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In a Hardware Retailing industry viewpoint, NHPA strategic consultant Mike Aylen recommends that hardware retailers build customer groups and set contractor discounts by product category. He argues the approach can support sales while reducing the risk of overly broad discounts eroding margins, but provides no quantified results or independent evaluation.
Hardware Retailing has published guidance from NHPA strategic consultant Mike Aylen on using customer groups and product-category pricing to manage discounts for contractors and other professional buyers. In the fourth installment of the “Inside the Margin” series, Aylen argues that tailored plans can support sales while avoiding unnecessary discounts on products where margins are already tight.
Aylen recommends starting with customer groups based on the retailer’s market and current customer base. For a retailer building a system from scratch, he suggests keeping the number of standard groups to 10 or fewer, while allowing additional individual plans for customers whose volume warrants separate treatment. Possible groups include plumbers, painters, builders, concrete workers, property-maintenance businesses and local councils.
Retailers should define why a customer qualifies for a group, considering the customer’s work and, where appropriate, sales volume. Aylen describes a retailer that divided plumbers into large, medium and small groups, with discounts linked to monthly sales. He also says a retailer may choose to recognize loyalty: a customer who falls into a middle sales tier but directs all its business to the store could be offered the terms of a higher group.
Aylen recommends reviewing customer sales information at least twice a year, using reports to adjust group assignments and identify customers whose purchases are declining. He advises estimating each customer’s potential spend, looking for products they buy elsewhere and discussing those gaps with them. For new accounts, he suggests a 60- or 90-day trial group rather than granting the best permanent terms immediately, with movement into a lasting group based on whether the customer meets agreed criteria.
Why Category-Level Discounts Matter
The approach matters because a uniform discount can have different effects across products. Aylen warns that a global percentage off retail may cut too deeply into margin on some items while giving away less necessary discounts on others. His examples include plumbers buying hot-water units and painters buying ladders, where a broad discount could make sales unprofitable, according to his account.
He also describes a plumbing plan set at cost plus 28% that resulted in a clamp selling for 94 cents, compared with $1.64 at what he calls the retailer’s main corporate competitor. The example illustrates the risk of setting a formula without checking individual selling prices and market comparisons. It is an example from Aylen’s work, not evidence of an industry-wide outcome.
For retailers, the proposed method links discount decisions to both customer value and product economics. That could help businesses compete for professional customers without applying the same price reduction to every department. The source does not report measured margin gains or sales growth, so those benefits remain Aylen’s rationale for the process rather than a quantified result.
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From Customer Groups to SKU Exceptions
The article is a practical viewpoint, not a report of a newly introduced industry standard or a study comparing retailer results. Aylen presents the recommendations as part of Hardware Retailing’s “Inside the Margin” series, focused on sales and margin management for contractor and professional customers. He says retailers should use their own customer base and market conditions to set group criteria.
After deciding on groups, retailers can set discount rates by department and then refine them for classes, fine lines or individual stock-keeping units (SKUs). Aylen names Margin Master and Epicor Pricing Planner as tools that can help retailers review selling prices, while saying the calculations can also be done manually in Excel. He advises checking rounding settings during price analysis and says SKU-level exceptions should have an expiration date rather than being fixed indefinitely.
“If you are starting this from scratch, I recommend limiting your customer groups to no more than 10.”
— Mike Aylen, NHPA strategic consultant, in Hardware Retailing
No Measured Results Provided
The supplied article does not give a publication date, retailer names for its examples, or supporting sales and margin data. It also does not quantify how much a category-based plan changed revenue, customer retention or profitability. The recommendations are attributed to Aylen and should not be read as independently verified performance findings.
Retailers’ costs, competitors’ prices, customer purchasing patterns and product margins vary. The source does not set discount levels that would work across businesses, nor does it detail how to account for all operating costs when calculating a profitable price. The examples illustrate Aylen’s concerns but do not establish that the same pricing outcomes would apply to other stores.
How Retailers Could Apply the Advice
Aylen’s proposed next steps are to define customer-group criteria, review customer-level sales, and calculate discounts by department before making narrower adjustments for classes, fine lines or SKUs. Retailers following the approach would then allocate customers to plans and review their results using sales information, with Aylen recommending a formal review at least twice yearly.
For new customers, he suggests setting expectations about the criteria for permanent pricing and using a 60- or 90-day trial period. The article says Aylen plans to address another topic in a future installment of “Inside the Margin,” but does not identify its subject or publication date. No specific follow-up findings or retailer results are announced in the supplied material.
Key Questions
What is a category price plan?
In Aylen’s description, it is a pricing arrangement that sets customer discounts by product department and, where needed, by class, fine line or individual SKU. The rate can vary across customer groups.
How many customer groups does Aylen recommend?
For a system being built from scratch, he recommends no more than 10 standard groups. He says individual plans may be added for customers whose volume calls for separate terms.
How often should customer groups be reviewed?
Aylen recommends reviewing customer sales information and group allocations at least twice a year. He says customer-level sales reports can help identify changing purchasing patterns.
Does the article show that category pricing increases margins?
No quantified results are provided. Aylen argues the method can help grow sales and protect margins, but the article does not include measured outcomes or an independent evaluation.
What should retailers do with SKU-level exceptions?
Aylen advises against locking an exception at a fixed price indefinitely. He recommends attaching an expiration date so the special price can be reviewed.
Source: hardwareretailing.com
