Category Archives: Line Item Profit Analytics

181. ALL-WIN, QUID PRO QUO (QPQ)

QPQ For The Good

Politics is giving QPQ a bad reputation. But, “this for that” can also be a selling tool for turning win-lose customer requests into win-win outcomes.
Distributor reps can use QPQ for transactional fairness.

“Mr. Customer: you want a lower price? Understandable! How can we turn a – you win, I lose event – into a win-win transaction? Perhaps a bigger order or the promise of greater future purchases?”

Continue reading 181. ALL-WIN, QUID PRO QUO (QPQ)

175. Melting-Unicorn Wisdom for Distributors

Unicorn Melt-Downs?

Valuations for WeWork, Uber, Blue Apron, etc. have been tanking. They all prove that a company’s business service-cost model can’t spend more costs on a unit of activity than the unit’s margin-dollar content, and then make it up on volume.    

The same economic reality hit many retail dotcoms back in 2000. Remember eToys? In ’99, they were averaging $20 in margin per order while spending an all-in cost of $300 per order for fulfillment.

Continue reading 175. Melting-Unicorn Wisdom for Distributors

174. Doctors Prescribe: “Evidenced-Based Management”

“Data-Driven Decision-Making” vs. HiPPO Wisdom

When decisions are made at Amazon, “the best data and innovation metrics” win. No hearsay, golden-gut, follow the herd, or political self-interest beliefs. The HiPPO (Highest Paid Person Opinion) in the room doesn’t win with suck-ups bobbling in agreement. Continue reading 174. Doctors Prescribe: “Evidenced-Based Management”

170. Boost Your Corporate Analytics IQ

Poor ROI For Analytics Investments?

Corporate America (distributors included) is overwhelmingly NOT getting results from new analytical insights. Test your company’s Analytics IQ against:

  1. The number of analytical-dimension tools that you have
  2. The buy-In rate for new insights
  3. Your success rate at turning insights into results

The 4 Lenses: Financial + Three Service-Profit-Chain

Everybody uses financial analytics (lens 1). Distributors should also get/invent analytics for the three dimensions within the “Service Profit Chain”(SPC) (Google the term.) The SPC simplified: best quality people (lens 2) deliver service (lens 3), that yields(customer retention) profits (lens 4).  

The SPC outlines how Costco can pay (v. Sam’s/Walmart) 141% more per employee to get 157% more sales and margin dollars. And, how Costco also has legendary customer loyalty, and better sales growth – while selling at a measly margin of 13%.

These four analytical lenses each have blind spots. For example: “Inventory management” from a financial perspective stresses “Turn-and-earn” with minimal “dead and excess stock investments”. But, service-value and people-productivity lenses spotlight “fill-rates”.

Best fill-rates (tuned to a target-customer niche) from one location reduce outages which:

  1. Erode service-value
  2. Cause small-dollar, back-orders and interbranch, split-shipments
  3. These, in turn, boost transactional costs while lowering productivity and morale.

Seek the best total-economic balance!                           

And, Sell More!   

Financial thinking stresses pumping sales (and margin dollars) for economies of buying and operational fixed costs. Plus, get those fatter rebates from best-bribing vendors.   

But, service analytics asks:

  1. Grow sales from which target customers with what unique, service-value proposition? Selling commodities to all customers with standard service creates no service-value equity.  
  2. And, do all employees know the most net-profitable (potential) target-customers? And, how/why they should allocate extra service-hustle to them?       

Customer Profitability Analytics (CPA) Informs All 4 Lenses, But…

Most distributors are 110% focused on financial-belief activities. CPA reveals that some big, and many small customers, are unprofitable. Then, those who are incented on any sales/margin volume, resist. Why low buy-in for insight-plays that logically will deliver greater wins for all?  

Four Nobel Prize winners (over the past 40 years) have proven that our brains are riddled with cognitive biases. Stubborn, short-cut, data-free beliefs win over longer-term realities.    

For More on 4-Lens, Big, All-Win Gains:  

Book an initial (free) C-suite, virtual session with me (bruce@merrifield.com). And, for Waypoint Analytics clients, join me at the workshop in Phoenix on November 7th (link below).    

WayPoint Institute 2019

167. Human Biases Beat Analytical Insights 70-30

SURVEY STATS: THE BRAVE AND THE FADING

I scan a lot of articles. One of my research themes being ROI for Analytics, for which there are frustrating results. One survey found that 70% of companies are not benefitting from their analytics investments. And, worse:  the percentage of firms thinking themselves as “data-driven” has declined. Over the past three annual surveys:  37% were data-driven in ’17 to only 31% in 2019.  (Source? Google the – “2019 Big Data and AI Executive Survey” – by New Vantage Partners for more stats.)

WHY THE ANALYTICAL-INSIGHT EXECUTION GAP?

Be honest. Most individuals and businesses already know what they could do to be better. Who needs even more analytical insights for more improvement opportunities? What’s needed, instead, are more effective change-management strategies, tactics and tools. Most folks need help to be what they want to be.

How can a distributor immediately engage all employees’ minds, hearts, wallets, and team spirit – to move down a new path of innovation?  

TRY THIS LOGIC TRAIN

Discuss with all employees:

  1. “Who wants more total compensation along with job security, growth, and pride?” (100%!)
  2. Then we must, at least, grow Gross Profit Dollars per Full-Time Equivalent Employee (GP$s/FTEE), because only increased GP$s can pay for our wishes.
  3. “What controllable input activities can we do immediately to start to moving GP$s/FTEE higher by working smarter, not harder?”
  4. Order size assumptions: no one can do two customer-related activities at the same time, like: sales calls, order-taking, quotes, picks, deliveries, invoice-paper-matching, etc.  
  5. If for each activity the average GP$s involved was magically higher, then GP$/FTEE would rise.   
  6. “How, then, do we win more, large-GP$ orders while consolidating small-GP$ orders?”
  7. Let’s invent some new analytics. Why not rank all customers by their average GP$s/invoice (along with their total invoices)? And, on the side, let’s divide total orders for the year into operating expenses to find out what our average cost per invoice is.
  8. What do we discover? What next level of questions and new, invented analytics will arise? At some point, what might be our first, easiest experiment to try?
  9. Scary? Is fine-tuning the status quo, instead, a viable option?  
  10. Help? Have other distributors ever gone down this path that we could learn from?

ANSWER TO #10: Yes! Please feel free to request a copy of my, Core Renewal Roadmap by emailing me. bruce@merrifield.com 

CALLING ALL WAYPOINT USERS: It’s time to earn your analytics black belt. Join us November 6th & 7th in Old Town Scottsdale for a 2 day, dual-track training event to refine your data analysis skills, and maximize the competitive advantage that WayPoint gives you. CLICK HERE to take advantage of this great opportunity. Not yet a WayPoint customer? request a free demo HERE

166. Digital Tools Aren’t A Profit-Growth Strategy (Part C)

Two Digital Selling Tool Paths:

  • Get a big, cool, web-selling site for both new and old customers.
  • Visit your most net-profitable customers to identify pain-points that can be reduced by applying off-the-shelf digital tools.

Case Question: How to Web-Sell Small, Losing-Accounts v. Profit Giants?

A one-location, $10MM distributor (packaging, jan-san) subscribes to a cloud Customer Profitability Analytics (CPA) service. They decided to segment customers by net-profitability, and digitally resell them accordingly. Here is what they did for two very different customer segments.     

Small Losing Accounts were 50% of the 1000 active accounts. They totaled 5% of margin dollars, but 21% of all orders. The segment’s service costs far exceeded the margin dollars for a big loss. The distributor’s fulfillment, process-cost structure is incorrigibly high v Amazon’s. They can’t make a profit on retail-sized orders at wholesale, list-pricing-plus and free freight.     

Solution? They created a “Small Account Division” with its own P & L and announced these new terms:   

  • Increased prices and a higher minimum order requirement.
  • Unbundled delivery charge.

Plus, these new, order-entry and order-size incentives:

  1. Minimum order size drops IF a customer enters an order via the web using a credit card.  
  2. The delivery charge stair-steps down to zero as the order size increases above the minimum.
  3. Then, by continuing to build the order even higher, additional price discounts/savings can be earned.  
  4. For order-building ideas, two SKU-suggestion lists were made available: A) Previously bought SKUs; and B) top 20 most-popular SKUs.   

Results? 10% of the customers left, but the new division became profitable.

Profit Giants’ Facts:

The top 20 most net-profitable accounts yield over 100% of the operating profits. (The company’s customer cross-subsidy stats: the top 30% accounts yield 140% of profits; bottom 70% lose 40%; so, 100% yields 100%.)  

Another 20 target accounts could potentially match the best-accounts’ profits. The entire organization is now refocusing extra efforts on the combined 40 accounts.  

How to e-sell these accounts better? Ask them! A comprehensive survey yielded a grid of opportunities including semi-customized e-integration solutions for each.

Because the company knows its unbundled service-activity costs (as does a 3PL firm), they – as an experiment – asked some target accounts:

“Would you be interested to compare your current, supplier-replenishment system(s) with one from us that starts with our open-book costs, and adds fees for your selected, unbundled services with maximum e-integration?”

80% said “Yes!”.

Conclusion: Get Customer Profitability Analytics and E-sell customer segments differently.

*This is the third and last of a series. The first two are my last two blogs at www.merrifieldact2.com .

CALLING ALL WAYPOINT USERS: It’s time to earn your analytics black belt. Join us November 6th & 7th in Old Town Scottsdale for a 2 day, dual-track training event to refine your data analysis skills, and maximize the competitive advantage that WayPoint gives you. CLICK HERE to take advantage of this great opportunity. Not yet a WayPoint customer? request a free demo HERE.