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?
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