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!
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”
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.
It’s visionary planning:
- Start with an ideal vision of what customers might want in 2020+.
- With that end in mind move backwards from the vision to the present.
- Then ask: “What do we do today – step by step – to move towards the vision”.
- “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.
- 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?)
- For backcasting slides search the term at Google Images.
Continue reading 93. Amazon (AMZ) Backcasting Strategies
A February 2017 survey by Vistage Worldwide found that 67% of small business owners report a shortage of skilled workers. To try and bridge the gap, 87% have increased recruiting and 60% have boosted wages.
The answers beg more questions
But, what company doesn’t worry about skilled worker shortages, recruiting, and wages? Continue reading 92. Tight Labor Market Challenges? Here Are Solutions!
Imagine a distributor that has 10 outside Reps making 4.5 calls per day at an all-in cost per call exceeding $100. They must believe that the costs of these rep calls are worth the benefits. So, what cluster of beliefs guides those daily bets that add up to over $4500?
What beliefs lie behind your rep call cost bets?
Here are two belief clusters that serve as poles on a continuum. Where do your beliefs fall?
We’re supply-chain value creators
- All our reps are certifiably excellent at knowing which are the highest net-profit potential accounts
- All our reps plan and proactively pitch (with team help) the best, win-win solutions to these accounts that deliver a one-stop shop array of SKUs throughout a customer’s business and are executed with perfect, basic service metrics tuned to the customer’s needs
- These solutions lower the total procurement cost of the customer’s replenishment process, while boosting their uptime productivity using our goods and lowering our cost-to-serve expense as a percent of sales
- We also take care of all (new) product knowledge needs customers may have
- Our goal is to secure a bigger, win-win share of spend, if not a 100% partnership
- When we partner with the best growing customers, they grow us
- Our sales (and rebates) grow faster than industry averages due to customer-centric, service-value innovations for replenishment of commodities (which now comprise 90% of our sales)
We maximize “relationship value” to get economies of sales
- Our “good” reps make just-in-case, regular calls to befriend customers and react to their needs (often economic concession demands)
- More reps secure more active accounts
- Our goals are to push products to more accounts to grow sales, margin dollars and rebates.
- With all operational costs (seemingly) fixed in the moment, incremental GP-dollars will flow increasingly to the bottom line. These profits will hopefully grow faster than sales. (But, they haven’t!)
Relationship beliefs stopped working long ago
Financial survey data shows years of low returns for 90% of distributor participants. Isn’t it time to update your beliefs and analytics to improve your odds for better returns on your rep-call bets?
Business is like poker. You can’t have perfect information or consistent good luck. The winners are statistically a few percent better at deciding when to fold or hold; and at winning the hands they play.
Focus your best people-talent bets on creating more value for your biggest net-profit growth potential customers. Customer/SKU profitability analytics will upgrade your beliefs and improve your betting odds.
How? Contact me for a free, desktop session.
On January 18, 2018, after 10 years of development, Nestlé rolled out Ruby chocolate KitKats in Korea and Japan, just in time for Valentine’s day. The pink KitKat, made from the Ruby cocoa bean, will make premium a line that has hundreds of flavors, including green tea and strawberry.
Asian distributors will race to be the first to market with the pink KitKat, but will greater consumption of the KitKat line result? What sustainable edge and profits will distributors get from Nestlé’s promotional bribes and intensive distribution policy?
In 2018, how many U.S. distributors, across channels, will be also racing to market with new micro-niche products within non-exclusive lines? And, for what sustainable gains? Continue reading 90. Pink Kit Kats v. Niche Domination