Unlock hidden margin with special pricing agreements
Strategies and considerations for wholesale distributors
Special pricing agreements (SPAs) are a vital component to an electrical distributor’s business and overall profitability, not just a back-office nuisance. While SPAs are complex, they’re here to stay and represent a significant opportunity area for many electrical distributors.
Why special pricing agreements are so important
By using SPAs, pricing can be tailored in ways no single alternative can replicate. Distributors can prioritize specific customers and/or territories with hyper-targeted pricing to improve margins or drive incremental volume.
Manufacturers directly benefit from special pricing agreements as well. When used, manufacturers disintermediate distributors and gain strategic pricing control directly to end customers. Further, it allows manufacturers to maintain advantageous sell prices to distributors for non-SPA customers.
Because of the advantages SPAs offer, they are heavily used. In fact, SPA dollars for an electrical distributor are often larger than net income dollars. Tackling SPA management opportunities presents both a fast time-to-value and a strong ROI relative to the effort required.
The complexity of special pricing agreements necessitates robust SPA management to avoid financial leakage. Despite this, most distributors do not have adequate SPA management systems.
SPA management best practices
Reaching “best in class” requires investment and consistent dedication across people, process, and technology
Choosing to invest in improving SPA management and SPA administration capabilities can deliver strong ROI and unlock untapped sources of value for distributors. Interested in learning more? We would be happy to connect and talk through SPA opportunities with you and your team.
