply the discount in question. The result? Customers who order any product tagged as belonging to the Mix & Match Quantity Discount contract, receive a discount when they order over a certain amount of any of those products. Essentially this means that instead of a customer having to purchase 20 cases of a particular product before receiving a price discount, they can mix and match from a variety of products to receive the same discount. Prior to using Blue Link, Creager had to manually change the price on all items associated with a mix and match deal. Now, users can click a button in the system to change the price of a mix and match item and quantity discounts are automatically applied.
“We also were able to setup mix and match quantity deals which is awesome. We were manually changing the prices of items on mix and match then Blue Link did a custom spec for us and now all we do is push a button and mix and match pricing gets changed – this alone has increased our beverage sales by at least 50%.”
– Zach Taylor, Creager Mercantile