177. Scary Strategic Questions for 2020 (A)*

The Usual Drill and What Breakthrough-Insight Experiments?

Calendar-year distributors: what’s your planning routine for 2020? Is it forecasts, goal setting and budgets, to beat last year by trying harder? Plus, what big-new-competitive-advantage experiments will you be trying? If you aren’t planning something a bit scary, then you are doing same old stuff in new clothes to get fading results.

New Clothes Case Example

Two years ago, a new client: spent big on a better web site, boosted search engine optimization, and had rotating, “best-value” specials from “preferred” (bigger rebate) suppliers on the homepage.

The results? They doubled active accounts, and I ncreased total margin dollars by 5% on 25% more transactions. They hired more employees to fulfill the explosion in orders. And, operational expenses increased faster than margin and rebate dollars to earn lower profits.

Lessons

  1. Distributors: you don’t have Amazon’s lowest-cost web site, warehouse picking, and deliveries. Nor, can you collect and monetize Prime buyer clickstreams in multiple ways.  
  2. “More sales and margin dollars at a good margin percentage” ignores both order size and cost-per-order. Trading higher service-cost dollars for lower, margin-dollar orders does not get profitable with increasing volume. Volume is vanity, profit sanity!
  3. Most distributors already have accumulated a hidden, small-customer/order problem over the years. Distributors that invest in customer-profitability analytics typically find that: about 30- 50% of the smallest customers generate 4-8% of total margin dollars on 18-25% of total transactions. Always for a net-profit loss.
  4. 95% of these unprofitable minnows are self-employed with zero to declining growth. They do love exchanging retail-sized orders for wholesale services and prices.
  5. This losing, Minnow Busy-ness has an “opportunity cost”. There is little time or profit to invest into better serve value for most net-profitable customers and target accounts.
  6. Without net-profit analytics, every customer and margin dollar is good and too equally served.

2020 Breakthrough Idea

Do a simple, customer net-profit ranking analysis. Or, check the best cloud service for distributors (www.waypointanalytics.net).

Then, how will you segment customers and reserve them differently? Existing data-free beliefs like – all customers and margin dollars are good” – die hard.

For a comprehensive roadmap on how to fix losing minnows while winning more from best accounts, ready my Core Renewal Roadmap by clicking HERE.

*First of several “Scary 2020 question” blogs.

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