By Mark Rockwell, President of Rockton Software and Architect of Rockton Pricing Management (RPM)
I’ve been working with distributors on pricing for close to thirty years, and the conversation changes less than you’d think. The ERP changes. The pricing problems are pretty much the same.
A typical NetSuite project goes something like this. The team maps the price lists, sets up price levels, turns on Advanced Pricing, and pricing gets checked off. Then real orders start coming in. A contractor buys by the case on Monday and by the each on Thursday. A rep needs to match a competitor’s quote before end of day. A customer has a contract discount, qualifies for a volume tier, and is buying something that’s on promotion this month. So which discount applies first? Do they stack? And what’s left in the margin when they do?
The Pricing Manager is usually the one who gets that phone call, and a lot of times the answer is, let me go check the spreadsheet.
What NetSuite Does Well
I want to be fair to NetSuite here. It’s a strong ERP, and Advanced Pricing is a real improvement. Price rules can assign a price level by customer, customer group, item, or category. You can do cost-plus pricing, set start and end dates, and schedule future price changes. Promotions handle coupons and campaign discounts. For a lot of businesses, that’s going to be enough.
Where Distributors Outgrow NetSuite
Distribution is a little different. Margins are thin, catalogs are deep, and most of the deals were negotiated one customer at a time over a lot of years. Those are the places where we typically see distributors outgrow what comes out of the box, and there are four that come up in almost every NetSuite conversation we have.
1. How Discounts Stack
Every distributor I’ve worked with stacks discounts a little differently. One applies the contract price, then the volume tier, then the promotion. Another takes the best of the three and stops there. Another only lets the promotion stack on items above a certain margin. None of those are wrong. They’re just how that company decided to do business.
In NetSuite, those pieces live in different places. Price levels set the base, quantity pricing sits on the item, and promotions get applied on top. By default, promotions can stack with each other. You can mark a promotion so it doesn’t combine with others, or give it a priority, but you’re managing the result one setting at a time.
Let me give you an example of how that plays out. Say you have a $100 item and you run a 10% promotion, expecting it to sell at $90. But this customer is already on a $70 price level, so the promotion comes off the $70 and they pay $63. Nobody meant for that to happen, and usually nobody notices until it shows up on a margin report.
In Rockton Pricing Management (RPM), you define the order the discounts apply in, which ones combine, which ones compete, and where the stack stops. Every line goes through that same sequence every time, and RPM records which rules fired, so you can trace any price back and see exactly how it was built.
2. Units of Measure
This one sounds like a small thing, but it’s not. NetSuite handles multiple units of measure, but the price generally follows the conversion rate. If an each is $2.00 and a case holds 12, the case comes out to $24.00 unless you build something to change it.
That’s not usually how distributors price. The case is priced to move volume, the pallet has its own deal, and the each carries a premium because somebody has to break the case and pick it. Those differences are where you make or lose money on a line. If the system treats a case as twelve eaches, you either give away margin on broken-case sales or your team overrides the price by hand, and then you’ve got a governance problem on top of a pricing problem.
In RPM, each unit of measure can carry its own price, its own tier breaks, and its own discount behavior, all inside the same rule set. Case, each, pallet, foot, roll, whatever you sell in.
3. Sales Overrides and Margin Floors
Your reps need room to negotiate, and I’m not suggesting you take that away. The issue is when an override happens and nobody can see it. There’s no floor, no approval, and no record of why the price changed.
In NetSuite, a user with the right permissions can change the rate on a line. What isn’t clear to me is how you’d let reps adjust price within a range, stop them at a margin floor, and send anything below it for approval, while keeping a record of who changed what. The guidance I’ve seen is to model margins in saved searches and review them afterward, and by then the order has already gone out.
RPM puts that control on the line itself. You set margin floors by customer, item, or category. Reps can override within those limits, and anything below the floor goes for approval. Every override is logged with the rule that applied, the suggested price, and the price that was actually given. So sales still has flexibility, and finance still has its margin.
4. Rebates, Commissions, and Tariffs
Let’s walk through an order. A rep books a $1,000 order at 25% margin, so you’ve made $250. At the end of the quarter, the customer earns a 3% rebate, which is $30. The rep gets 5% commission on the sale, which is $50. And the item picked up a tariff last month that added $40 to your landed cost, but nobody updated the cost in the system. So that $250 is really $130, and your 25% margin is actually 13%.
None of that showed up when the price was set. NetSuite prices the line and stops there. It doesn’t have a commission module today, so most of the distributors we talk to are figuring commissions in a spreadsheet after the month closes. Rebates are in another spreadsheet, or with the one person in accounting who knows how the programs work. And tariffs get into cost whenever somebody gets around to it.
RPM puts those numbers in the same place the price is calculated. Customer and vendor rebate programs sit right next to the pricing rules and get tracked on every transaction. Commission rules run off the same data, so a rep can see what an extra 5% discount costs them before they give it away. Tariffs, freight surcharges, and other added costs can be part of the price logic too, so when a tariff hits, the price moves with it instead of you finding out three months later.
What’s left after all of that is what we call True Margin. It’s the margin after everything comes out, and it’s the number your CFO is going to ask about.
What It Costs to Work Around It
When pricing outgrows the ERP, there are basically three options: keep a spreadsheet next to the ERP, pay for custom scripts, or live with it. The spreadsheet works until the person who understands it goes on vacation. Custom code fixes today’s problem, but it has to be checked, and a lot of times fixed, every time NetSuite puts out a release. And living with it means accepting a margin gap you can’t measure.
That gap is usually bigger than people expect. In one sample analysis, we found 8.73% in margin that the pricing system wasn’t accounting for. On $100 million in revenue, that’s $8.7 million nobody could see. Most distributors know there’s a gap somewhere, they just can’t see where it is or how big it is, and you can’t improve margin you can’t see.
How RPM Works with NetSuite
RPM doesn’t replace NetSuite. It connects through the API, and when a line is added to an order, RPM calculates the price and fills in the unit price. The way we’d typically get there:
- We sit down with your team and go through every contract, tier, stacking order, and exception, including the ones that live in somebody’s head or spreadsheet.
- We build that logic in RPM, so it runs on every NetSuite order. Stacking, unit of measure pricing, margin floors, rebates, commissions, and tariffs all apply automatically.
- From there, you can trace any price back to the rules that built it, overrides are controlled and logged, and you can see True Margin by customer, item, and rep.
The end goal is that your Pricing Manager can answer “why is this price what it is” in a few seconds instead of an afternoon, your reps can close deals without calling the office for permission, and your CFO can trust the margin number in the board deck.
We see a lot of companies take this on when they’re moving to NetSuite, when a new CFO or CEO starts asking questions about margin, or after a merger leaves them with two pricing playbooks to reconcile. If that’s where you are, you’re going to be rebuilding your pricing either way.
Let’s Walk Through Yours
If there’s a pricing scenario NetSuite isn’t handling cleanly for you today, I’d like to see it. Bring the one that gives your team the most trouble, and we’ll walk through how Rockton Pricing Management (RPM), the pricing intelligence platform for ERP-driven distributors, would handle it on a 30-minute discovery call.
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