“When adjusting prices to inflation in 2024, the priority for distributors has been maintaining margin (38%), even slightly more than meeting customer demand (37%).”
— Modern Distribution Management, 2025 Pricing for Profitable Growth Outlook
In an industry defined by slim margins, high SKU counts, and constant supplier cost increases, distributors are rightly focused on protecting profitability. Yet one of the most significant and overlooked sources of margin loss remains hidden in plain sight: customer-specific pricing agreements.
These negotiated prices represent a large share of revenue but are often buried in spreadsheets, ERP records, or email chains with little oversight. Pricing teams lack visibility, sales reps rarely revisit terms, and cost increases often fail to trigger timely price updates. Without active management, these agreements quietly fall out of sync with business goals and market conditions. In fact, many organizations aren’t even sure how well their agreement processes are working or where the gaps lie (see how yours stacks up here).
When left unchecked, static or outdated agreements become a silent drain on profits. Prices stagnate as costs rise. Expiring or underperforming deals go unnoticed. Sales and pricing strategies drift apart. And because these issues emerge slowly, they often aren’t recognized until the financial impact is significant.
In today’s environment, where costs shift quickly and margin pressure is unrelenting, pricing agreements must be treated as dynamic assets — not set-and-forget contracts.
5 Common Pricing Agreement Pitfalls in Distribution
1. Manual Processes That Don’t Scale
Many pricing teams still rely on spreadsheets and email to manage agreement updates, making it nearly impossible to keep up when supplier costs shift or customer terms need revisiting.
2. “Set-and-Forget” Pricing
Agreements often lack end dates or regular review cadences. Fixed net prices stay static even as product costs climb, eroding margins over time.
3. Siloed Systems and Poor Visibility
Without a centralized agreement system, teams often lack visibility into how many agreements exist, which ones are underperforming, or whether margin targets are being met. This blind spot makes it nearly impossible to manage agreements strategically or take corrective action.
4. Field-Level Pricing Drift
Sales reps may negotiate prices that deviate from pricing strategy. Without governance, this creates inconsistency and undermines corporate objectives.
5. Delayed Price Updates
When supplier costs rise, agreement pricing changes are often delayed by manual ERP work or lack of coordination. That lag directly impacts margin.
Why Pricing Agreement Management Is a Strategic Priority
This isn’t just a pricing operations issue. Poor agreement management affects profitability, customer trust, and your ability to execute strategic initiatives like segmentation, value-based pricing, and inflation pass-throughs.
Distributors are especially vulnerable. Complex product catalogs, customer-specific pricing, and decentralized sales teams make consistency hard to maintain. And with razor-thin margins, even small delays in price updates can lead to significant profit loss.
Because so much revenue runs through negotiated deals, the risk is substantial. A few outdated agreements or missed price changes, scaled across thousands of SKUs and customers, can quietly erode millions in margin. Managing agreements with discipline and visibility is no longer optional. It’s a strategic necessity.
What Proactive Distributors Are Doing Differently
Leading distributors are shifting to a more disciplined and dynamic approach to pricing agreements. That includes:
- Centralizing agreement data across teams and systems
- Implementing regular review cadences tied to cost and performance
- Applying governance to ensure negotiated prices align with strategy
- Accelerating price change cycles when costs increase
- Equipping sales with data-driven pricing context to improve negotiations
These actions help distributors protect margin, build customer confidence, and stay ahead of cost volatility.
Don’t Let Agreements Become a Blind Spot
Customer-specific pricing agreements are essential to doing business in distribution. But when left unmanaged, they become liabilities — silently draining margin, undermining strategy, and adding friction across teams.
Now is the time to shift from reactive maintenance to proactive agreement management. By building visibility, governance, and agility into your pricing processes, you’ll protect profitability, enable faster decisions, and build trust with customers in a volatile market.
Managing smarter starts with treating agreements not as static contracts, but as living components of your margin strategy.
Ready to Find the Gaps in Your Pricing Agreements?
Even the most seasoned distributors have blind spots in how customer-specific pricing is managed. Our Negotiated Price Management Assessment will help you pinpoint where margin may be slipping through the cracks and what you can do about it.
Take the assessment today to evaluate how effectively your organization manages customer-specific pricing from strategy to execution.
