Two Digital Selling Tool Paths
- Invest in better digital selling tools for all customers to (hopefully) use.
- Visit your most net-profitable customers to identify their buying journey pain-points to remove with digital solutions.
Here are two contrasting case studies. Which one is a focused, profitable-growth strategy?
Case One: Great Web Site for All
A huge distribution chain invests millions into an award-winning, web-selling site. Active accounts double. Margin dollars increase by 5%, and warehouse orders increased by 25%.
The distributor subsequently subscribes to a Customer Profitability Analytics (CPA) cloud-service. Shocking revelation: the Web Division is hugely net un-profitable. The web-division leader goes crazy. “The model is flawed; etc.” (Reinvent the model to show that we are profitable.)
- Does this distributor have web, fulfillment, and delivery costs as low as Amazon?
- Doesn’t Amazon lose on many small orders even with lower costs? But, AMZ does have profitable offsets that the distributor does not! Think: clickstream data (+) machine learning (+) AI which enables: up/cross-selling, targeted email promotions, selling of dynamic precision ads to resellers/brands, etc.
- What is the opportunity cost for the distributor’s resource investment in web selling to all?
- What if they had put those resources into creating better, digital experiences/benefits for their most net-profitable customers?
Case Two: Key-Account, Digital Solutions First
A distributor using the same Customer Profitability Analytics (CPA) service discovers that:
- 3% of their customers (all in the same niche) generate a massive percent of the company’s net profit. Although the niche has the lowest average margin-percentage for warehouse business, their average order is $8000. And, the goods are typically pre-sold when they arrive at the warehouse to be shipped immediately to the customers.
- A CEO-led team visits the five best customers in the niche to search for new needs. They all buy misc. SKUs from multiple vendors with lots of attendant paperwork.
- Solution: the distributor designs and installs an on-premise storage system. Replenishing all misc. SKU-needs is now fast with lower stockout, downtime and emergency order costs. The orders feed into each customer’s semi-customized, reorder-page at the distributor’s web site. Operating profits for the niche increase 50% in one year for a huge ROI.
*Part A of several case study comparisons.