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In a Hardware Retailing industry viewpoint, NHPA strategic consultant Mike Aylen outlines a category-pricing approach for hardware retailers serving contractors and other professional customers. He recommends manageable customer groups, discounts tailored to departments and regular reviews, while warning that broad discounts can erode margins or make some products uncompetitive.
Hardware Retailing has published a new industry viewpoint by Mike Aylen, an industry expert and National Hardware Show Association strategic consultant, on using customer groups and department-specific price plans to manage margins on sales to contractors and other professional customers. The article argues that retailers should avoid applying one discount across every department and instead set rates that account for differences in product margins and customer buying patterns.
Aylen’s article is the fourth installment of the “Inside the Margin” series. He recommends that retailers building a customer-group system from scratch start with no more than 10 groups, while making separate exceptions for individual high-volume customers when needed. 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, Aylen says retailers should define the criteria. These might relate to the customer’s day-to-day work, purchasing activity or sales volume. A retailer could, for example, divide plumbers into large, medium and small accounts and set eligibility or discounts by monthly sales. The article also describes using customer loyalty as a factor: a customer whose sales place them in a middle tier might receive more favorable treatment if they direct all of their business to the store.
Aylen recommends reviewing customer activity at least twice a year, using sales-by-customer reports to make allocation changes and identify declining purchases. Retailers can then discuss changes with customers and look for products or quantities they currently buy elsewhere. For new customers, he suggests a 60- or 90-day trial group rather than immediately granting the best permanent discount, with the customer’s later allocation based on whether they meet the retailer’s criteria.
Why Department-Level Discounts Matter
The central business issue in Aylen’s advice is that a discount that attracts sales in one product category can reduce profit or put another category below a competitive price. A single percentage applied throughout a store does not account for different costs, margins or market prices. His examples include a 15% global discount that could leave little room on low-margin, high-value water heaters and could result in ladder sales at a loss.
Aylen also recounts a retailer’s plumbing plan priced at cost plus 28%. In one example, that approach put a clamp at 94 cents while a major competitor sold it for $1.64. The comparison illustrates that a formula applied broadly may produce prices that are unnecessarily low on some items. These examples are presented as Aylen’s experience, not as independently verified industry-wide results.
For retailers, the practical stakes are balancing customer retention and sales growth against the risk of discounting products more than necessary. A structured plan can give staff clearer rules and give customers a path to better pricing, while department-level checks can help the store avoid giving away margin across unrelated products.
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How the Price-Plan Process Works
The article separates the work into two stages: deciding which customers qualify for each group, then determining the discount for each group across relevant product categories. Aylen advises against setting one rate for all departments. Rates may need to vary by department and, after further review, by class, fineline or individual stock-keeping unit.
Retailers using Margin Master or Epicor Pricing Planner can use those systems to examine selling prices under proposed discounts, Aylen says, advising users to turn off rounding during the calculation. Retailers without those tools can work through the rates manually in Excel. Once the plan has been checked, it can be entered into the retailer’s system and customers assigned to the appropriate groups.
Aylen cautions that a SKU-level exception should not be locked at a permanent fixed price. He recommends including an expiration date so the exception can be revisited. The source offers operational guidance and examples, but does not report a measured financial outcome from implementing the process.
“The main advantage is that you can use it to grow sales.”
— Mike Aylen, industry expert and NHPA strategic consultant
Results and Implementation Details
The supplied article does not give quantified results showing how much sales, margin or customer retention changed after a retailer adopted these plans. The examples are attributed to Aylen’s work with retailers and should not be read as a survey or a guarantee that the same results will occur elsewhere.
It also does not specify recommended discount percentages for particular departments, a universal definition of customer tiers or the size of the individual-account exceptions. Those decisions depend on each retailer’s customers, product economics and local competition. The article does not identify the publication date in the supplied material.
Retailers Must Set and Review Their Plans
Aylen’s proposed next steps for retailers are to define group criteria, analyze prices by department, set discounts at the appropriate level and assign customers in the pricing system. Retailers can then use sales reports to review group membership and revisit allocations at least twice a year, with additional checks when customer activity changes.
For new accounts, the suggested 60- or 90-day trial gives the retailer a period to assess purchasing before deciding on a permanent group. The source does not announce a policy change, formal industry standard or scheduled implementation date; the advice leaves those decisions to individual businesses. Aylen says the “Inside the Margin” series will continue with a later topic, but the supplied article does not name it.
Key Questions
What is the article’s main recommendation?
Mike Aylen recommends grouping professional customers using clear criteria and setting discounts by department, rather than applying a single rate across the store.
How often should retailers review customer groups?
Aylen says retailers should review customer activity and group allocations at least twice a year, using sales-by-customer reports.
How should a retailer handle a new professional customer?
Aylen suggests placing the customer in a 60- or 90-day trial group and setting permanent pricing after assessing whether the customer meets the retailer’s criteria.
Does the source show that the strategy increases margins?
No quantified outcome is provided. The article offers Aylen’s recommendations and retailer examples, but does not report measured changes in sales or margins.
Source: hardwareretailing.com
