The Present Facts
Amazon (AMZ) is building out the first value channel from end-users back to factories. And of course, this channel is a cloud-based digital channel. The customer-centric channel is comprised of 10+ intersecting, reinforcing, winner-take-all platforms starting with the 60MM Prime members in the U.S. (100MM+ worldwide). This monopoly capability will allow AMZ to sell into, and/or collect fees from, all verticals that sell anything to Prime members.
This cloud-based value channel has breakthrough advantages over legacy, product-push channel players. Hence, there is insane loyalty from Prime members and astronomical sales growth. Continue reading 104. Innovation Two-Step: Core Renewal and a Cloud-Based Value-Channel
For 140 years fortunes have been made on Wall Street by exploiting insider information. While this tactic is illegal on Wall Street, there is a way to use information your competitors don’t have ethically and with enthusiastic front-line employee engagement. How?
Get line-item profit analytics to generate both customer and SKU/vendor profitability rankings. No competitor has your same internal rankings. Nor, do they have your underlying capabilities that have co-evolved with your history of capturing and keeping your profit winners. Continue reading 103. Use Insider Information to Get Rich, Then Innovate
This is one of the first insights that distributors who subscribe to Line-Item Profit Analytics are shocked to find out. Analytics reveal that:
- Naturally high-margin percent SKUs and customers are mostly net-profit dollar losers
- Gross profit dollars on small-dollar lines and orders are less than their cost-to-serve dollars
You can’t ignore small transaction size, or the variable service-people costs for customers with bill-me-later, paper-based trade credit. Continue reading 102. High-Margin Counter Sales Aren’t Profitable!
An industrial buyer asks a distributor CEO a question.
BUYER: “Can you beat my last year spend on 20 MRO SKUs? The grand total was $35K.”
CEO: “Well, it depends upon the average dollar size of your orders. We can do simulations with my OptiQuote calculator. The general rule is that prices drop with fewer, bigger orders. We pass the reduction in our line and order fulfillment activity costs on to you. And, on any given order prices will drop at both the line-item level and order-total level as the dollar totals increase. As a best-theoretical case, we could enter the annual SKU totals on one big order.” Continue reading 101. Case Study: Customer Names Price, OptiQuote Calculator Sets Terms
The first step to ensuring your strategic pricing initiatives are successful is to understand what you’re doing. Here are a few questions to ask of yourself, as a business owner, and of your top management.
- What is “strategic pricing”?
- What is our Pricing Analyst’s job? (scope, objectives and success metrics)
- What assumptions underlie these answers and is there data to back them up?
- What additional analytics would improve pricing effectiveness?
If you find wildly varying answers, or confusion, from your management team it’s time to upgrade your approach to strategic pricing. Continue reading 100. Distributors: Upgrade “Strategic Pricing”
The Problem: Informational Blindness and Paralysis
Human brains have evolved to make fast either/or decisions. Reflex thinking includes a type of informational blindness that fools many on this riddle:
A bat and ball cost $1.10. The bat costs $1 more than the ball. What does the ball cost?*
New analytical insights can also be overwhelming. The quick decision becomes whether you should figure out the problem now or put it aside and do it later. Then there is no later, and paralysis sets in. We are too busy doing what we habitually do, with fine tunings. Continue reading 99. Why Don’t Folks Use New Analytics?