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In a Hardware Retailing industry viewpoint, Mike Aylen recommends that hardware retailers build manageable customer groups and tailor contractor discounts by department, class or item. He argues that broad discounts can cut margins or leave retailers uncompetitive, and advises reviewing customer activity at least twice a year.
Hardware Retailing has published a new installment of its “Inside the Margin” series in which industry expert and NHPA strategic consultant Mike Aylen recommends that retailers use customer groups and department-specific price plans to pursue contractor sales while protecting margins. The advice centers on replacing blanket discounts with pricing tied to customer activity and the economics of particular product categories.
Aylen’s fourth article in the series starts with customer segmentation. For retailers building a system from scratch, he recommends limiting standard groups to 10 or fewer, with individual plans added for customers whose volume warrants separate treatment. Groups might reflect trades such as plumbers or painters, as well as builders, concrete workers, property maintenance businesses or local councils. Retailers should define the criteria for each group using their own customer base and market.
Those criteria could include a customer’s trade, purchasing patterns or sales volume. Aylen describes a large retailer that created three plumber tiers—large, medium and small—with discount levels based on monthly sales. He also says loyalty can factor into allocations: a customer who meets the medium-volume threshold but directs all of its business to the store might merit placement in a higher group.
Aylen recommends checking customer sales information at least twice a year, using reports to identify changes in activity and speak with customers whose purchases have declined. He also suggests estimating a customer’s potential spend, identifying products it buys elsewhere and discussing what additional business could qualify it for a better offer. For prospective customers, he proposes a 60- or 90-day trial group rather than immediately offering the strongest permanent discount.
Why Blanket Discounts Can Backfire
The pricing approach matters because a discount that attracts business in one category may undermine profit or competitiveness in another. Aylen cautions against applying a single percentage off retail across all departments: product margins and price competition vary, and a uniform rate may be unnecessarily generous on some goods while still failing to win sales on others.
He gives examples from his work with retailers. A 15% global discount, he says, could leave little room on low-margin, high-value plumbing products such as hot water units, or lead to losses on ladders sold to painters. In another case, a plumber plan set at cost plus 28% produced a price of 94 cents for a clamp, compared with $1.64 at the retailer’s main corporate competitor. The examples are Aylen’s reported observations, not independently verified comparisons in the article.
For independent and other hardware retailers, the underlying trade-off is between earning more of a contractor’s spending and preserving enough margin on each sale. A structured plan can make offers easier to explain and adjust, but only if the retailer checks the resulting prices against costs and local competition.
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From Customer Groups to Item Pricing
Aylen’s article focuses on the sequence for setting up a category price plan: decide which customer groups make sense, establish transparent allocation criteria, and then calculate discounts for each group across relevant departments. Where department-level pricing remains too broad, he recommends breaking rates down further to the class, fineline or SKU level.
Retailers using Margin Master or Epicor Pricing Planner can use those systems to model selling prices by department, Aylen writes; he says the same work can be done manually in Excel. He advises turning off rounding while calculating discounts so retailers can see the price effects more accurately. Once the rates are checked, they can be entered into the retailer’s system and assigned to customers.
He also cautions against setting a fixed price for an item-level exception. Instead, he says, retailers should use an expiration date so a temporary exception does not remain in place indefinitely. The article presents this as operational guidance; it does not report a new retailer program, measured financial result or industry-wide pricing data.
“The main advantage is that you can use it to grow sales.”
— Mike Aylen, industry expert and NHPA strategic consultant
No Results Data Provided
The article offers Aylen’s recommendations and examples, but provides no independently audited margin figures, sales results or study comparing retailers that use category plans with those that do not. It does not quantify how much revenue or profit a retailer might gain, or specify how to calculate discount rates for every product and market.
The source also does not identify the retailer involved in the clamp-price example or provide the date, location or product specifications needed to assess the comparison with its corporate competitor. Retailers would need to verify their own costs, prices, customer behavior and applicable system settings before adopting a plan.
Retailers Must Set and Review Rates
Aylen’s proposed next steps are practical rather than a scheduled industry milestone: retailers can define customer groups, calculate rates for each department and any necessary lower-level categories, enter the plans into their pricing systems, and assign customers according to stated criteria. He recommends reviewing sales information at least twice yearly and adjusting allocations when purchasing patterns change.
For new customers, retailers can test a proposed relationship through a 60- or 90-day group before deciding on a permanent tier. The article says Aylen plans another installment in the “Inside the Margin” series, but gives no publication date or details about its subject.
Key Questions
What does Aylen mean by a category price plan?
It is a pricing structure that assigns customer groups different discounts, with rates set by department and, where needed, by class, fineline or individual item.
How many customer groups does he recommend?
For a retailer starting from scratch, Aylen recommends no more than 10 standard groups. He says individual plans for customers with particular volume needs may sit outside that count.
How often should retailers review customer allocations?
Aylen recommends reviewing activity at least twice a year, using customer sales reports to spot changes and follow up with customers whose purchases have declined.
Why does he oppose one discount across every department?
Different departments have different margins and competitive conditions. A blanket rate can cut profit on some products, while leaving prices uncompetitive on others, according to Aylen.
What does the article establish about results?
It reports Aylen’s advice and examples, but does not provide independently verified data showing how much category price plans change sales or margins.
Source: hardwareretailing.com
