199. Create – Targeted, Additive, Service – Vigorish

Vigorish?

Vigorish (“vig”) is the fee charged by a bookmaker (casino or loan shark) for accepting a gambler’s wager. For roulette, gamblers bet on 1- 36 possibilities. The wheel, though, has 38 slots that include 0 and 00. When the ball lands in the 0’s (2/38th or 5.26% of the time) the house takes in all bets. With a 5%+ edge and time, the house prospers.

What if your company had several, service-value edges over the competition? Or, conversely, would you want to compete against a firm that has big, additive, value and/or cost edges over you? Two cases.

#1: Distributor Targets Best, Commercial Contractors (20-50/Location)

With analytics and in-house metrics the distributor:

  1. Improves fill-rates for the target, customers’ SKU-mix by 10% points. Competitive edge: a guesstimated 3-15% points over the competitive field.
  2. Reduces errors per thousand-line-items-picked to less than 2.
  3. Achieves (for target accounts) a 99% on-time delivery score.
  4. Announces (for targets) a – zero error, on-time-delivery – guarantee.
  5. For failures: a half-day fix response with a $100 credit to cover the hypothetical cost of the paperwork and downtime for the contractor. (“Heroic Recovery”)
  6. All quotes completed within a half-day. Elaborate ones: a promised, response time that still beats competitors.
  7. Sells the value benefits of these services constantly.

Results? Target sales double in one year’s time. (Plus, more!)

#2: Amazon Business’ Total Vig for Spot Buys

  1. Many more SKUs than any B2B distributor.
  2. Highest effective fill-rates due to redundant resellers’ stock.
  3. 24/7 web ordering on the best-performing website.
  4. Click to ship time: 15 minutes with total human labor content of $1.00
  5. Delivery: one-day to same-day (and shrinking)
  6. At lowest total delivery cost (and dropping)
  7. Best real-time tracking
  8. Offers integration into any BigCo’s internal, catalog system with…
  9. …contract pricing and central spend management tools.
  10. No minimum orders or freight.
  11. Unprofitable small orders? Offset by monetizing the customers’ clickstream.
  12. And, more innovations to come.

Conclusions:

  1. Don’t sell small customers on Amazon’s terms to “win” net, unprofitable orders.
  2. Do have web-order-entry terms that are net profitable. And, expect to lose unprofitable, spot-buy orders to Amazon.
  3. Do sell one-stop-replenishment orders with: a “build-your-order-for-discounts” calculator coupled with shopping-list-suggestions. Goal: margin-dollar content exceeds fulfillment dollar costs for a profit.
  4. Don’t be distracted from creating and selling service vig to best, big accounts!

Solution?

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