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In a Hardware Retailing industry viewpoint, consultant Mike Aylen recommends that hardware retailers use customer groups and department-specific price plans to pursue contractor sales without applying blanket discounts that can erode margins. He advises reviewing allocations at least twice a year, using trial periods for new customers and adding expiration dates to SKU-level price exceptions.
Hardware Retailing contributor Mike Aylen has outlined a category-based pricing approach for hardware retailers seeking contractor sales while protecting margins. In the fourth installment of his “Inside the Margin” series, Aylen recommends grouping customers by trade and sales criteria, then setting discounts by department rather than applying one rate across a customer’s purchases.
Aylen, an industry expert and National Hardware Show Association (NHPA) strategic consultant, says retailers starting a customer-group system should generally limit it to 10 groups or fewer, with individually negotiated plans for customers whose volume warrants separate treatment. The groups should reflect the retailer’s market and existing customer base; examples include plumbers, painters, builders, concrete workers, property maintenance businesses and local councils.
Before assigning a customer to a group, retailers should set clear criteria, Aylen writes. These may reflect the customer’s day-to-day work, sales volume or both. A retailer he worked with, for example, divided plumbers into large, medium and small groups using monthly sales to set discount levels. Aylen also says loyalty can be a factor: a customer who buys all of its supplies from one store could merit a stronger offer than its sales total alone would indicate.
Aylen recommends reviewing customer sales and group assignments at least twice a year, using sales-by-customer reports. A decline can prompt a conversation about the customer’s needs and what products it buys elsewhere. For new accounts, he suggests a 60- or 90-day trial group rather than immediately granting the best permanent discount. Customers can then demonstrate whether they meet the retailer’s criteria.
Discounts Must Match Product Margins
The central business issue is that a single discount can have very different effects across a store’s product range. Aylen warns that a global discount across departments may cut too deeply on already low-margin products while failing to offer a competitive price where one is needed. His examples include plumbers buying high-value, low-margin hot water units and painters buying ladders: a flat 15% reduction could leave the retailer with little margin or a loss on those items.
He also describes a plumbing plan set at cost plus 28% that priced a clamp at 94 cents, while a main competitor charged $1.64. That example, as reported by Aylen, illustrates the risk of setting a formula without checking how it positions individual products against local competition. The article’s proposed approach is to use customer plans to support sales growth while checking prices at department, class, fineline or individual-item level.
For retailers, the practical implication is that contractor pricing needs both a customer strategy and product-level controls. A plan that encourages a professional customer to consolidate purchases could increase sales, but discounts that are not checked against costs, market prices and product margins may undermine the intended result.
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From Customer Groups to SKU Controls
The article is part of Aylen’s ongoing “Inside the Margin” series, which he describes as covering ways to grow sales and protect margins among contractor and professional customers. The supplied article focuses on how retailers can build customer groups first, then set the pricing rules attached to them.
For the pricing work, Aylen points to Margin Master and Epicor Pricing Planner as tools retailers can use to review selling prices by department and test discounts. He says retailers can also do the work manually in Excel. The aim is to identify where a group discount is appropriate and where it should be reduced or broken down further by class, fineline or SKU. He cautions users to turn off rounding when testing discounted prices in the named software.
Aylen also recommends that any SKU-level exception have an expiration date and not be locked at a fixed price. That gives retailers a way to prevent a temporary or item-specific deal from remaining in place without a later review.
““The main advantage is that you can use it to grow sales.””
— Mike Aylen, Hardware Retailing contributor and NHPA strategic consultant
Results Depend on Local Pricing Data
The article presents Aylen’s recommendations and examples, but the supplied source does not provide a measured sales or profit outcome from adopting the approach. It also does not specify which customer-group thresholds, discount rates or review methods will work for every retailer. Those decisions depend on each store’s customer mix, costs, competitors and product margins.
The examples of the 15% discounts and the clamp priced at 94 cents are attributed to Aylen’s experience; the article does not identify the retailers involved or provide supporting sales records. Readers therefore cannot independently assess those cases from the supplied material. The article also does not give a publication date, so its timing beyond its placement in the series is unclear.
Retailers Set and Review Their Plans
Aylen’s recommended next steps are for retailers to define customer-group criteria, analyze sales by customer, and build a discount schedule by department before assigning accounts to plans. Stores can use pricing software or spreadsheets to check proposed prices, then break out exceptions where department-level rates are too broad.
After implementation, retailers should review group allocations at least twice a year and use short trial periods for new accounts. The article says Aylen plans to address another topic in a later installment of the series, but the supplied report does not name the subject or give a publication date.
Key Questions
What is a category price plan?
In Aylen’s article, it is a pricing approach that assigns customers to groups and sets discounts by product department, with further adjustments by class, fineline or individual SKU where needed.
How many customer groups does Aylen recommend?
For a retailer starting from scratch, Aylen recommends no more than 10 groups in general. He says some high-volume customers may need individual plans in addition to those groups.
How often should retailers review customer groups?
Aylen recommends reviewing customer sales and group allocations at least twice a year, using sales-by-customer reports to spot changes and decide whether to talk with an account.
Why does Aylen advise against a single discount across all departments?
He says products have different margins and competitive needs. A blanket discount could cut too deeply on low-margin or high-value items, or leave prices poorly matched to local competition.
How should retailers handle new customers and SKU exceptions?
Aylen suggests a 60- or 90-day trial group for new customers before offering a permanent top-tier deal. For SKU-level exceptions, he advises against locking in a fixed price and recommends adding an expiration date.
Source: hardwareretailing.com
