105. Connecting Customer Profitability and (Amazon) Cloud Commerce Effects

Willful blindness and selective denial

Willful blindness is legalese for “ignorance of the law is no excuse”. Other selective denial expressions include, ignoring the elephant in the room, sparing sacred cows, believing in the emperor’s new clothes, shooting the bearers of bad news and groupthink.

Humans tend to deny new facts when they are too shocking, painful and/or scary to confront. But, companies that acknowledge, debate and act on truths beat competitors who remain in denial. And, they will be better able to compete with Amazon in the ecommerce cloud of 2021.

Elephant #1: Disbelieving customer/item profitability facts

Every distribution executive knows that they have both profitable and unprofitable accounts and SKUs. Most have heard about Customer Profitability Analysis (CPA) with Cost-to-Serve models. Some have even created experimental rankings, but few then use this information to innovate forward.

 

Their logic looks a lot like denial.

“Our findings were unbelievable (read: embarrassing and too challenging). Besides, profits are OK. Our (traditional) competitors aren’t changing, so the game is still a fair fight. So, if it ain’t broke, why fix it?”

Elephant #2: The 2021 cloud-based value channel effects

AMZ has invented a customer-centric value channel in the cloud. By 2021, all successful vendors must be offering mass-customized, omnichannel, cloud selling options. Buyers will have radical, online product information, pricing and availability. Millennials will check prices on your higher-cost commodity and most net-profitable items. Finding price savings from AMZ, especially on new clones with great reviews, they will spot-buy those items from AMZ.

This is a big problem because your super-profitable items currently fund:

  1. Losses on many small-dollar pick items (that need an array of fixes)
  2. The bundled costs of your outside and inside sales reps, which digital sellers won’t include
  3. Just-in-case rep relationship calls that Millennials aren’t going to pay extra to support

Pull-marketing will reduce push-marketing

By 2021, AMZ will allow factories to pitch new stories to perfectly targeted end-users based on their clickstream histories. Targeted recipients will get reward points for watching 5G-bandwidth, multimedia infomercials.

And, if a target wants to instantly chat with an expert or order a sample, factories can oblige 24/7. Trial rollouts can happen in one week! There’s no need for local distributor experts or inventory.

Distributors may subsequently get hotter leads from factories and fulfill new-demand sales. But, the combined effects of cloud commerce will require the unbundling and reweaving of distributor cost and pricing models.

What should your action steps be?

Know, understand, and exploit your own CPA truths. Boost profits and agility to better innovate into the impending cloud commerce scenarios.

Learn how by attending one of my one-day seminars that start this fall

http://merrifieldact2.com/amazon-business-defend-against-partner-and-out-innovate/?vsmaid=1855&vcid=3457

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