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In a Hardware Retailing industry viewpoint, NHPA strategic consultant Mike Aylen recommends that hardware retailers use customer groups and category-specific price plans for contractor and other professional customers. He says regular sales reviews and department-level discount decisions can help retailers pursue customer growth without applying overly broad discounts that erode margins.
Hardware Retailing has published advice from industry expert and NHPA strategic consultant Mike Aylen on using customer groups and category price plans to manage discounts for contractors and other professional buyers. In the fourth article in his “Inside the Margin” series, Aylen argues that retailers can use sales data to target offers while avoiding broad discounts that may cut into margins on particular products.
Aylen recommends that retailers starting from scratch keep customer groups to no more than 10, with separate plans added for individual high-volume accounts when needed. Groups might reflect trades such as plumbing or painting, or other customer activities, including building, concrete work, property maintenance and local government. He says retailers should use their existing customer base to decide which groups suit their market.
Before assigning customers, retailers should set clear criteria based on their customers’ work and, where appropriate, sales volume. Aylen cites a retailer that split plumbers into large, medium and small groups and set discounts according to monthly sales. He recommends reviewing allocations at least twice a year using sales-by-customer reports, both to adjust group placement and to identify customers whose purchases are declining.
For new customers, Aylen suggests a 60- or 90-day trial group rather than immediately granting the best permanent discount. Customers can be told what criteria apply and then demonstrate whether their business qualifies for a long-term plan, he writes. After groups are established, retailers can set discounts by department and, where needed, by class, product line or individual stock-keeping unit.
How Targeted Discounts Protect Margins
The advice addresses a pricing trade-off for hardware retailers: discounts may help attract or expand business from professional customers, but a uniform offer can reduce earnings on products with already narrow margins. Aylen warns against applying one discount across every department, saying the same percentage may be unnecessary in some categories and too high in others.
He gives examples from his work, not industry-wide data. A 15% global discount, he says, could leave little room on hot-water units bought by plumbers or result in ladders being sold at a loss to painters. In another example, a plumbing plan priced at cost plus 28% put a clamp at 94 cents, while the retailer’s main corporate competitor charged $1.64. The examples illustrate why he advises checking prices product by product; they do not establish typical prices or outcomes across the sector.
For retailers, the proposed approach links discounts to both customer behavior and the economics of what they buy. Sales reviews can prompt conversations when spending falls, while information on product mix can help staff identify purchases a customer may be making elsewhere. Aylen presents this as a way to pursue additional sales while avoiding discounts that are larger than needed.
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From Customer Groups to Price Plans
The article is the fourth installment of Aylen’s “Inside the Margin” series, which he describes as focusing on sales growth and margin protection among contractor and professional customers. Its subject is the setup process: define customer groups and allocation criteria first, then determine the discount structure for each category.
Aylen names Margin Master and Epicor Pricing Planner as tools retailers can use to examine department-level selling prices and test discounts. He also says the calculations can be done in Excel. For product-level exceptions, he cautions retailers not to lock a SKU to a fixed price and recommends setting an expiration date. The article offers practitioner guidance; it does not report a new pricing policy, a survey or measured results from a controlled study.
“The main advantage is that you can use it to grow sales.”
— Mike Aylen, industry expert and NHPA strategic consultant
Results Depend on Local Pricing
The source does not quantify how much sales or margin retailers can gain from these plans, or provide comparative results showing how the approach performs against other pricing methods. Its examples come from Aylen’s consulting experience and are not presented as a representative industry sample.
Retailers would also need to establish their own group thresholds, discount rates and review practices. The article does not give a universal formula for those decisions; it says they should reflect a store’s customer base, product costs and market. Competitor prices and customer purchasing patterns can vary, so the examples should not be treated as standard benchmarks.
Retailers Set and Review Their Plans
Aylen’s proposed next steps are for retailers to define customer-group criteria, assess sales and product mix, calculate category discounts, and assign customers to plans. They can use pricing software or a spreadsheet, then review customer sales at least twice a year and adjust allocations when the data supports a change.
For new accounts, his advice is to communicate the qualification criteria and use a time-limited trial before assigning a permanent discount group. The article does not announce a follow-up measure or report a later result; Aylen says the series will cover another topic in a future installment.
Key Questions
What is a category price plan?
It is a pricing arrangement that sets discounts for customer groups by department or product category, with possible further adjustments by class, product line or individual item.
How many customer groups does Aylen recommend?
For retailers building a system from scratch, Aylen recommends starting with no more than 10 groups. He says individual high-volume accounts may need their own plans in addition to those groups.
How often should retailers review customer assignments?
Aylen recommends reviewing them at least twice a year, using customer sales reports to identify changes in purchasing and possible declines.
Why does he advise against one discount across all departments?
Different departments and products have different pricing and margin conditions. Aylen says a blanket discount could be too generous on some items while doing little to support sales in others.
What does Aylen recommend for new customers?
He suggests using a 60- or 90-day trial group and explaining the qualification criteria before assigning a permanent plan. The customer can then demonstrate whether their business meets those criteria.
Source: hardwareretailing.com
