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In a Hardware Retailing industry viewpoint, NHPA strategic consultant Mike Aylen outlines how hardware retailers can build customer groups and tailor discounts by category. His recommendations include reviewing groups at least twice a year, using trial periods for new customers and setting expiration dates for SKU-level exceptions; the article does not report measured results from retailers using the approach.
Hardware Retailing has published a new industry viewpoint in which Mike Aylen, an industry expert and NHPA strategic consultant, recommends that independent hardware retailers organize contractor customers into defined groups and set discounts by product category. The guidance is intended to help retailers pursue more sales while avoiding discounts that erode margins on particular items.
Aylen says retailers starting from scratch should generally limit customer groups to 10 or fewer, apart from individual plans for customers whose volume warrants separate treatment. Possible groups include plumbers, painters, builders, concrete workers, property maintenance businesses and local councils. He advises retailers to define group criteria using customers’ day-to-day work and sales activity; where volume matters, a trade can be divided into tiers such as large, medium and small.
He recommends reviewing customer allocations at least twice a year using sales-by-customer reports. Retailers can use those reviews to identify declining sales, discuss possible causes with a customer and consider whether a customer’s loyalty or purchasing potential supports a different plan. Aylen also suggests estimating what customers could spend by comparing what they currently buy with the products they may be purchasing elsewhere.
For new customers, Aylen proposes a 60- or 90-day trial group rather than immediately offering the best permanent discount. He says customers should understand the criteria for moving into a permanent group and have an opportunity to demonstrate that they meet them. For established groups, he advises setting discounts separately by department and, where necessary, by class, fineline or individual stock-keeping unit (SKU).
Category Discounts Can Protect Margins
The article’s central point is that a single discount across all departments can produce very different outcomes across a store’s inventory. Aylen argues that a discount suitable for one product category may be too generous for another, particularly when items have low margins or high selling prices. A retailer may win contractor business on some goods while giving away profit on others.
As an example, Aylen describes retailers offering plumbers and painters 15% off retail across the board. He warns that this could leave little margin on hot water units or lead to ladders being sold at a loss, depending on costs and pricing. He also recounts a plumbing plan set at cost plus 28% that produced a price of 94 cents for a clamp, compared with $1.64 at a competitor he described as a main corporate competitor. These are examples from his consulting experience, not independently verified market comparisons or a measured assessment of the overall strategy.
For retailers, the practical implication is that trade pricing needs to account for both customer value and the economics of each product category. Grouping customers and checking prices at narrower product levels may help staff make offers with clearer criteria, while avoiding an automatic discount that applies regardless of margin.
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Building Plans From Customer Sales
The viewpoint is the fourth article in Hardware Retailing’s “Inside the Margin” series. Aylen frames the advice around growing sales and protecting margin among contractor and other professional customers. The supplied report provides guidance and examples from his work, rather than a formal study, retailer survey or quantified comparison of results.
Aylen names Margin Master and Epicor Pricing Planner as tools that retailers can use to examine prices by department and set category plans. He says retailers without those systems can work through the calculations in Excel. His suggested process is to use customer sales information to form groups, decide on criteria and discount rates, check the effect across categories, and then enter the plans into the retailer’s system and assign customers.
He also cautions against setting SKU-level exceptions as fixed prices. For those exceptions, he recommends using an expiration date so the price does not remain in place indefinitely. The report does not specify how retailers should choose a particular discount rate; that decision depends on their own costs, pricing and customer data.
““If you are starting this from scratch, I recommend limiting your customer groups to no more than 10.””
— Mike Aylen, industry expert and NHPA strategic consultant
No Results Data Provided
The supplied article does not provide a publication date, retailer names for its examples, or data showing whether the recommended plans increased sales or improved margins. Aylen’s price comparisons and warnings are presented as examples from his experience; the report does not give the underlying costs, dates, product details or methodology needed to assess them independently.
It is also unclear how a retailer should set the right discount for each group and category without reviewing its own costs, sales mix and competitive prices. The article offers a process, not a universal discount schedule or evidence that one group limit or trial period will suit every store.
Retailers Must Set Local Criteria
The article does not announce a product launch, policy change or scheduled industry milestone. Its proposed next steps for retailers are to define customer-group criteria, review sales and purchasing patterns, calculate category-specific discounts, and build the resulting plans into their pricing system or a spreadsheet.
Aylen advises retailers to revisit allocations at least twice a year and use temporary groups for new customers before assigning permanent discounts. The supplied report says he plans to cover another topic in a future “Inside the Margin” article, but gives no subject or publication date.
Key Questions
What is the article’s main recommendation?
Set contractor discounts by category rather than applying one global rate across every department. Aylen says retailers should also define customer groups and the criteria for assigning customers to them.
How many customer groups does Aylen suggest?
For a program starting from scratch, Aylen recommends no more than 10 groups, with separate plans for particular high-volume customers where needed. He says the groups should reflect the retailer’s own customer base and market.
How often should retailers review customer groups?
Aylen recommends reviewing allocations at least twice a year using sales-by-customer reports. The report does not provide results data establishing that this schedule is right for every retailer.
How does Aylen suggest handling new customers?
He suggests placing them in a 60- or 90-day trial group and explaining the criteria for a permanent plan, rather than immediately giving them the best discount.
Does the report show that the pricing approach increases profit?
No quantified results are included. The article presents Aylen’s recommendations and consulting examples, but does not report measured sales or margin changes attributable to the approach.
Source: hardwareretailing.com
