Do you sell price-sensitive commodities? If so, consider reinventing service-value by customer-niche with these eight steps:
Gross Margin Dollars (less) Cost-To-Serve Dollars = Profit Dollars
Continue reading 17. Rank Customer-Niches by Net Profits and Act
“The 20/80 principle” roughly applies to most distributors’ largest customers and their respective sales.
It’s called the Pareto Principle, and it’s a “power law” generalization from Pareto’s 1896 discovery that 20% of the Italian population owned 80% of the land.
Customers and their respective profits are far more skewed than 20/80, actually. Instead, distributor / customer-profit analytics reveals these power-laws:
200 of your SKUs are hugely, net-profitable, but, another 200 are hugely unprofitable. Amazon knows SKU profitability and exploits traditional competitors’ informational blindness. Want to get smarter, too? Here’s how:
Amazon knows the following “profit equation” for every SKU (customer, etc.):
Continue reading 15. SKU-Profit Winners, Losers and Amazon Tactics
Most distributors have naturally-occurring, High Gross Margin percentage (house) accounts and High Gross Margin percentage (small-dollar-pick) SKUs. These sales are surprisingly “Operating-Profit-Dollar” (Profit$s) losers.
The Gross Margin Dollars (GM$s) in these small-dollar picks and orders amount to less than the Cost-to-Serve Dollars (CTS$s) they consume, which means they cost your company more to fill than the Profit$s they generate for your company.
By contrast, direct-ship orders with low Gross Margin percentage are often quite profitable.
Continue reading 14. Gross-Margin Percent (GM%): A Poor Indicator of Profitability
In second grade, I was stunned to learn of the number of years of formal education still ahead of me. But, my PhD dad assured me that this big journey would be well-mapped and had been completed by many, non-exceptional adults.
He told me “Have courage, you can easily do it too!”
Besides, he was looking forward to helping me as needed, one fun grade-step at a time. Supportive, well-educated parents were, for me, a thankful given.
Continue reading 13. Questions to Ask Yourself Along Your Customer-Profitability Journey
It’s in our DNA. Hyper-vigilance enabled mankind to survive while a small percentage of wackos generated the innovations that have cumulatively lifted all of us into today’s first-world economies.
Industry best-practices pursue efficient economic activity, which is not “innovative” economic activity that will grow sales, profits or all stakeholders’ benefits faster. Fine-tuning the past leads to fading financial returns and eventual death. Customers, suppliers and employees who are more ambitious and progressive will choose to work with more innovative, rewarding distributors. The innovative rich get richer.
If “innovation” sounds too abstract, big and scary, then relax. Innovation comes in many speeds, ranging from common adaptations done by everyone to disruptive supply-chain innovations like Wal-mart’s cross-docking, quick response or Amazon’s 2-Hour, Prime delivery.
Continue reading 12. Increase Innovation With A Curiosity Rule and Tool