PROS Pricing Solutions Maximize Margins for Building Products Distributor

A leading building products distributor experienced significant margin loss caused by widespread pricing noncompliance at its branches. A PROS solution reduced discount overrides from 55% of transactions to 39% while gross margins improved 310 basis points – a value realization of $3.5 million.

CHALLENGE

Many customers were quoted the lowest price, then given additional discounts using overrides. These lowmargin transactions accounted for more than half of all transactions.

Major process changes were required to ensure correct pricing and proper margins. Excessive discounting had become standard practice. Gaps in the pricing and quoting processes created inefficiencies and errors. Approvals and escalations were not required. Price guidance and visibility were poor. The IT environment posed additional challenges since the distributor utilized a
combination of homegrown and off-the-shelf software to manage pricing.

SOLUTION

Advanced PROS price management tools improved price governance, enhanced and streamlined processes while eliminating excessive discounting and price overrides.

The company chose PROS as its pricing/quoting toolset for its ability to fill the critical gaps in its processes and deliver value quickly. A pilot project for eight locations was designed and implemented over a four-month timeframe, which included PROS Insights, Guidance, Control and Quoting (Sales Optimizer) functionality. The distributor’s project team included nine staff from the business side and 10 IT resources. PROS provided a team of implementation/ configuration experts. Working together, the cross-functional team implemented and configured the software, then focused on process optimization.

RESULTS

The PROS solution delivered huge improvements by closing gaps in the system, improving processes, enhancing governance, and providing greater visibility.

Sophisticated price guidance along with governance had a number of positive effects. Margin-killing overrides fell from 55% of transactions to 39% – a 16-point improvement. This significant drop in overrides resulted in a big increase in the number of transactions at all other price levels along with increases in average prices. Margins improved in parallel: 10 months after go-live, gross margin had
improved 310 basis points – a value realization of $3.5 million. 

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