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Mike Aylen, an industry expert and NHPA strategic consultant, has published the fourth article in Hardware Retailing’s “Inside the Margin” series, outlining how hardware retailers can use category price plans for contractor and professional customers. He recommends setting clear customer-group criteria, reviewing sales at least twice a year and tailoring discounts by department rather than applying one global rate. The article offers guidance, not reported evidence that the approach produces a particular financial result.
Hardware Retailing has published the fourth article in its “Inside the Margin” series, in which industry expert and NHPA strategic consultant Mike Aylen recommends that hardware retailers use customer groups and category-specific price plans to pursue contractor sales while protecting margins. The article advises retailers to base discounts on customer activity and the economics of individual departments, rather than applying a single rate across the store.
Aylen recommends starting with no more than 10 standard customer groups when building a plan from scratch, while allowing separate plans for customers whose volume warrants individual treatment. Potential groups could include plumbers, painters, builders, concrete workers, property-maintenance businesses and local councils. He says retailers should use their current customer base and define why a customer belongs in each group, including whether the decision reflects the work they do, their sales volume or both.
One retailer Aylen worked with divided plumbers into large, medium and small groups, using monthly sales to set discount rates. He says sales-by-customer reports can help retailers assign customers, review allocations and spot declining purchases. Aylen recommends reviewing group activity at least twice a year, and suggests speaking with customers whose sales fall to find out why.
For new accounts, Aylen advises against immediately offering the strongest permanent discount. Instead, retailers could explain the criteria for a preferred group and use a 60- or 90-day trial period to see whether the customer meets them. Once groups are set, he says discounts should be worked out separately by department, with further adjustments at the class, fineline or individual stock-keeping unit level where needed. Plans can be built with pricing software or manually in Excel, according to the article.
Why Department-Level Discounts Matter
The advice addresses a trade-off facing retailers that sell to professional customers: discounts may help attract or retain business, but broad reductions can cut into earnings on items that already have limited margin. Aylen argues that a single discount across every department can be too high for some products and too low to be competitive on others. Setting rates by category gives retailers a way to account for those differences before assigning customer plans.
His examples illustrate the potential risk, but they are examples from Aylen’s experience, not independently verified industry-wide results. He describes a 15% global discount that could leave little profit on hot-water units or result in losses on ladders. He also recounts a plumbing plan set at cost plus 28% that produced a 94-cent selling price for a clamp, compared with a competitor’s $1.64 price. The article does not provide broader data on how frequently such outcomes occur.
For retailers, the practical implication is that a customer’s discount should be considered alongside the products they buy and the prices needed to remain competitive. The recommended reviews could also prompt a conversation when a customer’s purchases decline, although the article does not quantify the sales or margin effects of this process.
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How Retailers Set Customer Groups
The article is the fourth installment of Hardware Retailing’s “Inside the Margin” series. Aylen frames category price plans as one tool for growing sales and protecting margins among contractor and other professional customers. The supplied material does not give a publication date, identify a particular retailer adopting a new plan or report a change to industry policy.
Aylen points to Margin Master and Epicor Pricing Planner as tools retailers can use to examine selling prices and discounts by department. He says retailers without those systems can use Excel. His article also advises turning off price rounding when evaluating discount-based selling prices and cautions against setting SKU-level exceptions at a fixed price without an expiration date.
“Do not make the mistake of putting a global discount across all departments because this is too generic and will cost you sales in many areas on commodity lines and margin on others where the discount is too high and unnecessary.”
— Mike Aylen, industry expert and NHPA strategic consultant, in Hardware Retailing
Results and Adoption Remain Unreported
The supplied article does not state when it was published, how many retailers use the approach or whether a retailer has measured its effect on sales, customer retention or margins. Aylen presents recommendations and examples from his work, but the material does not include independent verification, a comparison with other pricing methods or a quantified before-and-after result.
It is also not clear what discount levels would suit any particular retailer. The article says plans should reflect customer activity, department economics and local competition; it does not provide a universal rate or a detailed calculation for setting one. Retailers would need to assess their own costs, prices and customer data before applying the recommendations.
Further Advice in the Series
Aylen says he plans to cover another topic in a future “Inside the Margin” article. The supplied source does not name that subject or give a publication date. For retailers considering the method described here, the article’s proposed next steps are to define customer-group criteria, calculate department-level discounts, build the plans in their pricing system or a spreadsheet, and review customer sales at least twice a year.
Key Questions
What is a category price plan?
In Aylen’s article, it is a pricing approach that assigns customer groups different discounts by department, with further adjustments possible for a class, fineline or individual SKU.
How many customer groups does Aylen recommend?
For retailers starting from scratch, Aylen recommends no more than 10 standard groups. He says customers with enough volume to merit an individual plan can be handled separately.
How often should retailers review customer allocations?
Aylen recommends reviewing group activity at least twice a year, using sales-by-customer reports to check purchases and identify declines.
Does the article report proven sales or margin gains?
No quantified results are provided in the supplied article. Aylen presents professional advice and examples from his work, but does not report measured outcomes across a defined group of retailers.
What does Aylen suggest for new customers?
He suggests explaining the criteria for a permanent customer group and using a 60- or 90-day trial period rather than immediately giving a new customer the strongest discount.
Source: hardwareretailing.com
