Category Archives: Line Item Profit Analytics

103. Use Insider Information to Get Rich, Then Innovate

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

99. Why Don’t Folks Use New Analytics?

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?

98. “Your Margin is My Opportunity” (Jeff Bezos)

Why Are Your Margins Too High v AMZ’s?

Your margins must cover your channel cost structure which was built for bygone days. Most channel costs evolved (from WW2 on) to push true-new products to first-time buyers. Cold calls (requiring product-education) required both factory and distributor reps to create demand. Both sets of reps got paid roughly 5% of their respective sales. Today (70 years later), most channels still have two sets of reps costing about the same. What other elements of your push-channel costs will AMZ threaten?

2018 Legacy-Channel Challenges:                    

  1. The US consumer-society lifecycle is mature with too much global supply. Power has shifted to customers. And, AMZ owns the increasing numbers of Prime customers. Brands must go to where the eyeballs are and sell them the way they want to buy.
  2. 80%+ of distributor product sales are for equally-excellent commodities (no demos needed)
  3. 90% of sales are rebuys from experienced customers (fewer cold calls)
  4. The internet makes all product – information, availability and pricing – 24/7 available. As digital information grows, product knowledge help from local reps drop.
  5. Mark-ups for full-lines of SKUs create profit/loss cross-subsidies. Average-pick size and turns are ignored. Buy: a popular $500 piece of equipment at 20% margin and some fittings for $1 to $3 each at a 40% margin. The equipment’s $100 of gross profit covers: its activity costs; the losses on fittings; and residual company profit.
  6. Mark-ups covering bundled services are not customer-centric. Customers get an assigned rep whether they want them or not. If reps were unbundled for fees and customers got 5% rebates for buying on their own, what would happen? Without unbundling, Millennials will web-room you on the big-price, popular and most profitable items on AMZ for less. They will: check the $500 equipment price at AMZ. Sees savings of $X. Spot buy it. Then, order the little-dollar picks (net-profit losers) from the distributor.
  7. And, the Perfect Clones of most profitable items are increasing at AMZ. Clones – with great information content, reviews and prices – will steal share from top brands not there. Clones can skip channel development costs and go right to AMZ’s unlimited cyber-shelf space using Fulfillment by Amazon.
  8. Loyalty to – brands, distributors and reps – will continue to erode.

Unless What?

Factories and distributors share SKU profitability analytics to solve cross-subsidies and rethink their respective service bundles. And, factories get on AMZ to win the content management war against the clones. For more: contact me for a free, virtual, SKU analytics session.     bruce@merrifield.com

97. Bright-Spot Effectiveness Versus Busyness

Efficiency Versus Effectiveness

If efficiency is doing things right, and effectiveness is doing the right things (Drucker), then what are your existing most “right things”? Find out with a customer profitability ranking. Your most net-profitable accounts qualify as your best “right things”. So, why not assign a crack team to research how to take the most profitable customers and the best customer niches to the next level?

Are you and your colleagues currently too busy to spearhead new solutions for either super-winners or losers? You can google “Cult of Busyness” to address personal psychological issues.

Analytics helps you investigate how your company can get less busy overall in order to reinvest slack into your best accounts. What are your measurable wheel-spinners? Continue reading 97. Bright-Spot Effectiveness Versus Busyness

95. Rusty Staub and Your Unequal, Margin Dollars

UNDER-VALUED RUSTY: RIP

Daniel Joseph (Rusty) Staub passed on March 29th at 73. Rusty (Le Grand Orange) played 23 years in baseball’s major leagues retiring in ‘85. His career stats: batted in 1,466 runs; averaged .276 with 292 homers and 2,716 hits; and walked a spectacular 1,255 times. With walks, his career on-base percentage (OBP) was .362. He didn’t swing at bad pitches.

Rusty, a champ admired on and off the field, did not make the Hall of Fame. Baseball beliefs back then were still blind to the value of Walks. In 2000, the same Analytical Ignorance allowed the Oakland A’s to “buy runs to win games” cheap. They snagged free agents with superficial flaws, but high OBPs. (Well told in Moneyball: both the book and movie). Continue reading 95. Rusty Staub and Your Unequal, Margin Dollars

93. Amazon (AMZ) Backcasting Strategies

Does your company plan to sell – physical or digital – goods to AMZ Prime members in 2020 and beyond? Then, backcast about the ideal customer shopping journey that AMZ will be dictating. And, start changing now.

WHAT’S BACKCASTING?

It’s visionary planning:

  1. Start with an ideal vision of what customers might want in 2020+.
  2. With that end in mind move backwards from the vision to the present.
  3. Then ask: “What do we do today – step by step – to move towards the vision”.
  4. “Back” contrasts with “fore”- casting which takes our past and extends it into the future. Backcasting will move you towards the future you will need.
  5. Talk in the future perfect tense. “By 2020, AMZ will have achieved this next-level shopping experience. And, we will have accomplished…” (What: to stay vital?)
  6. For backcasting slides search the term at Google Images.

Continue reading 93. Amazon (AMZ) Backcasting Strategies