Managing in THIS EconomyFirst Law for a slow economy: Things over

which you have little or no control should get very little of your time and attention. 

Cost Reduction TechniquesIncreasing RevenuePruning the TreeSources for Additional AssetsRedefining LeverageMaking it Work, Removing workPreparing for the Upturn

Drivers of Declining Profitability in any Economy

Inconsistent PricingBuying for CustomersChasing the Wrong BusinessInternal vs External FocusDependence on ‘Technology’Unknown Service CostsRe-distributionLack of effective Metrics

Recovery Demands

Receivables – from creep to jumpConsigned InventoryMore TransactionsBetter PricesFaster ResponseMore Service {undefined; unmeasured}Short Term FixesWarranties – Extras - Options

Action Plan For Survival1. Crisis craves structure2. Conserve cash.3. Analyze your customers & suppliers.4. Define profit levels for customer categories5. Stop servicing unprofitable customers.6.Analyze sales effectiveness and reorganize.

Consider upgrading sales group.7. Analyze product portfolio; Which ones are

really profitable?8. Simplify supplier relations.9. Analyze sales and logistic processes, identify

costs.10. Initiate methods for continuous

improvement.

No Whining - SellingFight demands for “recession discounts” Price

Management“Everything’s on hold for now” recession stall (no, it’s

not) Understand decision-making in the “recession bunker”

– where your customers plan (misguided) strategies It’s time to use questions to uncover customer

motivations and give you an edgeThe importance of re-prioritizing your accounts How do you keep your good customers loyal?Identify which companies will bounce back first Reposition your products and services so they have a

recession benefit.

Financial Management & Profitability

Economic Outlook

Industry Outlook

Business Outlook

Keys to Success – Beyond 2010

Which Business Functions Will Look Different?

CreditSalesPurchasingPricingInventory ManagementLogisticsTechnologyServiceMetrics

Components YOU Must Measure / Manage Effectively

PRICE What value looks like numerically

QUALITY Not the highest, the Right

SERVICE Defined by the acceptor only

SALES Perceived value must be higher than the price asked

RELIABILITY How often you do what you say you will

Integrity

Interactions with friends, family, co-workers,

customers, suppliers, co-volunteers, groups,

organizations, community, country, and the spirits of

the dead.

Definitions Webster’s New World Dictionary.

1. the quality or state of being complete; unbroken condition; wholeness; entirety

2. the quality or state of being unimpaired; perfect condition; soundness

3. the quality or state of being of sound moral principle; uprightness, honesty, and sincerity

An object has integrity when it is Whole and Complete.

Any diminution in whole and complete results in a diminution in workability.

Think of a wheel with missing spokes, it’s not whole. It will become out-of-round, work less well and eventually stop working entirely.

Likewise, a system or a channel has integrity when it is whole and complete.

Essentials for GrowthDocumented, Repeatable Business

ProcessesWorld Class Cost ControlCustomer Base ManagementIntroduction Of Additional ValueValueProfitable RelationshipsBench StrengthContinual StretchSpeedDiscontinuity

Total Customer OpportunityBranch by Branch

InventorySuppliers

Products

Processes

Key Notes:• Opportunity is the result of complex interactions between several dynamics • Accordingly, Profit improvement is an integrated process• A Systems approach seeks to balance these interactions and drive improvement

Key Notes:• Opportunity is the result of complex interactions between several dynamics • Accordingly, Profit improvement is an integrated process• A Systems approach seeks to balance these interactions and drive improvement

Segmentation Basics

Each customer segment will have its demands met at an acceptable level (Needs)Size is a lousy segmentation criteria

Our channel position will make us visible to our customers where we have sales opportunities (Coverage)How do they “see us”?

The Channel provides required services at an acceptable cost and offers partners a viable economic return (Economics)We make enough profit to justify investment

in demand creation and building brand power

Segmentation Goals

Customer Relationship ManagementThorough Business AnalysisTime and Profitability - Inseparable

Segment Characteristics•Who are they?•What do they look like?•What do they need?•How do they act?•What do they buy?•When do they need it?•Why do they want it?•What do they cost us?•What do they contribute•How do we grow them?

Time•Customer lifecycle view•Frequency of Purchases•Customer life position•Channel Selection

Profitability•Share of Spend•Buying Phases•Profit per Purchase•Cost to Serve•Investment Potential

Opportunistic Core

Unprofitable Service Drain

Customer Life

Volume

Pro

fit

Cost

to S

erv

e

High ProfitabilityNo RelationshipLow Cost to ServeLow Volume

High ProfitabilitySustained RelationshipLow Cost to ServeHigh Volume

Low ProfitabilityNo RelationshipHigh Cost to ServeLow Volume

Low ProfitabilitySustainedRelationshipHigh Cost to ServeHigh Volume

PRICE to VALUECUSTOMER PROFITABILITY

Measuring Customer Contribution

From margin to Net Contributionby Transactionsby Offerings & Consumptionby Cost of Servicesby Valuefrom a Sales Perspective

Customer ManagementCustomer Management

Segments Strategies

•Long Term Alignment•Customized Services•Increase Penetration

•Retention•Selective Optimization•Increase Penetration•Increase Profit•Reduce Free Services

50%

30%

20%

5%

15%

80%

# Customers GP $ Share

What Can We Look Like?Brokers – Professional buyers for

selected customers; no vendor alignment

Responders – Internet friendly, expandable, data driven, etc

Demand Creators – professional sellersResponse Actuators – Sell – Source –

ShipNiche Players – by geography, product,

customers, time, information, or cost

Never Forget Distributors are channel intermediaries that play a cost transfer role

They perform activities more cost effectively than those they buy from, (suppliers) & those they sell to (customers)At the heart of the distributor’s position & role is economics:

– Suppliers sell through distributors only because it’s more profitable for them to do so.– Customers buy from distributors for the same reason.

Warning!!No magic formulas….no silver bullets;

you’ve got to think about it……

Learn to live with paradox; accept conflict; and have response alternatives for the future

You Can’t Push People into a Future; ….You CAN Create a Future and ask them to join YOU!

How much hope and change can you stand?