2024 was a challenging year for global distribution, but according to the latest economic indicators, better times may be on the horizon. A new study shows distributors are optimistic about 2025 and are adapting their pricing strategies accordingly.  

Pricing Agility Required 

Distributors have a long history of agility. It’s an essential capability for a business model that operates on razor-thin margins even in the best of times. As the only constant in the market in recent years has been more change, agile pricing strategies have proved vital.  

Successful distributors have executed a measured response to the challenging market pressures created by post-pandemic global economic volatility. When adjusting prices to inflation in 2024, the priority for distributors has been maintaining margin (38%) and meeting customer demand (37%), according to the 2025 Pricing for Profitable Growth Outlook. They could do this by closely managing costs and anticipating supply chain disruptions. Price benchmarking, or monitoring competitors’ prices, has also played a key role in setting prices acceptable to buyers. 

Align Market Realities with Customer Insights 

True price agility comes from a combination of market insights, buyer knowledge, and the ability to quickly respond to all of it. Growing market optimism along with deep customer knowledge contributes to why 22% of distributors say they are cautiously optimistic and preparing for better times but nearly half (48%) are even more positive and report feeling bold about 2025 and have already introduced new products/services and implemented appropriate pricing models. 

Prices are set based on a customer’s perceived value of a product in a value-based pricing strategy and distributors report this is their top strategy today, followed by a market-based approach. Engaging with customers to gain deep knowledge as capable partners is required to keep that seat at the table and grow the relationship.  

Drill Down on Willingness to Pay 

One way to determine value is regularly monitoring buyer sentiment and behavior. Distributors track buyers’ willingness to pay (WTP) thresholds or the maximum amount of money buyers are willing to spend on a product or service. It represents the value a customer perceives in your offerings. These insights are foundational to offering the right price – not so high you lose the deal but not so low you leave money on the table.  

In 2025, leaders anticipate the top influences on buyers’ WTP will be customer experience (34%), product support options (32%), and sustainability (30%).  

There are several tactics organizations can use to understand their customers’ WTP. Manufacturers and distributors report the top two ways they gain WTP insight today are through market research (26%) and price benchmarking (22%), or the comparison of prices across competitors. Other common methods include customer segmentation (17%), direct surveys (17%), and consulting pricing experts (17%). Individually, each one is a good tactic. Collectively, they deliver powerful context for decisions. The complete, most accurate picture comes from using multiple tactics.   

Scale with Automation and AI 

For distributors to implement and scale these agile pricing strategies, reliance on software is essential. Over half report using software to set global reference prices and guidance for negotiated pricing decisions and provide product suggestions and context for pricing decisions to sales teams.  

AI is also an important resource for pricing but despite its value, overall adoption remains low. AI can help distributors discover what’s causing changes in revenue and margin, identify revenue and margin leakage and how to fix it, identify appropriate products to propose to customers based on their preferences, and determine optimal negotiated prices to quote.  

While more distributors than manufacturers report using AI to add an important layer of intelligence for greater profitability, still only one-third say it’s currently being used in that way today.  

Invest Where It Counts 

Global volatility has defined the last few years. While distributors have long been equipped to roll with change and thrive, recent circumstances have only underscored the importance of agile pricing strategies. In response, nearly half (43%) of distributors (all with 500+ employees) employ 11-20 people to work on price today and 99% say they will recruit more people tasked with pricing in 2025.  

Buyers and their experiences will take center stage in 2025. Meeting their expectations while aligning with market realities is how distributors will find success in 2025.