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Industry consultant Mike Aylen’s latest “Inside the Margin” article advises hardware retailers to build contractor customer groups and set discounts by product category rather than applying one global rate. He recommends reviewing customer sales at least twice a year, using trial periods for new accounts and setting expiration dates for SKU-level price exceptions.
Hardware retail consultant Mike Aylen has outlined a category-based pricing approach for stores serving contractors, recommending that retailers group customers by trade and buying activity, then set discounts by department instead of applying one rate across the store. The advice appears in the fourth installment of his “Inside the Margin” series in Hardware Retailing and is intended to help stores pursue contractor sales without unnecessarily reducing margins.
Aylen recommends starting with no more than 10 customer groups, with separate arrangements for unusually high-volume accounts added when needed. Possible groups include plumbers, painters, builders, concrete workers, property-maintenance businesses and local councils. He says retailers should use their existing customer base and define clear criteria for assigning accounts, such as the customer’s day-to-day work and monthly sales.
One retailer Aylen worked with divided plumbers into large, medium and small groups, with discount rates linked to monthly sales. He also says loyalty can be considered: a customer who falls short of a volume threshold but directs all of its business to the store could be offered a higher group based on that relationship. These are recommendations from Aylen’s industry viewpoint, not reported results from a controlled study.
For pricing, Aylen advises calculating rates separately for each department, and then at class, fineline or individual-product level where necessary. He warns that a global discount can be too generous on some low-margin products and insufficiently targeted elsewhere. Retailers using pricing software such as Margin Master or Epicor Pricing Planner can model department-level prices, he says; others can do the calculations in Excel. He advises turning off rounding during price analysis and using expiration dates for SKU-level exceptions rather than locking them at a fixed price.
Pricing Contractors Without Blanket Discounts
The approach matters because contractor accounts can generate repeat business, but a broad discount may reduce profit on products where margins are already tight. Aylen’s examples illustrate the trade-off: he says a 15% storewide discount could leave little room on hot-water units or lead to ladder sales at a loss, depending on the retailer’s costs and pricing. He also recounts a case in which a plumbing plan set at cost plus 28% produced a price of 94 cents for a clamp, compared with $1.64 at a major competitor.
Those examples are Aylen’s reported observations, not independently verified market-wide findings. They show why retailers may want to test prices against their own costs and competitive conditions before assigning discounts. A more segmented plan could help stores make offers that reflect customer value and product economics, while regular reviews may catch declining account activity or discount settings that no longer fit.
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How the Proposed Plans Work
Aylen frames customer grouping as the first step: define who qualifies for each plan, then decide the discount structure. He recommends reviewing group assignments at least twice a year using sales-by-customer reports. If sales are falling, he suggests meeting the customer to understand the reason and identify products the account may be buying elsewhere.
For new customers, Aylen proposes a 60- or 90-day trial group rather than immediately offering the best permanent discount. The customer can demonstrate whether it meets the retailer’s criteria before being moved into an established group. He presents this as a way to avoid giving a large concession without evidence of an ongoing business relationship.
“The main advantage is that you can use it to grow sales.”
— Mike Aylen, industry expert and NHPA strategic consultant
Retail Results Are Not Quantified
The supplied article does not provide measured sales or margin results from retailers adopting these plans, nor does it quantify implementation costs or the effect on customer retention. Aylen’s examples are presented from his consulting experience, without detailed dates, store identities or supporting datasets in the supplied material.
The right group thresholds and discount rates will vary by retailer, product costs, local competition and customer buying patterns. It is not clear from the article how frequently a retailer should review rates beyond the recommendation to review customer allocations at least twice yearly, or what specific performance targets should determine whether a trial customer qualifies for a permanent plan.
Retailers Would Need to Test Their Rates
Aylen’s article points retailers toward building customer criteria, modeling department-level prices and assigning accounts to plans, then checking sales data during regular reviews. Stores following the advice would need to compare their own costs and competitive prices, monitor account activity, and adjust rates where the numbers show a plan is not meeting its aims.
The source identifies no announced follow-up research or rollout schedule. Aylen says the article is the fourth installment in “Inside the Margin” and that he plans to cover another topic in a later installment; the subject and publication date were not specified in the supplied text.
Key Questions
What is a category price plan?
It is a pricing arrangement that assigns customer groups different discounts by product department or category, rather than giving every customer the same storewide rate.
How many customer groups does Aylen recommend?
Aylen recommends starting with no more than 10 groups, while allowing separate plans for certain high-volume customers when needed.
How often should retailers review customer groups?
Aylen says retailers should review allocations at least twice a year, using sales-by-customer reports to identify changes in account activity.
What does Aylen suggest for new contractor customers?
He suggests a 60- or 90-day trial group so a new account can demonstrate that it meets the retailer’s criteria before receiving a permanent plan.
Does the article show that these plans increase profit?
No quantified results are provided in the supplied article. Aylen presents the approach as consulting advice and gives examples, but does not report measured outcomes across a defined set of retailers.
Source: hardwareretailing.com
