Category Archives: WayPoint 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

96. How to Be Strategic on Channel Rebate Management

Channel partner incentives, collectively and imprecisely known as rebates, are huge, addictive, and problematic programs for distributors. One 2012 survey estimated total channel incentives in the U.S. to be $55B. That’s 80% of the reported $69B in total channel management budgets. A Silicon Valley survey reported that the typical factory respondent ran an average of 21 incentive programs annually with an estimated overpayment of 6%.

Twenty-one incentives programs annually? Sure! Cash bribes get fast attention. Competitors understand indirect price cuts and can quickly follow, tweak and escalate with their own programs. But, without effective plans for disciplining, tracking—and in some cases exiting—these initiatives, what happens? Factory list prices generally keep rising as backend channel incentive checks multiply. Continue reading 96. How to Be Strategic on Channel Rebate Management

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

94. Amazon’s $7 Per Line-Item, Wake-Up Call

AMAZON’S SMALL-DOLLAR-ITEMS: Math and Solutions

Amazon knows warehouse activity costs to the penny. Their 9th generation warehouses may have the lowest, cost-per-pick on the planet. Some stats:

  1. The “click to ship” elapsed time is 15 minutes and dropping.
  2. The average human time input for each order is one minute which includes 15 seconds to pack.
  3. The cost per pick – in the narrowest sense – is 44 cents for a human and 20 cents for a robot.

Continue reading 94. Amazon’s $7 Per Line-Item, Wake-Up Call

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