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In a Hardware Retailing column, industry expert Mike Aylen outlines how hardware retailers can use customer groups and category-specific price plans for contractor and other professional customers. He argues that reviewing customer sales and setting discounts by department, rather than applying one broad discount, can help pursue sales without unnecessarily eroding margins.
Mike Aylen, an industry expert and strategic consultant to the North American Hardware and Paint Association, has outlined a pricing approach for hardware retailers seeking contractor and other professional sales: group customers by relevant criteria and set discounts by product category rather than applying a single rate across a store. The guidance appears in the fourth installment of Hardware Retailing’s “Inside the Margin” series and is advice, not a report of measured results.
Aylen recommends that retailers starting from scratch keep customer groups to 10 or fewer, with individual arrangements added where a customer’s volume warrants them. Groups could reflect customer trades, such as plumbers and painters, or other types of business activity. Retailers should use their own customer base and define why a customer qualifies for each group, including whether the decision depends on the work they do, their sales volume, or both.
For businesses that want to distinguish customers by sales, Aylen describes a retailer that created large, medium and small plumber groups and set discount rates using monthly sales. He says customer sales reports can support allocation reviews, which he recommends carrying out at least twice a year. Those reviews may also flag declining sales that warrant a conversation with the customer.
Aylen cautions against offering a uniform discount across all departments. He says retailers should test rates at the department level, then make further adjustments for classes, product lines or individual stock-keeping units where needed. He points to pricing software such as Margin Master and Epicor Pricing Planner, while also suggesting that retailers can work through the calculations in Excel. For any SKU-level exception, he advises against locking in a fixed price and recommends setting an expiration date.
Pricing Plans Can Limit Margin Leakage
The advice focuses on a trade-off facing hardware retailers: customer discounts may support sales and loyalty, but a discount that ignores differences between product categories can reduce profit or leave a retailer selling some items below a competitor’s price. Aylen’s examples illustrate why a single rate may not fit a customer’s entire basket. He says a 15% storewide discount could be costly on low-margin, high-value plumbing products or ladders.
Segmenting customers and checking actual department economics gives retailers a way to make offers more specific, according to Aylen. The approach may also create a basis for discussing a customer’s wider purchasing needs. However, the column does not provide data showing how much sales or margins changed after retailers adopted the method. Its recommendations should be read as operational guidance rather than proof of a particular financial outcome.
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From Customer Groups to Item Rates
The article is the fourth piece in “Inside the Margin”, a series Aylen says examines ways to grow sales and protect margins among contractor and professional customers. Its focus is the sequence of setting up customer groups, establishing qualification criteria, and assigning price plans at suitable levels of the product range.
Aylen illustrates the risk of pricing too broadly with two examples from his consulting work. He describes a retailer that used cost plus 28% across plumbing products and found that a clamp was priced at 94 cents, compared with $1.64 at what he calls its main corporate competitor. He also warns that a 15% discount could put certain plumbing products or ladders at an unprofitable price. The article does not identify the retailers, products beyond those examples, or the dates of the observations.
“If you are starting this from scratch, I recommend limiting your customer groups to no more than 10.”
— Mike Aylen, industry expert and NHPA strategic consultant
No Results Data Provided
The source is an industry viewpoint and does not report a controlled study, retailer-wide survey, or quantified outcome from using category price plans. It does not specify how the examples were measured, when they occurred, or whether the retailers changed their pricing afterward. It is also unclear how the suggested group criteria or discount levels would perform in different markets; Aylen says retailers should base those choices on their own customer activity and product economics.
Retailers Must Set and Review Rates
Aylen’s next recommended steps are for retailers to define group eligibility, examine sales by customer, and calculate discounts separately across departments before assigning plans in their pricing system. He suggests using a 60- or 90-day trial group for new customers rather than immediately granting the most favorable permanent terms. Retailers would then review sales and adjust allocations at least twice a year. The column announces another installment in the series but gives no date or subject for it.
Key Questions
What is a category price plan?
It is a pricing arrangement that assigns customer discounts across product departments or narrower categories, rather than applying one rate to every item in a store.
How many customer groups does Aylen recommend?
For a retailer starting from scratch, Aylen recommends no more than 10 standard groups. He says individual plans may be added for customers whose volume warrants separate treatment.
How often should retailers review customer groups?
Aylen recommends reviewing allocations at least twice a year, using sales-by-customer reports to identify changes, including declining sales.
Why does Aylen oppose a storewide discount?
He says a single discount can be too high for some products and unprofitable on low-margin items. His alternative is to calculate rates by department and refine them for smaller product groups when needed.
Does the article show that these plans increase profit?
No quantified results are provided. The article presents Aylen’s recommendations and examples, but does not establish how much the approach affects sales or margins.
Source: hardwareretailing.com
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