Wholesale Electronics Distributor Tackles $41M Revenue Leakage

A leading global wholesale distributor of security, AV and low-voltage products had three goals: reduce margin leakage and manual overrides, identify and win new sales opportunities, and gain pricing agility and visibility. These three challenges alone were estimated to cost the company more than $40M a year. To reach these goals, this distributor invested in new pricing and selling technology powered by AI, resulting in a 10X return on that investment.

incremental revenue data point

 

Challenges

The distributor’s sales teams struggled to identify and price opportunities through both their warehouses and storefront while the pricing team was constantly grappled with lengthy and manual pricing processes without any real control, visibility, or agility.

Selling Challenges:

  1. Difficulty Identifying Opportunities

    One of the key issues this global distributor faced was that its sales team did not know what prospects to target and what products or services to offer. This challenge was due to the manual and time-consuming labor required to analyze data and identify sales opportunities. Additionally, the distributor’s ever-growing product lines, SKUs, data, and sales channels made it more difficult for salespeople to identify cross-sell and upsell opportunities. Instead of focusing on selling, the sales team spent hours manually digging through data and attempting to keep up with new products, bundles, and offerings.

  2. Manual Overrides

    Even when the sales team understood who to sell to and what to sell them, it faced another challenge: optimally pricing those offerings. As with many of its industry peers, this distributor’s salespeople have been with the company for a very long time. Though they are very skilled and experienced, their pricing was often linked to gut feel and intuition and not necessarily paired with data and insights to help them win deals. Consequently, this led to a significant volume of manual overrides that negatively impacted revenue.

  3. Slow Processes

    These manual overrides involved many individuals and damaged customer satisfaction due to slow turnaround time. If a customer asked for a deviation from the set price, whether it be over the phone or through a storefront, the sales representative would have to go through a series of checks, balances, and external approvals. This lengthy, time-consuming process not only impacted the sales rep’s confidence and ability to sell but also had detrimental effects on the customer experience.

Pricing Challenges:

  1. Managing Global Pricing

    As with many global businesses, this distributor struggled with pricing visibility and agility at both regional and channel levels. With many regions to consider across both North America and EMEA, the company struggled to efficiently and effectively execute its pricing strategies (both negotiated and non-negotiated), manage different pricing across regions, and coordinate omnichannel prices.

  2. Improving Agility

    The pricing team included a data scientist with many ideas on how to improve prices and respond to market, regional, and competitive changes. However, to the team’s frustration, it could not implement these ideas in its existing systems, which included 40-year-old ERP technology. Updating a customer, promotion, or channel price list required an ERP consultant to configure each request, with the associated time and cost implications.

  3. Addressing Margin Leakage

    Executives knew the company was leaking revenues and margins in all regions. However, due to the manual nature of the systems and processes in place, they had no way of identifying and addressing the sources of the leakages.

The Cost of Status Quo:

Working with PROS, the distributor quickly realized its current tools and processes were costing it $40.98M annually ($3.4M per month):

  • $17.64M due to margin leakage and manual overrides
  • $20.31M due to manual price setting processes
  • $3.02M due to missed sales opportunities

Based on these figures, the executive pricing and selling teams calculated a minimum 10X return on their investment in the PROS Commerce Platform.

Solutions

Today, this distributor is identifying and winning opportunities while optimizing prices across all regions and channels with full visibility, agility, and control through a single platform. The purpose-built PROS solution is fully integrated into the distributor’s existing ERP and CRM systems.

  1. Higher (and Higher) Quality Opportunities

    Opportunities are served directly to the distributor’s sales team through its existing CRM system. Leveraging AI and machine learning, the PROS system recommends who to sell to and what to sell them. Sales reps then decide to accept or reject these recommendations. By analyzing feedback, data, and outcomes, the AI continuously improves recommendations and uncovers more opportunities over time with prescriptive analytics.

  2. Optimized Prices & Reduced Overrides

    Sales representatives now offer the right price at the right time. Today, when a customer asks for a price, the system serves up the optimal price for them based on certain detailed attributes and in three price buckets: negotiated pricing, segment pricing, and standard pricing. Then, if the customer wants a different price and an override is necessary, the system equips the sales rep with the right negotiation tools, which are set by standard business rules. The sales rep is presented with negotiated price guidance based on a set default margin for that product or category, a hard floor margin (minimum allowed), or a ceiling margin (maximum allowed). If the guidance falls between the threshold, sellers do not need to request approval, saving both the distributor and the customer precious time. This also gives the sales rep the confidence to close the deal, knowing the price they are serving up to the customer is optimal and logical for current market conditions.

  3. Agile Processes

    Before, the pricing team could not easily make price changes or identify margin leakage; it now has full control, visibility, and agility to execute as it desires. The pricing team has now established automatic workflows that trigger with every price index change, cost change, and look-up change. These price lists are all refreshed in real time. Additionally, the pricing team gets together quarterly to review pricing and make necessary improvements to segmentation and attributes. The team’s new pricing processes enable it to select the best attributes for each region, work with different currencies, and focus on the metric that matters most: margin.

Results

This global distributor’s goals of reducing margin leakage and manual overrides, identifying and winning new sales opportunities, and gaining pricing agility and visibility are now simpler and faster to achieve than ever before.

During the first month of going live with PROS, the distributor realized $377,732 of incremental revenue in North America by detecting and winning new sales opportunities. Annually, this one tactic alone is estimated to represent more than $4M.

The teams quickly came to trust what they were seeing. The data’s transparency enabled the teams to fully understand how and why an offering or price was recommended and granted them the ability to enhance the system’s insight with their own knowledge, experience, and customer relationships.

Executive buy-in was also critical to the success of the project, with customizable dashboards and KPI tracking that allow the team to quickly gain granular insight at the click of a button and clearly see proof of ROI.

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