Learning to price from both directions

For much of my early B2B career, pricing followed a straightforward logic. The starting point was product cost, after which distributor margin and reseller margin were added until an end-user price emerged. That approach made sense in an environment where the commercial chain was built from the inside out and where each participant expected to earn a defined return on top of the previous cost layer. My exposure to retail economics introduced a very different way of thinking.

In retail, the market often determines the viable selling price before the upstream economics are known. The calculation therefore runs backwards from the competitive end-user price, deducting retailer margin, promotional funding and distributor economics until the remaining number defines the target purchase cost. That reversal changed the way I understood pricing because it made clear that cost does not always determine price; in many markets, price determines the allowable cost structure. Once both approaches become familiar, pricing becomes less about applying a margin and more about understanding how value is distributed across the chain.

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Reconstructing the economics behind the deal

Being able to work both forwards and backwards through the calculation created visibility beyond our own margin. It became possible to estimate what another distributor was likely to have paid, how much margin a retailer required and how much promotional funding would need to be present for a transaction to work. In categories such as memory, where market prices could move rapidly, those calculations also made it possible to form a reasonable view of whether a competitor was making money, breaking even or accepting economics that would eventually become difficult to sustain.

That mattered because pricing decisions were never isolated from volume, inventory and purchasing power. A low-margin transaction could still make strategic sense if it materially improved a vendor position or strengthened future buying conditions, while an apparently attractive order could be commercially weak if it consumed capacity without improving the wider economics of the business. The useful question was therefore not simply whether an individual deal produced margin. It was whether the deal improved or weakened the commercial position around it.

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When market share changes the pricing decision

By the time Tech Data had developed a strong position across components and memory, we already had substantial B2B volume spread across thousands of customers. Additional retail volume was therefore not something we needed to pursue automatically, because our core scale already gave us meaningful purchasing power. That created room to be selective about which transactions genuinely strengthened the business and which merely increased turnover.

In some situations, taking the volume improved our negotiating position with vendors, reinforced supply access or enhanced the economics of the broader portfolio. In others, allowing a competitor to win the order was the better commercial choice because the price required to secure it would have weakened our own economics while potentially forcing the competitor into a less attractive margin position. At sufficient scale, declining a transaction can be as strategic as winning one. The decision depends on understanding what the volume does to the economics of the whole system rather than judging it in isolation.

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Translating B2B and B2C commercial logic

That pricing experience became particularly valuable later at Samsung Electronics, where much of the organisation was shaped by large-scale B2C economics. Promotional mechanics, retail funding, channel incentives and high-volume consumer behaviour were embedded deeply in the way the wider business operated. My background had been rooted in B2B distribution, reseller economics and channel margin, but I had also learned how consumer pricing could be built backwards from the market.

That combination made it easier to work across both commercial logics without treating either one as inherently superior. I could understand why the B2C mechanisms existed, reconstruct the economics underneath them and help colleagues recognise where the B2B business required a different application of the same principles. The advantage was not simply knowing two pricing formulas. It was being able to translate between two different ways of organising commercial value.

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Pricing as a view of commercial power

The deeper lesson was that cost-plus and market-back pricing are not opposing systems so much as different perspectives on the same economic structure. One starts with the cost base and moves towards the customer, while the other starts with what the market will accept and works backwards towards the allowable cost. Moving comfortably in both directions made it possible to reconstruct much of what the other participants in a transaction were likely earning and to understand where pressure was building in the chain.

At sufficient scale, that information changes the nature of the decision. The question is no longer limited to whether a company can win a deal at an acceptable margin, because the more important issue is what winning or losing that deal does to the economics of everyone involved. Pricing then becomes a way of understanding competitive behaviour, purchasing power and market leverage rather than simply a method for setting numbers. That perspective has remained relevant throughout my career because pricing decisions are rarely only about price.

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