Building Materials Distribution Company
From Pricing Chaos to Pricing Control
$100M EBITDA Impact
Strengthening Pricing Across a Decentralized Business
Highly decentralized business transformed with centralized pricing strategy.
This building materials distribution company, faced unreliable list prices, inconsistent negotiations, and limited pricing control across ~500 branches. Together we developed a more credible and scalable pricing approach by improving list prices, optimizing customer-product prices, and engaging branch teams. The result was stronger pricing consistency, governance, and long-term margin management.
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Situation
Pricing Complexity Undermined Potential
Unreliable list prices and decentralized decisions limited pricing control
- List prices not credible & largely ignored – Customer-product prices used to “protect” customers from non-credible list prices
- Much inefficient negotiating at the point-of-sale; high pricing autonomy with little oversight
- Customers highly frustrated by high list prices and inconsistent pricing
- Highly decentralized – over 500 branches, each run as their own P&L
- Regionally sensitive products
- ~250K SKU count; ~500K customer count; over ~20M customer-product prices
- Limited levers / tools for Leadership Team to impact net prices
Discovery
Analyzed current state to find non-credible list prices and significant decentralized decision making
Single SKU in single region; Month 1 to Month 7
- No rationale behind which customers got which prices on average
- Thousands of individual decision-makers with broad manual override authority
Single Branch, Single Product
- Customer average price for a given item masked additional transaction-level price variability across time that was the single biggest complaint
List Price Inconsistency by Product Family
- List Price vs. Net Sales distribution commonly varied within a single product family
- Starting list prices could not be moved at the SKU level independently due to the substantial laddering (Good/Better/Best, S/M/L) across the ~240K items
Current State Stats:
- >1K Individuals Making Pricing Decisions
- ~4.5M Transactions Per Year
- >5M Customer-Product Combinations
- ~69% System Priced Transactions
Approach
Built a Credible, Scalable Pricing System
Improved pricing through credible targets, tools, and branch engagement
- Develop and implement methodology to achieve credible targets and processes for BOTH list prices and customer-product prices
- Continue to use customer-product prices where appropriate but reduce their need by leveraging newly credible list prices for small quantities and convenience purchases
- Engage deeply with branch teams to build trust and change pricing culture
- Deliver customized tools, processes, and standard algorithm rule set to promote review and optimization of prices over time (sustainability and continuous improvement)
Segmentation
Identified optimal segmentation to properly identify value-driven price factors
- Defined peer groups using key value drivers, including product type, component vs. assembly, stocked vs. non-stocked, customer tier, category, and warehouse source
- Segmented products and customers to better reflect differences in buying behavior, service needs, and importance to the customer
- Used segmentation to set more credible, differentiated target prices across customer-product combinations
List & Discount Structure
Developed a pricing structure to refine target price levels to get the "right" customer-product price and enable purposeful variation
Price Change Process
Set list price, set customer price targets, and then conduct sales review for buy-in and ongoing maintenance
Ongoing Price Management
Pricing is a process, not a project, and requires management across time through established processes and tools
Impact
Improved Price Control and Consistency
Enabled more credible pricing, stronger governance, and sustainable margin improvement
$100M
EBITDA impact
92%
System-priced transactions
500%
Reduction in unique customer terms
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