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Hardware Retailing published the fourth installment of its “Inside the Margin” series, in which industry expert Mike Aylen outlines how retailers can structure contractor pricing by customer group and product category. His recommendations include reviewing customer sales at least twice a year, testing new accounts before granting permanent discounts, and using SKU-level exceptions with expiration dates.
Hardware Retailing has published the fourth article in its “Inside the Margin” series, with industry expert and NHPA strategic consultant Mike Aylen advising retailers to tailor contractor discounts by both customer group and product category. The guidance focuses on using sales information to pursue repeat business while avoiding broad discounts that can cut margins on products with little room for price reductions.
Aylen recommends starting with a manageable set of customer groups, generally no more than 10 for retailers creating a plan from scratch, with additional individual plans where a customer’s volume warrants one. Possible groups could include plumbers, painters, builders, concrete workers, property maintenance firms and local councils. He advises retailers to base those choices on their existing customer base and define clear allocation criteria, such as customers’ work and monthly sales.
Sales volume can justify subgroups within a trade. Aylen describes a large retailer that divided plumbers into large, medium and small groups, with discount rates tied to monthly sales. He also argues that retailers can use group assignments to recognize loyalty: a customer whose sales fall into a middle tier might qualify for a stronger offer if the retailer receives all of that customer’s business.
Aylen says retailers should review customer activity at least twice a year, using sales-by-customer reports to adjust assignments and spot accounts with declining sales. Those changes can prompt conversations about why a customer’s purchases have fallen and whether the store can win more of their business. He recommends estimating each customer’s potential spend, comparing it with what they currently buy, and discussing unmet needs.
Discounts Must Reflect Product Margins
The article’s central point is that a discount that helps win business in one department may damage profitability in another. Aylen warns against applying a single storewide discount to every product in a contractor’s plan: it may be excessive on some items while leaving retailers unable to compete on others.
He gives examples of the risk. A 15% reduction across the board could leave little room on hot water units or result in ladders being sold at a loss, he says. In another case, a retailer’s plumbing plan set prices at cost plus 28%; Aylen says that resulted in a clamp selling for 94 cents, compared with $1.64 at the retailer’s main corporate competitor. These are examples from his work, not independently verified market-wide findings.
For independent hardware retailers, the practical implication is that customer discounts need to account for differences between departments, product classes and individual items. Better-targeted plans may help retailers make a competitive offer without granting unnecessary reductions on high-value or low-margin merchandise.
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From Customer Tiers to Item Pricing
Aylen recommends setting group criteria before assigning customers, then building discounts by department. Retailers using Margin Master or Epicor Pricing Planner can use the software to examine selling prices under proposed discounts, he says; he advises turning off rounding during that work. Retailers without those tools can use Excel spreadsheets to calculate rates.
The analysis may need to go beyond departments, down to a product class, fineline or individual stock-keeping unit, depending on where a discount would affect margin or competitiveness. Once rates are set, retailers can enter the plans into their pricing system and assign customers. Aylen also cautions against fixing SKU-level exceptions at a permanent price, recommending an expiration date instead.
For new customers, he advises against immediately offering the best permanent discount. A retailer can explain the requirements for a group and set up a 60- or 90-day trial, then assess whether the customer meets the criteria for a lasting allocation. The article presents these steps as professional guidance, rather than reporting a new pricing rule or a measured industry-wide result.
““The main advantage is that you can use it to grow sales.””
— Mike Aylen, industry expert and NHPA strategic consultant, in Hardware Retailing
No Industry-Wide Results Provided
The source article offers Aylen’s recommendations and examples, but it does not provide data showing how commonly retailers use these practices or quantify their effect on sales and margins. It also does not identify the retailers in the examples or supply details that would allow the cited prices and discount outcomes to be independently checked. The appropriate customer tiers and rates will vary by retailer, customer mix, competition and product costs.
Retailers Can Review Plans Twice Yearly
Aylen’s proposed next step is for retailers to build or refine their groups, calculate category-level rates and assign customers against defined criteria. They can then use sales-by-customer reports to review activity at least twice a year, adjust allocations and discuss declining purchases with customers. For new accounts, a trial period can provide time to test whether the relationship meets the retailer’s requirements. The article says Aylen plans to address another topic in a future installment of “Inside the Margin,” but gives no date or subject for it.
Key Questions
What is a category price plan?
It is a pricing approach that assigns customer groups specific discounts by department or product category, with further adjustments for classes, finelines or individual items where needed.
How many customer groups does Aylen recommend?
For a retailer starting from scratch, Aylen recommends keeping the number to 10 or fewer, apart from individual plans for customers whose volume warrants separate treatment.
How often should retailers review customer assignments?
Aylen recommends reviewing them at least twice a year, using customer sales reports to identify changes in activity and opportunities to adjust a plan.
Should new customers receive a retailer’s best discount immediately?
Aylen advises against granting the best permanent deal immediately. He suggests explaining the criteria and using a 60- or 90-day trial period before deciding on a permanent group.
What does the source say about the impact of these plans?
The article describes how Aylen believes category-specific plans can support sales and protect margins, but it provides no industry-wide performance data or quantified results.
Source: hardwareretailing.com
