False Profits

Author: Marshall Lehr

  • Price Moves Business. Relationships Keep It.

    Price Moves Business. Relationships Keep It.

    On a recent call with the president of a wholesale distributor—a $200-million access-control company with 34 locations stretching from Seattle to Miami—he said something that immediately stuck with me:

    “Price moves business. Relationships keep the business.”

    It’s a simple statement, but it captures one of the biggest truths (and tensions) in distribution.

    The False Choice

    Too often, companies treat pricing strategy as a philosophical debate: “Do we want to be the cheapest, or do we want to be a relationship-based company?

    ”The truth is, that’s a false choice. Every distributor lives in the tension between price, relationship, and value. Those levers constantly shift depending on the customer, the product category, and the competitive situation.

    When Price Does Move Business

    That president is right—price does move business. But not every price.

    It’s the price on your most core, highly visible items—the SKUs your customers buy mostoften and know best.

    Just like grocery stores don’t advertise cheap toothpicks, they advertise cheap milk and chicken—because those are the items that drive store choice.

    For distributors, those “milk and chicken” SKUs might be conduit, gate operators, or wiring devices—whatever products anchor your customers’ spend and mindshare. You must be competitive there.

    Where Price Doesn’t Matter (As Much)

    On the other end of the market basket—the hundreds of low-volume, infrequently purchased items—price sensitivity drops dramatically.

    No one is switching suppliers over being a few points high on an item they buy once a year. But optimizing those “tail” items can drive significant, sustainable margin gains.

    That’s where strategic pricing earns its keep: knowing where you can hold margin confidently, and where you can’t afford to be out of line.

    The New “Value-Add”

    In that same meeting, the VP of Sales & Marketing added another insight:

    “Customers love value-add, but it’s become table stakes.”

    He’s absolutely right. The “value-adds” distributors once promoted—local inventory, delivery, technical support—are now the minimum.

    Amazon has redefined what “easy to do business with” means. Differentiation now comes from understanding where customers truly perceive value—and aligning your pricing, communication, and experience accordingly.

    The Balance That Wins

    Price matters. Relationships matter. Value matters.

    But none of them exist in isolation.

    The best distributors aren’t asking, “Which one do we choose?” They’re asking, “Where should we lean heavier right now?”

    Because in a world where price moves business, relationships still keep it.

  • Wrong Map, Wrong Diagnosis: The Danger of Misreading Quote Data

    Wrong Map, Wrong Diagnosis: The Danger of Misreading Quote Data

    Using quote conversion data to diagnose pricing—without proper context—is like trying to navigate New York City with a map of Chicago.

    You’ll still be moving. You’ll still be making decisions.
    But you’ll be solving the wrong problems, chasing the wrong streets, and ending up lost and frustrated that your inputs aren’t producing the outcomes you expected.

    That’s what happens when we treat quote conversion and lost sales data as a clean window into pricing performance. The data might look like a map—but it’s not a map of the territory you’re actually in.

    The Wrong Assumption, Repeated Often

    When clients ask us to pull quote conversion or lost sales data, there’s usually one assumption baked in:

    “This will show us how competitive our pricing is.”

    And yes—price might be part of the story. But it’s rarely the whole story.

    In fact, when we assume price is always the deciding factor, we risk drawing the wrong conclusion and fixing the wrong thing.

    The Reality: Quote Data is Noisy

    Quote conversion data doesn’t live in a vacuum. It’s impacted by a host of non-price factors that don’t show up in the spreadsheet:

    • Availability
    • Proximity to the jobsite
    • Brand preference
    • Relationship strength
    • Sales rep follow-up (or lack thereof)

    If we ignore these, we’re misreading the signals—and usually, that leads to pricing decisions that quietly erode margin.

    Here’s a Better Set of Questions to Ask

    Instead of stopping at “price was too high,” ask:

    • Are we their preferred supplier?
      Or are we a secondary, tertiary, or just a specialty backup?
    • What was our inventory position?
      Did we have what they needed in stock and ready to go?
    • Could we deliver it where they needed it, by when they needed it?
      (Contractors care more about avoiding job delays than saving 2%.)
    • Is the brand we quoted one they know, like, and trust?
      Or did we quote an unknown or lesser brand against a familiar favorite?

    If you’re losing business but didn’t follow up to uncover these insights, then you’re not working with real data—you’re working with assumptions.

    Relationship Beats Price—Most of the Time

    Here’s an uncomfortable truth:

    If the customer wanted to buy from you—and had a strong relationship with your sales rep—they probably would’ve worked through the price.

    That conversation didn’t happen? That silence is data too.

    A strong relationship creates room for dialogue.
    A weak one ends with ghosted quotes.

    So when a quote goes cold, don’t automatically slash the margin.
    Ask: Did they actually want to buy from us in the first place?

    Conversion Data is a Mirror—But It’s Foggy

    Quote and lost sales data can be helpful, but only when interpreted in context.
    If you assume price is the only story, you’ll cut margins when you should be improving service, availability, or brand alignment.

    So before adjusting your pricing strategy based on quote data, make sure you’re using the right map.

    Because if your goal is to navigate a competitive market…

    The only thing worse than having no map—is using the wrong one.

  • Margin Myth #1: Lower Prices = More Sales (and Profit)

    Margin Myth #1: Lower Prices = More Sales (and Profit)

    “For every complex problem, there is an answer that is clear, simple, and wrong.” – H. L. Mencken

    It’s easy to believe that if you lower prices, sales will go up. And to some extent, that’s true. But like most half-truths in business, it’s also dangerously misleading.

    This belief—lower price = more sales—is a perfect example of a simple answer to a complex problem. It’s easy to understand, easy to justify, and often backed by feedback from the field. Unfortunately, it often leads to a quiet but significant destruction of profitability.

    The Appeal of Simplicity

    Sales teams hear it constantly: “Your price is too high.”

    When sales slow down, it’s tempting to see that objection as truth. Over time, that repetition builds cognitive bias:

    • Recency bias: Recent feedback weighs heavier.
    • Confirmation bias: We interpret new information as proof of what we already believe.
    • Availability bias: We rely on the most readily available explanation.

    Eventually, sales teams start believing that price is the reason they’re not closing deals—and that if they just had lower prices, sales would take off.

    The 8.5% Margin Mistake

    I worked with a specialty distributor who learned this lesson the hard way.

    Over a 6-month period, their sales had dipped to around $1.2 million, which represented a 16.1% decline in average monthly sales compared to the previous year. Margins held at about 35%. Feedback from the sales team and customers was consistent: “Your pricing is too high.”

    So, in an attempt to regain momentum, they made a bold move—cutting their general matrix pricing down to 26.5%, an 8.5-point drop in gross margin.

    What happened?

    They saw a modest 4.5% increase in sales. But their gross profit dollars dropped by roughly $15,000 per month.

    They gained a little on top line—but lost big on the bottom line.

    Why This Happens

    The problem isn’t that price doesn’t matter. The problem is believing it’s the only thing that matters.

    In most B2B buying decisions, price is just one part of a much larger equation. Buyers also weigh:

    • Inventory availability
    • Delivery speed and accuracy
    • Ease of doing business
    • Invoicing and returns
    • Relationship and trust
    • Brand familiarity
    • Risk of switching suppliers

    When a distributor offers the lowest price—but isn’t the preferred partner—that quote usually becomes leverage. The buyer brings it back to their existing supplier, who sharpens their pencil just enough to keep the business. The original distributor? They never see the order.

    “If two people want to do business together, price is not going to be a problem. However, if one of the two doesn’t want to do business with the other, price is always going to be a problem.” – Jim Cathcart

    What the Math Actually Says

    Here’s where it gets real: If you’re a 30% margin company and give a 10% discount, you now need to increase your sales quantity by 50% just to earn the same profit.

    That’s a massive lift.

    It’s easy to say sales will go up.
    It’s incredibly hard to increase sales by 50%.

    To make the same $12,000 in gross profit, you now need to sell $150 worth of product at the new price.

    So What’s the Better Approach?

    Rather than broad, reactive discounting, consider this:

    1. Get strategic about who matters
      Focus on key accounts, high-potential customers, and those willing to grow with you.
    2. Understand what drives their behavior
      Every buyer has a handful of products that drive their purchasing habits—high-volume, high-frequency, planned spend. Think “eggs, milk, and diapers.” Be sharp on those.
    3. Avoid the trap of across-the-board cuts
      Not all items need aggressive pricing. Lowering prices on less influential items won’t win you more business—it just erodes margin.
    4. Use price as a scalpel, not a sledgehammer
      Be competitive where it counts. Don’t slash where it doesn’t.

    The Bottom Line

    Yes, lowering price can increase sales. But if you’re not careful, you’ll sell more, work harder—and make less.

    In most cases, especially with across-the-board cuts, price reductions are a shortcut to shrinking profits. The key is not to be the cheapest. The key is to be the smartest.

    Pricing isn’t simple. And treating it like it is? That’s a myth that will cost you.

  • Stop Blaming Price—Start Understanding Why You’re Not Winning

    Stop Blaming Price—Start Understanding Why You’re Not Winning

    If you spend much time in distribution sales, you’ve probably heard it—or said it yourself: “We lost the order because our price was too high.” But that explanation, while convenient, often oversimplifies what’s really going on.

    In this post, I want to unpack what salespeople get wrong about B2B buying habits—and how those misunderstandings are costing them deals they could be winning.

    Salespeople Misunderstand Buying Behavior in Two Big Ways

    Many distribution sales reps operate with two flawed assumptions:

    1. They think B2B customers make decisions based only on price.
    2. They believe B2B buying is completely different from their own personal buying habits—when in fact, there are some surprising similarities.

    Let’s take a closer look at both.

    Misconception #1: “My customers are price-sensitive on everything.”

    Salespeople often picture their customers shopping like they do on Amazon: they see a price, compare options, and pick the cheapest. That mental model leads reps to think that if they didn’t win the order, it must have been because someone else had a lower price.

    But that’s not how B2B buying actually works.

    • B2B buyers have preferred suppliers. If a contractor’s go-to distributor is a little high on a quote, the buyer doesn’t walk away—they pick up the phone. A plumbing contractor might say, “Hey Jay, I’m seeing some really competitive numbers out there on XYZ product. Has the market changed?” That conversation often ends with Jay getting the order—at a price the buyer can justify.
    • Price is negotiable. Unlike retail purchases, pricing in distribution is fluid. Strong relationships create space for flexibility.
    • The distributor relationship matters. Most contractors have suppliers they prefer to work with. And if the price is close enough—a price they can justify—they’ll often stay loyal, even if it’s not the lowest number on the page. Trust, service, availability, and ease of doing business carry real weight.

    That’s especially true for everyday, routine business—like picking up a handful of items for a job. Contractors won’t drive across town to save 5% on a $100 order. But on larger, planned projects—say a hospital or school—price plays a bigger role. A 5% gap could disqualify a bid.

    Still, even on big jobs, price alone doesn’t win. If a customer doesn’t trust you to deliver—on time, complete, and hassle-free—your low quote will probably just get shopped and awarded to someone else who can be trusted. Execution and credibility matter.

    Misconception #2: “B2B buying is totally different from consumer buying.”

    Yes, there are differences. But there’s also a key similarity: both B2B and consumer buyers tend to anchor their decisions around a few key items, not the whole basket.

    Let me give you a personal example:

    • I shop at Winco because they sell my favorite sparkling water at $2.68 for an eight-pack. That’s what drives my decision to go there. Once I’m there, I don’t scrutinize the price of every single item—I just add what I need to my cart.
    • My son? He shops based on diapers and formula. That’s what determines which store he chooses. The rest of the shopping trip is built around those key items.

    It’s the same in distribution.

    For a repair plumber, it might be a 50-gallon gas water heater or a tankless unit. That’s the high-spend, high-frequency item that drives the purchasing decision. Once that’s decided, they’re not going to price-shop every flex connector, valve, or heater pan—they just add them to the order.

    So What Should Salespeople Do?

    • Stop assuming every lost sale is due to price.
      When a customer says, “Your price was too high,” it likely means you’re not their preferred supplier—at least not on that item. They probably used your quote to negotiate with their go-to distributor, who got the order.
    • Identify the items that actually drive decisions.
      Every customer has “anchor” products—the ones they buy in volume, frequently, and with price sensitivity. Understand what those are for your customers. Win those, and the rest tends to follow.
    • Build trusted relationships.
      Whether it’s a $100 fill-in order or a six-figure commercial project, being the justifiable choice matters. And that comes down to trust, consistency, and service—not just the number on the page.

    Final Thought

    Don’t oversimplify the buying process. B2B customers aren’t mindless price-shoppers. Like all of us, they have a mix of habits, preferences, and priorities that shape their decisions.

    Yes, price plays a bigger role on large jobs, and a few percentage points can absolutely change the outcome. But even then, trust and delivery capability can tip the scales. If a contractor doesn’t believe you can execute, your low number won’t win—it’ll get used as leverage somewhere else.

    The goal isn’t to always be the cheapest. The goal is to be the supplier they want to work with—because your price makes sense, your service is reliable, and your relationship is solid.

  • Welcome to False Profits: Why This Site Exists

    Welcome to False Profits: Why This Site Exists

    Over the years, I’ve worked with dozens of distribution companies across North America—coaching pricing strategy, analyzing margin leaks, and helping teams move from gut-feel pricing to data-backed profitability.

    But here’s what I’ve noticed again and again:

    The biggest barrier to better pricing isn’t data. It’s belief.

    Bad pricing decisions aren’t made in spreadsheets—they’re made in conference rooms, sales huddles, and behind-the-scenes conversations where myths go unchallenged.

    We accept half-truths like:

    • “Your price is too high” = You lost the deal
    • Sales should control pricing because they’re closest to the customer
    • Strategic pricing doesn’t work in our business

    I created False Profits to push back against that.

    This isn’t just another pricing blog. It’s a platform for calling out the stories that quietly shape how distributors price—and how much they profit. Some of what you read here will challenge deeply held assumptions. That’s intentional. And necessary.

    What You Can Expect Here

    • Margin Myths — a recurring series that breaks down common pricing beliefs and the costly truths behind them
    • Real-world examples — patterns I’ve seen repeat across teams, industries, and time
    • Tactical insights — ideas you can take back to your team today to improve pricing conversations and outcomes
    • Occasional rants, frameworks, and truth bombs

    If you’re in distribution and you want to stop racing to the bottom, you’re in the right place.

    Thanks for being here. I’m just getting started.

    —Marshall Lehr