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1. ONE LAST, LAST COMMENTARY BEFORE SUMMER FOR SURE

As I continue to do some research while outlining my book, I keep coming up with more ideas, articles and slide shows that I would like to share. So, here is one more commentary that focuses on an important distributor cause: how do we find and exploit our unique value creation opportunities that are buried in our customer portfolios?

Most managers have known for a long time that 20 percent of their customers are producing somewhere north of 100% of the operating profits to offset losses that come from some big name accounts that generate avalanches of small, money-losing orders. But, less than 2% of the distributors have figured out how to measure customer profitability in a sufficient, actionable way and then do something outrageously successful with the information in spite of resistance from established outside sales forces, product promotion managers and decentralized P & L branch managers.

After 2 or rounds of layoffs and pay freezes while waiting for three years for an economic recovery that hasn’t yet appeared, are executives thinking about trying something else besides pushing products for promotional terms and cutting costs? What are the odds that more people might start looking at customer profitability as the starting point for breakthrough insights into how to create and capture higher profits? Who knows? But, if anyone is intrigued by this angle read on.

2. THE NEXT, BIG (OLD) MANAGEMENT IDEA/CRAZE

Last week in DCC # 30, I did a review on a brand new book entitled: "Angel Customers and Demon Customers" This book is faux-research and pop-style written, so it should generate a number of customer reviews at Amazon, but it is still too new for any to have accumulated. The Amazon trailing sales ranking has climbed from #10,345 on June 24^th to #3569 on June 28^th to #2,767 this morning (June 30^th).

I would like to think that it was my plug last week that has driven hordes of readers to Amazon, but the two co-authors are clever marketers. Here are the big promotional drivers. The July 1^st Fortune magazine issue which hit my house on Saturday has an excerpted content from the book; I put hotlinks to three different recycled book excerpts at www.Fortune.com in last week’s review. And, the June 1^st issue of the Harvard Business Review had a re-purposed chapter from the book (ch. 10) as an article. Because HBR likes to pretend that they have cutting-edge, original material for which they charge the most, there are no links to free stuff at their site. I do admire and envy how they make so much on infomercials.

But, to be a big selling book like the first best practices book, In Search of Excellence, which sold 13 million hardcover copies starting in 1983, the authors have to have a compelling big idea that meets the perfect business climate needs right on. Could "Angel Customers" be a big seller? I gave it a good review; it is the first book to comprehensively popularize customer profitability strategies.

I think it will do well. It won’t sell as well as "Good to Great" still is, and any modern business book has the same odds of beating Search’s record as any pitcher in the major leagues has of surpassing Cy Young’s 511 career wins.

Will the book be a catalyst for dammed up action? After three years of post-bubble economy lay-offs and pay freezes with no rebound in sales for all industries except autos and houses, whose down turn is next, could companies start to consider looking at their businesses from a customer profitability viewpoint. Ramming-n-jamming more offerings to too many different types of customers isn’t growing sales well enough while the profits continue to go the wrong way. When our hair is on fire, we tend to look for solutions faster with more courage.

Maybe this is all wishful thinking on my part. Because I have been promoting customer profitability ideas starting with the "small order solution" in 1979, I keep hoping that more than 2% of the manufacturers and distributors will find great success with customer profitability solutions. How can I encourage and support you (further) to look into a total turn-around process that starts with customer profitability ranking reports? I've got plenty of ideas. For new readers, you might catch up on my past ideas by: skimming through our "strategy paper" (free via e-mail from karen@merrifield.com); reading our site articles that deal specifically with "customer profitability rankings" and the seven turn-around, revival plays that spin out of those. Or, check out our annotated slide show at the site which references the articles and tells more at this URL: Good_to_Great_Distribution_Results.pdf

Plus, here are some more best-of-the-web articles that you might check out:

FOR MANUFACTURERS AND DISTRIBUTORS WHO ARE DOING IMPORTING AND 3PL ACTIVITY:

"Profits in the Balance" at optimize magazine’s site. Here’s the URL: http://www.optimizemagazine.com/issue/020/customer.htm

This article points out that a huge percent of the big companies that have tried to install Customer Relationship Management (CRM) software applications have gotten zero to negative returns, because they didn’t rethink CRM applications around which customers were profitable and which ones were not profitable. The next step software solution from the industry is now called "analytical CRM".

CRM re-applied with customer profitability insights does well, but when it is synergistically combined with Supply Chain Management (SCM) collaborative efforts off the back end of the supplier’s business then really big results happen. Doing both CRM and SCM together keyed off of customer profitability thinking adds up to a "digital loyalty network" according to the article. It’s a compelling read!

ARTICLES MORE TUNED TO DISTRIBUTORS:

The two best articles that I could find of many skimmed were: "Are Your Biggest and Most Loyal Customers Making You Money? Maybe Not? Here’s the URL: http://www.glscs.com/archives/04.03.crm.htm?adcode=10

This article references several good research studies. It lightly mentions a case example starring the mongo, public distributor, Fisher Scientific and its use of Acorn System’s distributor-friendly, customer profitability package. And, generally the descriptive quotes are quite distributor relevant.

Another substantive, good overview article that is easy to read is: "The Customer Profitability Conundrum: When to Love’em or leave’em" Here’s the URL: http://www.strategy-business.com/article/?art=17929527&ps=dAxlM0

If you are looking for detailed case studies on distributors using customer profitability software, the only two that I could find were on Banta Foods, a foodservice distributor out of Springfield, MO. They also happen to be happy users of Acorn Systems’ customer profitability package. Here are the URLs for those case studies:

"Everything ABC: Analyzing costs and margins". Print out just pages 3 and 4 of this PDF document from ID (institutional foodservice distributor) magazine’s November 7^th ’02 issue at this URL: http://www.idmagonline.com/idmagazine/images/pdf/2002mr1107.pdf

ID magazine then went back for more of the story from Banta by naming their CEO, Chuck Banta, "2003 Innovator of the Year". Mr. Banta was more than generous in letting his industry get a second scoop of what he is doing to beat their brains in. Here’s the URL, the April 17^th, ’03 story starts again on page 3: http://www.idmagonline.com/idmagazine/images/pdf/2003mr0417.pdf

When a new direction in management takes off, there are lots of easy additional ideas and refinements that can come off of a new mindset and operational reporting platform. Besides our past publications and our "high performance" video, we will continue to add implementation ideas on the "customer profitability" platform at this site and in our forthcoming book. For now, you might want to check out the slide show that is briefly described below.

3. CRACKING TARGET ACCOUNTS (ANNOTATED SLIDE SHOW)

Read the latest article on customer profitability starring two different distributors in the July issue of Inc. Magazine. This is a must read in which the ubiquitous Acorn Systems software application appears once again. If you want to try a first approximation at ranking customers by profitability for 2% of the cost and 80% of the total return read our site articles in this order: #s 2.15, 2.3, 2.19 + attached case study.2_15.asp, 2_3.asp,2_19.asp.

If you want a total strategic re-thinking process in 14 slides go to this slide show:Good_to_Great_Distribution_Results.pdf

Here’s the URL for the MUST READ Inc Magazine article entitled "The Price is Right": http://www.inc.com/magazine/20030701/25654.html