August 20, 2003 - Distribution Channel Commentary (DCC) # 35

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THIS WEEKíS TOPICS:

  1. Back To School One Way Or Another
  2. Motivational Company Wellness Program Article and 3 Levels of Application
  • Save on Insurance, Boost Morale and Energy
  • Apply the Kinetic Chain to Your Wellness Program too
  • Let Personal Transformations with Team Help Support Corporate Transformation
      3.    Check out Chapter One of our Forthcoming Book: "Reinventing Distributor Profitability"
  1. Back To School One Way Or Another

In North Carolina, the public schools start today. My son is entering the ninth grade and his sister will start fifth grade tomorrow. I suspect that many of you who have school age children are also back from summer adventures, except those in the Northeast, the last stronghold for public school starting after Labor Day. (The summer tourism industry is hanging tough against the teachersí unions.)

In another sense, though, we all have to go back to school to figure out how to reinvent distribution profitability. Selling tangible goods at flat to lower prices (assumption: no pricing power on the horizon) into mature customer industries will not get any relief regardless of how the hoped for 2nd half recovery unfolds. Because most distributors are guilty of selling too many items to too many customers, we have innovative opportunities sitting within hidden niches of customer-product-service match-ups within our general activity portfolios. We just need new strategic insight tools for finding them and then some "intrapreneurial" energy to make incremental service value creation and change happen.

Here are a few more thoughts on hidden corporate potential:

  • Customer profitability analysis will reveal that 20% of the customers generate 150% of the profits. How do we retain the best customers and sell quite a bit "more to the core by Ď04"?
  • 60% of our customers are roughly breakeven. How do we subdivide these customers and change our pricing, terms and service offerings to either make them profitable and worthwhile or let them find some other supplier better suited to serve them? Being strategically effective involves not just doing our best stuff better, but getting out of profit draining activities in which we have no business pursuing.
  • 20% of our customers are destroying about 50% of our profits. The worst ones of all are big name (potential) customers that are killing us with nothing but small orders and/or cherry-picking needs without paying enough for them. We are actually killing each other with transactional costs, so how do we convert 80% or more of these lead accounts into gold ones fairly quickly?

For insights on how to find and tap into the hidden profitability see topic 3, and then check out our video, "High Performance Distribution Ideas for All" on our homepage at www.merrifield.com. We have sold over 1000 kits through over 35 re-sellers. See if one of your affiliation groups qualifies for a special price. If not, contact us to see how easy it is to set up a re-seller agreement.

2.   Motivational Company Wellness Program Article and 3 Levels of Application

In the August 10th issue of the New York Times business section there was an article that brought back good memories for me. The article was entitled "Shed Some Pounds (and Get a Bonus)". The reporter touched on a number of case examples of corporate wellness programs that had been designed to help employees lose weight. The intent of the article was to illustrate how well designed programs could help: employees to shed pounds, lower insurance costs and boost employee energy and team/company spirit. These are great, first level objectives, and I know that we can do more with such programs. Before moving on to the next level thoughts, you might want to check out the article at the following link:

http://www.nytimes.com/2003/08/10/business/yourmoney/10EXLI.html

The article took me back to the "Presidentís Challenge" which I initiated at the front-end of a distribution firm turnaround project that I was leading back in the mid-Ď80ís. We had, at that time, big corporate transformational opportunities ahead of us (the macro). But, we couldnít make the big changes happen if everyone didnít want to be part of the solution and change their: educational outlook, energy levels and skill sets (the micro changes).

Being an outsider with no specific channel credibility who wanted to propose revolutionary ideas (to them) on how to change the company, I needed a simple, first program that they could get excited about. What was a simple, beneficially understandable, personally important, reasonably quick (90 days) opportunity that could illustrate how a corporate team can work together and harder to improve both individual (micro) and collective (macro) well being? The answer was the "Presidentís Wellness Challenge". Everyone could optionally sign up to be part of the lose weight and/or improve cardiovascular performance programs. Ninety percent of the employees participated and all won, usually in multiple ways. We established, more importantly, a can-do, team spirit platform on which we could then do a number of turnaround plays that allowed us to triple our sales over the next 4 years while going from losses to high profitability.

TWO MORE LEVELS OF OPPORTUNITY

To insure running a thoroughly thought out and "aligned" wellness program, I recommend using my "kinetic chain of profit power" as an implementation checklist and corporate fabric reweaving tool. The "kinetic chain" is sprinkled throughout my published materials. A first, best place to read about it (and try to match up the wellness article ideas with the seven steps) is in an article at my web site. Hereís the link: 2_1.asp. It can also be found in the following places:

  • "Strategy map 6.1" in Chapter One of my forthcoming book that can be downloaded for free at the homepage of www.merrifield.com
  • Slide #9 in the annotated slide show on "strategy" at my web site at this link: Crafting_Corporate_Strategy.pdf
  • The "High Performance.." video, module #5.10 is dedicated to the kinetic chain

By using the kinetic chain to fill-in all of the blanks for running a wellness program, you will also gain insights into the corporate reweaving that is necessary for any "good idea" to actually work on a sustainable, integrated basis.

If you want to implement some "good idea", you can pinpoint which of the steps the idea is really addressing and realize that the idea will also have to be totally re-shaped and supported by all of the preceding steps and follow-through steps. If you donít, the idea will be quietly rejected by the corporate immune system within about two weeks of its introduction.

The third level of application is to use a wellness program success to prove to the team that the new, big changes for big gain ideas touched on in Chapter One (below) are do-able. Most people naturally focus on optimizing their individual, immediate worlds. The idea of building a stronger company that will in turn give all stakeholders better, longer-term economics escapes them. A wellness program is so visible, measurable and both personal and collective, it can serve as a first best case example of improving commonwealth benefits.

3.   Check out Chapter One draft of forthcoming book: "Reinventing Distributor Profitability"

Finally, for those of you who might have missed the announcement in last weekís commentary, we have posted a close-to-final draft of "chapter one" of our forthcoming book on the home page of our web site at www.merrifield.com. I guarantee that everyone will find provocative ideas in this read.

We hope to have the book finished by mid-September and published in paperback by mid-October. The book will have its own web site with a lot of free content and continuously updated follow-up content. In the meantime, we welcome your questions and editing suggestions.

The material is in theory copyrighted, but we grant you permission to reproduce and share Chapter One as much as you would like.

Hereís hoping that you all had enjoyable summers and have your batteries recharged for innovating your way through this tough economy to higher, structural, sustainable profit power.

Sincerely,

Bruce

Bruce@merrifield.com

919-933-7474