yes, you should be optimizing for distributor profitability
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Yes, You Should Be Optimizingfor Distributor Profitability
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Distribution is a low-margin business.
Sometimes it’s as low as pennies on the dollar.
Yes, You Should Be Optimizingfor Distributor Profitability
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There are just so manycosts involved.
And that’s not goodfor your bottom line.
Yes, You Should Be Optimizingfor Distributor Profitability
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In fact, distributors need a grossprofit margin (GPM) of at
least 10-15% to remain profitable.
Yes, You Should Be Optimizingfor Distributor Profitability
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You can only whittle yourcosts down so far.
If you want to increase your profitability, you need to
start focusing on other elements.
Yes, You Should Be Optimizingfor Distributor Profitability
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Obvious Element One:Volume
If you sell more, youmake more, right?
Yes, You Should Be Optimizingfor Distributor Profitability
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Wrong.
Even with cross-selling complementary products, it often isn’t enough.
Which brings us to, thesecond obvious element….
Yes, You Should Be Optimizingfor Distributor Profitability
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Yes, You Should Be Optimizingfor Distributor Profitability
Obvious Element Two:Price
A 1% price increase canimprove profits by 11%.
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Yes, You Should Be Optimizingfor Distributor Profitability
Pricing is a very powerful lever if you price at
the transaction level with your highest profit potential at the forefront of your
mind.
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Yes, You Should Be Optimizingfor Distributor Profitability
Unfortunately, for most distributors, pricing at the
transactionlevel is very difficult.
So where do you look next?
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Yes, You Should Be Optimizingfor Distributor Profitability
Your real opportunity for optimizing distributor
profitability is in mix shift.
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Yes, You Should Be Optimizingfor Distributor Profitability
Mix is just as important as price and volume when it comes to your profitability.
But it’s often overlooked – or worse – ignored completely.
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Yes, You Should Be Optimizingfor Distributor Profitability
It’s challenging to manage mix, because it’s usually a mystery.
The data is difficult tomanage and understand.
But that’s NO excuse.
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Yes, You Should Be Optimizingfor Distributor Profitability
If you start from the ground up withaccurate formulas that don’t use plugs,
mix data can lead to major margins.
Start with 4 types of mix data.
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Yes, You Should Be Optimizingfor Distributor Profitability
1. Product Mix:
how product sales vary across the business between two time
periods
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Yes, You Should Be Optimizingfor Distributor Profitability
Rank your sales transactions by profitability and determine the underlying
sources.
Which product and sales strategies are working?
Which aren’t?
Use these findings to optimize your sales tactics.
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Yes, You Should Be Optimizingfor Distributor Profitability
2. Customer Mix:
how customers purchase at different price points for the same
products
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Yes, You Should Be Optimizingfor Distributor Profitability
Evaluate your sales transaction data tosegment your customers and identify
what each group truly wants.
Then optimize your transactions by customer segment and optimize each for maximum
profitability with custom pricing strategies.
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Yes, You Should Be Optimizingfor Distributor Profitability
3. Business-specific Mix:
every business is unique, and each also has its own types of mix
shifts.
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Yes, You Should Be Optimizingfor Distributor Profitability
This could be channel mix, region mix, segment mix, order size mix, etc.
Take advantage of it!
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Yes, You Should Be Optimizingfor Distributor Profitability
Mix Matters
Mix analysis helps distributors understand confusing sources
of margin variance.
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Yes, You Should Be Optimizingfor Distributor Profitability
These data evaluations can even help forecast the results of strategy changes in the long run, minimizing problems before
they even arise.
Get the full explanation here.
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KiniMetrix maps out your mix data for you.
Its formulas eliminate plugs, allowing companies to see where opportunities for
margin improvement really are.Click here to see how
KiniMetrix can do this for you.
Yes, You Should Be Optimizingfor Distributor Profitability