As the dealer network grows, managing each dealer individually becomes impossible. Maintaining fifty price lists for fifty dealers is not sustainable.
The solution is grouping. Dealers operating under similar conditions are gathered in a segment, and prices, limits, and catalogs are defined through that segment.
In this article, we explained how to set up the account group structure, segment criteria, and price connection.
Table of Contents
Why is grouping necessary?
Dealer-based definitions seem flexible in the short term, but become unmanageable in the long term.
Making definitions from scratch for each new dealer takes time and creates inconsistencies. Two similar dealers start working under different conditions.
Price updates also become harder. Updating three groups is much faster than updating fifty separate definitions.
The group structure also provides transparency. The answer to "Why is this dealer getting this price?" is based on a rule, not a personal decision.
We covered the general framework of this approach in the customer-based pricing article.
Segment criteria
Segmentation must be based on measurable criteria. Intuition-based grouping is indefensible and degrades over time.
Annual purchasing volume.This is the most common and comprehensible criterion. It is a figure that both you and the dealer can easily verify.
Payment behavior.A dealer who pays on time deserves better terms than one who pays late.
Order pattern.A dealer who places a few large orders generates lower operational costs than one who places frequent small orders.
Brand loyalty.A dealer who works exclusively with you can be evaluated differently from one who also sells competing products.
How many groups should there be?
The number of groups is determined by the balance between flexibility and manageability. Few groups are simple but remain crude; many groups are flexible but become complex.
In practice, three to five groups are sufficient for most distribution structures. For example, main dealer, mid-sized dealer, small dealer, and project customer.
When more than five groups are established, the significance of differences between groups diminishes, and the team cannot keep track of which dealer belongs to which group.
Group naming should also be clear. Using descriptive names instead of codes facilitates daily use.
Group definitions are kept in the B2B module and work together with the catalog structure.
Group-dependent pricing and discounts
Each account group is linked to a price list. When the dealer enters an order, this list activates automatically.
Group-based discounts can be added on top of the price list. The matrix defined at the intersection of the product group and account group meets this need.
Quantity discounts can also be added; additional discounts on orders above a certain quantity serve as an incentive to increase order size.
The priority order of rules must be predefined; it should not remain ambiguous what happens when multiple discounts apply.
We detailed the matrix setup in the discount matrix and price list article.
Risk limit and maturity
The account group determines not only the price but also the commercial terms. Maturity period and risk limit can be linked to the group.
This ensures the establishment of a consistent risk policy. Dealers in the same segment operate under the same conditions.
The limit comes as a group default and can be adjusted on a dealer basis. Exceptions must be justified and periodically reviewed.
How order entry behaves upon limit exceedance can also be defined on a group basis; blocking is sufficient for some segments, while warnings suffice for others.
We covered the risk management framework in the collection risk management article.
Segment Transitions
Dealers do not remain static. A growing dealer should move up to a higher segment, while a shrinking dealer should be reviewed.
Writing transition rules in advance removes personalization from the decision. Saying "a dealer exceeding this volume moves to this group" is clear.
The evaluation period must also be determined. Annual reviews are common; a six-month period is suitable for more dynamic structures.
Downgrading is a more sensitive issue. Deteriorating dealer conditions strain the relationship; advance notice and providing justification are essential.
Customer-based sales reports are used for transition decisions; see the sales reports article.
Discussing the Segment with the Dealer
Keeping the segment structure secret may seem tempting; however, dealers talk to each other and the difference is learned sooner or later.
A transparent structure is stronger. Having clear criteria turns the difference into a performance reward rather than discrimination.
Moreover, this transparency creates an incentive. A dealer who knows the conditions of the higher segment aims to increase their volume to reach it.
Showing the dealer their own segment and the conditions of the upper segment is a strong argument in sales negotiations.
This communication is conducted through the field team; we discussed this relationship in the dealer network management article.
Establishing the Group Structure
The account group setup proves its value as the number of dealers increases. A structure that can be managed manually with ten dealers becomes unsustainable with a hundred.
When determining groups, it is necessary to write down the commercial logic first. The answer to the question of why which dealer sees different prices must be clear.
Common criteria are volume, region, payment terms, and product group. Their combination covers most structures.
The number of groups should be kept low. Creating a special group for every dealer defeats the purpose of the setup.
Exceptions can be defined on the dealer card; however, as the number of exceptions increases, the group structure must be reviewed.
Group changes must be logged; why a dealer was moved to a higher group is a question that will be asked later.
Points to consider
Price differences between dealers will sooner or later be discussed. Therefore, the setup must be defensible.
A volume-based difference can be explained; a difference based on personal relationships, on the other hand, causes a loss of trust.
How campaign prices will combine with group prices must also be defined from the start. Overlapping discounts produce unexpected margins.
The lower limit definition controls this risk; the calculated price cannot fall below the designated threshold.
Notifying the dealer of price changes in advance is also important for the relationship.
Having a different price displayed on the portal than the one on the invoice is the fastest way to lose trust.
Frequently asked questions
Which group is a new dealer assigned to?
A starting group must be defined. At the end of the initial evaluation period, they are reassigned based on actual volume.
Can a dealer be in more than one group?
No, they must belong to a single group. If different product groups require different terms, this is solved with a discount matrix.
Does a group change affect past orders?
No. Documents carry the conditions of their own period; the change applies prospectively.
Is the catalog also tied to the group?
Yes; dealer catalog creation we explained this structure in the article.
The account group structure is the core definition that makes the dealer network scalable. Once set up correctly, adding a new dealer becomes a matter of minutes.
During setup, first rank your existing dealers by last year's volume. Natural breaking points will already show your segments.
Then, document the price, maturity, and limit conditions for each segment. This document will serve as a reference for both your team and your dealers.
by consulting with the EQLEM team, you can structure your dealer segmentation.