Footnotes for “Strategic Insights # 1: “THE STRATEGIC PATH
TO PREMIUM DISTRIBUTOR PROFITS”
Al Bates is the CEO of The Profit
Planning Group. He has been doing financial management performance studies for
specific channel sub-sets of distributors for 30 years. He wrote a book on
“Improving Distributor Profitability” published by the NAW in which
he looked at 10 year trends of the roughly 10,000 distributors’ financial
data in about 40 different channels.
The net conclusion was that all channel financial returns had been
trending down through the ‘90’s into the early ‘00’s.
The bottom 90% were averaging a pre-tax Return On Total Assets (ROTA) of 5.4%
which is an inferior return - on an after tax basis – to what
shareholders would get if they
liquidated their companies and put the money into more liquid, less-risky municipal
bonds. The top 10%, however, were averaging 15.4%. The top 5% typically average
about 25%. For the top 5%, the after-tax return on shareholders’ equity
ratios (ROE, ROI) – depending upon the positive debt leverage that they
could have- averages 4 to 6 times greater than the ROI of the average distributor.
And, the top 10% individual companies consistently outperform their industries
peers over the years. My big assumptions are:
a. The top 10% are strategically more focused with
better operational cultures/beliefs.
b. A big chunk of the bottom 90% know that: they are under-performing;
but don’t want to change; and no one can make them.(CEO’s of public
companies, on the other hand, will have turnaround investors threatening to
take them over, fire the management team and run the business differently.)
c. Some percent of the 90% have (newly-arrived?) CEOs
who really are willing to shake things up to make the company a better economic
engine for all stakeholders (my kind of managers! Contact me!)
There is more on why ROTA is such a good universal measurement for financial
productivity and why in a de-leveraging world (that is currently experiencing a
government borrow and spend reflation recovery that will not end well) having a
free-cash flow company is very desirable. Here are two additional references:
Chapter one of my
virtual, unfinished book written in 2003 on pages 2-5 at this link: .http://merrifield.com/books/Chapter%201.pdf
“quantum profit gram #5 entitled “High Rota Management is
Key” at this link: http://quantumprofitmanagement.com/info/QPMnewsletter05.pdf
Quantum refers to – as in physics – the smallest indivisible unit
of matter. In this case, QPM calculates the profit or loss increments on a
given line item on a given invoice which will have dynamically accounted for
the different value-chain cost steps that actually went into that order (e.g.
direct, indirect, warehouse, cross-docked from a hub, counter, web order entry,
etc. all have different cost-step math.) Once a firm has this cost-model
quantum profit information, then it can be summed to provide profitability
ranking reports of all sorts, which can trigger multiple levels of analytics
optimally effective cost-model for your business to capture and them manipulate
this new quantum profit information is a daunting task. By outsourcing the
problem to Waypoint, you are basically hiring your own virtual VP of model
building and maintenance who has experience doing this job for many
distributors in many channels. Then, you and your team get to be the editors
with Waypoint doing all of your tweaking for you as needed.
QPM then goes
on to provide multiple levels of analytics on top of the core
profitability ranking reports. For example, if we look at the single biggest
losing customer at a given distribution location, we can do second level
analysis into why are they a loser by “right clicking” to check
all of transactions and all of the unique items that the customer has bought
for some period of time. The transactions and items are both ranked by
profitability too. Managers can instantly see meaningful patterns within this
data and usually have instant ideas for simple work-arounds that can improve
the economics for both partners.
third level of analytics
or progress tracking, we will want to see how reps and special task teams are
doing at improving the “net profit” for high-impact accounts
(“Delta PBIT” or “profit before interest and taxes”
progress). So, there are ranking reports by “Delta PBIT” for each
territory. A fourth level of tracking report is the 5x5 sales force dashboard.
And finally, we will want the reps to be incented the same way that shareholders
are. We don’t want them pursuing incremental margin dollars which may
have a cost to serve equal to or greater than the margin for a loss. They
should pursue, sell and structure buy-sell deals in which the company does make
a true net profit. And, retroactively, we would like to pay reps for being part
of the solution for turning current losing accounts into winners. So, QPM
includes (5) net profit incentive reports.
As a distributor uses QPM, they
start to realize a different set of guidelines apply than what we have normally
used when looking through a financial reporting lens. Eight of these guidelines
are summarize in Quantum Profit Gram #12 at this link: http://quantumprofitmanagement.com/info/QPMnewsletter12.pdf
Distributors that have
gone to market traditionally with outside sales reps often collect lots of
small, not-growing or even moribund customers that can only generate small
average orders and small annual total purchases. If the distributor has
continued to give them old-fashion wholesale service which includes: 800 #;
inside sales rep; warehouse people to pick, pack; shipping/ local delivery;
trade credit; and an assigned sales rep who may not even call on them now, THEN
the total service costs per transaction will exceed the margin dollars even
with list price margin percentages. To become profitable, this sub-set
of customers will have to be offered a different “business model”
or “service bundle/envelope” in which some or all of these
changes must be made (which exist for Grainger and Fastenal customers visiting
a wholetail location):
a. Higher prices
b. Strict minimum order size (order half as often, buy
twice as much; and/or buy more items from us that you may not have known we
c. Transaction fees for orders below minimum levels
d. Special orders for non-stocked items not offered or
at an unbundled fee
e. Unbundled freight charges with yet higher order
sizes to qualify for free freight
Drive to, pick out, pay
cash or CC at a “wholetail” location (more on this term below)
g. A less expensive, more effective, proactive way of
marketing communication than outside sales reps (web catalog and order entry;
Banks and casinos segment customers by volume levels; they can have
between 7 to 15 strata ranging from huge whales at the top of the pyramid of
customers to minnows at the bottom.
many strata of customers (with corresponding service models) within one
industry category can distributors have?
are the monthly/annual sales totals that divide one strata from another?
c. What are the typical service bundles for each
d. How many strata can one distribution facility
handle effectively, distinctively and profitably, because structural issues
– like location and costs per square feet -- can be mutually exclusive
for different strata? Here are some answers to these questions from one of my
distributors have a primary business/service-economics model that is trying to
serve too many different sizes of customers. From smallest to biggest
customers, here are five models that we see every day that could be selling the
same item at different prices and terms:
(retail) store on main street.
(“Wholetail”) store on a
commercial highway where rent is between retail and warehouse-zone costs. These
stores (Fastenal, WW. Grainger) have a deeper and/or more focused (fasteners;
auto-parts) selection of goods which customers often need quickly to do a job.
3. Catalog/mail-order and/or tele-sales warehouse facility going
after smaller-than-wholesale orders on items that are freight-insensitive
(UPS-able) and/or time-insensitive (otherwise go to the wholetailer).
Pricing is whatever the traffic will bear; credit cards handle “trade
credit”; and freight is unbundled and often marked up.
full-service-with-outside-rep wholesale model. From a warehouse-area
the distributor will sell at “wholesale list” or less, but include
free: phone in ordering; warehouse pick, pack and ship; trade credit; and
outside sales coverage.
5. Drop-ship, brokerage business. The
value proposition includes: the manufacturer’s brand; the
distributor’s trade credit; and the rep’s general services which
involve doing a lot of detail work for the customer’s projects and
monitoring/expediting/trouble-shooting any of the factory orders. There are, in
some channels, pure “office” wholesale brokers. In many channels,
there can be a few reps who handle primarily drop-ship, brokerage accounts.
Reps who “own” their customers and can switch to other distributors
with the same or equivalent supplier access and trade credit have the most
“power” in negotiating compensation terms.
Most distribution entities typically can do one or two of
these models profitably, but then will lose on the rest for both lack of
focused execution and expense structure conflicts. Cash-n-carry, wholetail
counters at the back of warehouses in warehouse districts with no visibility to
commercial traffic will, for example, under-perform as a profit center.
the cost of services bundled (or not) into the price of goods for the five
models: what is the minimum gross margin dollar per order and per month per
customer needed to make a profit on each customer with model 4 and 5?
many customers does your business currently have in each strata of customer?
is the total estimated profit or loss that your company is making on each
strata pool of customers?
your primary way to go to market is with outside sales reps, what is the
fully-loaded, average cost per sales call? What is the minimum gross margin
dollars per month from an account to support rep coverage? How many accounts
fall below the minimum? So What? (See article 4.11 reference below. It has
answers to some of these questions.)
For more on
turning the small-order/customer division from a loser into a winner:
For cases on solving the small order customer/problem see these
http://merrifield.com/articles/2_15.asp “tackle the small order problem
“rethinking distributor profitability”
“rationalize sales force capacity…” this article is a
must read, do the math and solve several inter-related problems with one big
solution that generates 5 new sources of profits faster than anything else a
full-service, rep-dominate distributor can do.
d. In the DVD training program, “High
Performance Distribution Ideas for All” a number of modules address the
small order problem and the need to segment customers by strata and re-serve
them differently at every level. The DVD is free for Waypoint subscribers.
Waypoint webinar attendees can buy it for $300. And, anyone can buy it from www.merrifield.com for $995. It is unconditionally guaranteed!
(LOTS!) MORE ON THE CORE
PROFIT INTERSECTION OF MOST PROFITABLE CUSTOMERS X PRODUCTS.
What follows is more
information than most people want, but indulge me; it is highly important for
stocking distributors. The first part is on how core-intersection(s) evolved at
a given distribution location and then why industry life-cycle realities make
critical mass fill-rate economics most important today. The last part is on
actual definitions, guidelines and tactical plays for improving fill-rate
economics for both customer and company.
FIRST BIG QUESTION: if most
profitable customers and items are mutually independent, which came first
the chicken or the egg? How did my “core-intersection”
grow up to be what it is? The first distributors in any new distribution
channel were typically spin outs from the manufactures founded by inventors who
invented the first product that started what grew up to a be an entire product
category, if not a vertical industry channel/ecosystem. Then, parallel, life-
cycle stories unfolded for:
Products, categories, and an array of
manufacturers (with an association)
Downstream, customer industries (with their
The hub-economics provided by independent channel species (reps,
brokers, importers, processers, master distributors, 3PLs,
distributors/dealers, retailers, etc.) each with their own respective
associations (which have all consolidated significantly in the past 15 years).
The channel creatures responded to the economic efficiency and effectiveness
needs of both suppliers and end-customers.
In the beginning of a given channel industry, an inventor develops
something new and sells it direct in his home area to the biggest,
most-logical, new, progressive customer(s). To sell it further away, he needed
to hire geographic territory reps who “knew the territory” (like in
the musical “The Music Man”). They typically got paid about 5%
commission on all sales shipped into their territory.
For freight and customer service reasons, factories next paid reps to
become regional “stocking reps” with factory inventory on
consignment and third party fees for extra handling costs. Then, the reps
wanted to run other complimentary products through these locations to sell more
products to the same customers who were begging the reps to help them, but the
primary factory didn’t make those goods. Reps then spun off to become
independent wholesalers, but still retained their original, geographic
Once distributors proved to be viable creature in a given channel,
entrepreneurs started opening distributorships from scratch usually taking on a
lot of #2, 3 and 4 imitative factory lines, because the original lines were
still locked up by the first wave of distributors. The startup imitators could
often get into the game, though, because the US consumer economy tripled in
constant dollars from ’52 to ’66. And, the original factories and
their exclusive distributors got rich, fat and complacent. The category
founders lost a lot of share to: “we are #2, but we try harder with lower
prices” factory-distributor combinations. Many founding channel factories
waited too long to: move towards more “intensive distribution”;
sell alternative channels; split their distribution into “short line
(commodity) and full-line (special local support and stocking needs)
As a distributor continued to attract and retain more customers with
common needs that were supplied by core franchises, snowball or virtuous, reinforcing feedback cycles started between
core products and customers. Customers demanded that the distributor
add more complimentary lines and products. And, new factories would go to best
target end-users, ask them who were the best full-service distributors and then
approach the distributors to take on the line. Bigger sales into a common
customer niche supported more profitable buying from an array of suppliers
needed to create a one-stop-shop, local-in-stock inventory offering.
But, life-cycle forces converted channels from ones dominated by
factories demanding product-push promotions (or lose your exclusive or the
line) to consolidated channels dominated by big customers who want
“supply chain”, demand replenishment systems for the now
commodities that they are buying. Distributors need to become truly
customer-centric as opposed to customer-centric about the products we want to
sell them. This requires an entire different way of thinking, marketing and
operating, which most distributors have not done. The key to growing
profitably is now marring the right growing customers by co-creating the
demand-replenishment systems that they want. The following transitions are
on-going; different customers are at different locations along the bell-shaped
adoption curve for supply-chain buying:
The rep is in charge of the
customer…..now a team shaped by the customer is:
Reps get paid on product volume in a territory/account base…by the
customer on an un-bundled for fee basis; or, the distributor must tune the
incentive(s) to the net profit and net profit growth an account covered by a rep.
The rep covers all accounts in a geography….only accounts with
$400/month+ in margin (potential) can support any sort of outside rep coverage
Don’t believe me? What were the cannons shot off in history to
let us all know that we must update our management assumptions to be in tune
with life-cycle realities? Key transitional phases in these life-cycles
were first signaled in consumer channels, but the life-cycle forces have
gradually permeated all other commercial channels. The macro theme is going
from: push-product to create and fill demand (want VHS or Betamax for $1000 in
’80 at Circuit
mature, consolidating industries in which experience, repeat buyers are
being chased by too much supply of equally, excessively excellent now-commodity
products/suppliers. The end-user has the power, and they want the lowest total
cost supply/service system (Circuit
City dies, Best Buy keeps
changing and wins). Here are some key milestone events and dates:
1962: Fair trade laws were disallowed and “brand names for
– K-Mart, Target and Wal-Mart – all started up as new business
models spun out of old parent models. Actual “List Price” selling
and exclusive-territory franchises started to fade away. Many distributors
first got their exclusive franchises “dueled” in the mid-‘70s
on. Factories started to sell alternative channels – big box stores,
catalogs, etc. -- in the early ‘80s.
1988: Wal-Mart announces that they will no longer see or pay for
“reps”. They will
only do business with suppliers who send management led-teams to co-create
“continuous replenishment”, “quick response” supply
system. Suppliers and reps fought back unsuccessfully to continue to push
products into geographic territories for a straight commission. This massively
overpaid a rep for Wal-Mart volume, because he happened to have Bentonville, AS
in his territory. Where is the customer-centric selling model and comp
plan?! (See article # 4.13 about rethinking your rep incentives: http://merrifield.com/articles/4_13.asp.
1995: P&G announces that they will drastically reduce their product
lines; stop doing channel loading programs; and reduce prices to
on the lessons that they have learned from Wal-Mart’s “quick
response” platform. One big lesson is that you can’t have your
best selling items making 300%+ or more of the profit to cross-subsidize
“affordable prices” on the long-tail of the line which is a net
profit loser. Otherwise, Wal-Mart will knock off the best items; guarantee
them; and sell them for up to 80% less. Sam’s Cola, for example, is the
exact same formula as Coke for 80% less. Ditto for Equate Mouthwash v.
Most stocking distributors have big cross-subsidies in their product
lines between the
popular commodities and the slow-moving, dust collecting items. This encourages
customers to load up on super A+ items from a narrow-stocking, discount
supplier (for retail formats think of Aldi and Trader Joe’s stores) and
then cherry pick the subsidized, special items at the full-stocking
distributor. And/or, for Asian, private-label clone products to eat over-priced
brand name commodities lunch. Factories have even more economic problems
with the “long tail” of their product lines. (see:
“Channel Economics Falling Down” at: http://quantumprofitmanagement.com/info/QPMnewsletter20.pdf)
1996: Jack Welch reports in a Fortune magazine article how much GE is
saving on MRO supplies bought in their factories by going to “integrated,
sole supply” contracts.
This “supply chain, spend management” strategy has been
heavily embraced by every big company running SAP which touts its “spend
process management” capabilities.
2001: The National Association of
Purchasing Managers, which has been educating career purchasing people for
Corporate America for years, changes its name to the Institute of Supply
Management. If a customer of yours has a
VP of Supply Chain, then where is your “inter-business, buy-sell
processes consultant” to audit the account and co-create what they really
2001: The best-selling book,
“Good to Great” by Jim Collins comes out. Based on stock
appreciation trends research that Collins uses that ended in 1995, he chooses
11 companies that went from good to great, the star of the stars is Circuit City.
City fires 100% of their
commissioned sales force who averaged over 50k per year to hire one half the
people for 24K per year salary. The reps jumped on you at the door and tried to
trade you up; the salaried folks wait to be asked questions. This mimics just
one aspect of Best Buy’s business model which kept pace with life-cycle
changes in the industry. But, it was too little change, too late for CC: RIP.
2010 Case Study: A Waypoint client distributor was shocked to find out
that his “really good rep” was only allowed to see one of the
company’s most profitable customers 4 times a year. But, the company comp
plan was paying the rep $20K in commissions or $5K/call. What’s wrong
with this picture? What would you advise the distributor to do to take the
great customer to the next level?
Is it more important to sell best total economic value to the right
customers in the right, best niches for your company or to do whatever
promotional programs your suppliers might like you to do? Product promotions
Tell us who are most profitable
Tell us not to sell to, because we are structurally higher cost and
lower service value than other competitors with different service models.
What core items –from many suppliers-
need best fill-rates?
What the rest of the service metrics are for the best niche’s
service value equation.
If you grow faster than your industry, because you have best total
service value for the right customers in the right, best niches for you, then
all of your suppliers that indirectly are selling product into that niche will
grow faster than the industry too. They will be pleased even if you don’t
buy into their product-push programs to any potential customers for just the
one line’s products.
If you have low-cost, because you are not servicing lots of misfit
customers at a loss, then you will be making great profits to pay your
suppliers on time which is the second most important thing you can do to make
continued): More CORE-INTERSECTION,
CRITICAL- MASS, Fill-rate Economics
assume that your company has used Waypoint’s QPM service to:
1. Zero in on a pool of customers who are all
in one common category (some kind of contractor, etc) that buys a one-stop-shop
array of goods. Or, they may be a cross-section of different verticals, but
they all buy common process needs solution from you (packaging, fluid power,
etc.) that requires a common cluster of most popular items.
2. You then do a most popular item ranking for this
specific pool of customers to zero in on the most productive, profitable and/or
service-satisfying items for the pool.
3. How do you know consciously round out this
core-intersection and maximize selling more of these core items to more of
these core customers on ideally a larger average order sized basis? Why? What
are the superior, win-win economics for both the customer and the distributor?
a. How does one-stop-shop, in-stock fill-rates lower
every one of the 11 elements of “total procurement cost” for a
customer except for “price”? (http://merrifield.com/exhibits/8elements.pdf)
b. If a customer can get everything they need when
they need it, what does it do for their:
labor productivity (“up-time,
their value-chain performance
(“done-on-time” for the next person, department or customer)?
satisfaction, retention and referral economics?
Do we measure these for
the customer to give them value and then help them sell this value to the next
party in the value-chain? Or, do we just let them cherry-pick our better
service value and let us meet the low price with last look?
c. If we increase a core customer’s order-size
and margin dollar total in a transaction by 10%, how much of the incremental
margin dollar flows through to the profit line? Given that many of our
transactional activity costs are fixed regardless of the order size (stopping a
delivery truck; paperwork processing costs to support the integrity of physical
delivery and trade credit), the flow through is high. For more on
d. Conversely, what if we don’t have everything
a customer wants right now at the desired (for both of us) location? What are
the extra, hidden costs to us and the customer for: back-orders, split shipments
from other locations, substitutions?
4. Some building block concepts within a mathematical
a. What is the minimum-to-maximum range/breadth of SKUs you would include
within a one-stop-shop array? How much would might the breadth narrow for a
small geographic market versus expand in your largest market in which one or
more competitors will also stock more widely and deeply?
b. What is the average inventory investment you would
have (depth) to achieve the highest,
fill-rate service value for core customers in comparison to competitors?
c. Let’s call this breadth x depth of investment: “critical
mass inventory” (CMI).
d. Assume that the
margin percentage rate that you typically enjoy on warehouse sales for this
critical mass is the by-product of a number of variables and a given, then how many turns would
you like to get out of the CMI have a good turn-earn #?
e. To get the target turn range, how much in annual
sales will you have to get from all of your customers (on warehouse business;
your sales on directs and indirects are separate)? Let’s call this target
sales number (range) “critical
mass sales” or CMS.
Do you have that much in
sales already? If not what’s the shortfall? From what target accounts can
it come from? Out of which weakest competitor’s hide will it come?
(I’ve seen branch locations with “too much inventory and too low a
turnover rate”, which is the symptom. The branch has clean A and B item
inventory, it just doesn’t have CMS to turn the inventory/fill-rates,
they need to competitively go after the heavy user customers. Is that sales
volume even there in a small market? Or, does some entrenched competitor
already own CM economics for the customers x product mix?)
Given the total size of
a given geographic market, how many distributors can achieve CMS to turn CMI
which is necessary to have a most competitive fill rate service level?
If we could achieve, CMS
for CMI by capturing 50 to 80% of the net profit pool of our target core
customer pool, how big a barrier to entry for competitors would that be?
CMI and CMS for a drug wholesaler is huge. Those numbers for a janitorial
supply distributor are quite a bit smaller which makes it easier for more
competitors to enter the space and try to get to CMS/CMI turn-earn.
Once we own a niche with
CM economics, if we have other great service metrics and team-sell the key
accounts, this core intersection will be a source of sustainable, free
cash-flow profits for a long time!
Other service metrics – zero errors, on-time
delivery, etc.- are important, but fill-rates is foundational. What good are
great people and great service except that we don’t have what you want
today. Tune CMI, team-sell key niche
customers, get 50-80% of the profit pool and 50% or more of the total volume
from a niche to create sustainable profit power!
5. Let’s do some “abductive
thinking” to develop a simple “BEEF UP CORE ITEM INVENTORY AND FILL
RATE ECONOMICS FOR BOTH PARTIES” experiment.
a. Abductive logic is the logic of what could be
possible; it can’t be proven by history, nothing innovative can, but it
is a logical leap of what could be.
b. Whatever our current fill-rates are on CMI items,
let’s assume that they will increase a bit if we boost our average
investment in all of these items (assume about 3-5% of all items that have been
active in the past year). Simulate what the total investment might be for a 10,
20, 30% increase for all CMI items and do something significant, but affordable
(get some suppliers to offer an extra 60 days on just the increment).
c. Then, track what the monthly sales increases for
those items are versus the next 3% of the most popular items that weren’t
beefed up: a controlled experiment.
d. Measure what happens to the total sales for the
core customers versus all other customers for a quarter or two as well as the
average order size for those two sets of customers.
e. Warning: don’t be surprised if all numbers go
up more than you might think, because your historic fill-rates were not as good
as you thought. Why?
If we don’t have a
most popular item, we have, in the past, done substitutions, but forgotten to
apply the demand towards the core item. So, fill rates on the core item look
better and the computer learns to re-order more of the substitute item and less
of the requested item. Not good.
We have done split
shipments, but did not apply the demand to the core item at the intended
branch. Fill-rates look better than they should and we are re-ordering more at
the other branch and less at the customers preferred branch. Not good.
A customer asks if we
have an extra large amount of a core item; we don’t. So, they go
elsewhere. We not only lost the sale and perhaps a customer on occasion, but
our fill rates appear to be better than they are. We are under-investing for
the past actual and potential demand!
Higher local fill rates
will also make local service people and the company far more productive,
because the extra costs of taking care of “shorts” go away. Volume
goes up and work activity actually drops.
Footnote # 5: More on margin flow through economics on
larger average order size.
Ch 2. Pp. 4-5 on “sensitivity analysis and incremental margin
flow-through to the profit line for several different scenarios at: http://merrifield.com/books/Chapter%202.pdf.
Footnote #6: Sales training on tweaking existing
buy-sell processes and business mix at high-impact accounts.
distributors understand how few accounts – typically less than 5% of all
of the active accounts – fall into the high (future) profit impact
category, they are compelled to re-focus on and take to the next-level: the
most profitable customers; the biggest upside target “gazelle”
customers; and the super-losers that can often be transformed into winners.
distributor principals and reps have little experience at doing buy-sell
process improvement “audits” and follow-ups. The link below is to a
first draft training guide on this actually quite simple, but powerful new way
of a team approaching and co-creating next-level, micro-innovation, tweaks with
key accounts: http://merrifield.com/exhibits/Ex%2059%20BSPI%20exhibit.pdf.
How to define and measure “service excellence.”
distribution turnaround work, I’ve always identified about 5
most-friendly, most-profitable customers in the number one most profitable
customer niche to interview. I go right to the CEO or VP of supply chain type
person and ask a series of questions:
your top three suppliers in volume order? Why do you weight your purchases in
that order? Has it always been that order? If you have shifted volume between
suppliers, when and why?
b. Going forward what are your main goals and key
metrics that you are looking at to improve the total productivity of your
company while lowering your total procurement cost for goods? At the end of the
year, how do you get measured and reviewed, we want to: improve your
productivity, lower your TPC and make you look as good as possible. Will you
help us to co-create new solutions to do that?
c. When you think about “outstanding
service” can you think of any incidents when:
a. We or some other supplier did something that
wasn’t good? The act caused you downtime, wrong answers, lost customers,
b. Can you think of any acts of extra service effort
by any supplier that still give you warm feelings today?
c. (By listening to not just the top person, but then
others as you do a walk through audit (see Ex. 59 at www.merrifield.com), we are looking for
new service wrinkles or old service blind-spot holes for which we then need to
invent in-house metrics to insure that we will create or improve those service
values to a distinctive or even unconditionally guaranteed level for key
d. Modules 4.1-13 in our DVD training program are all
about how to: define, measure, achieve, sell, get paid for and leverage the big
8 of service excellence.
e. Case study documents:
The “big 8”
of service excellence for a target niche of contractors: http://merrifield.com/exhibits/8elements.pdf.
“circle 2”, “basic expected service excellence” before
“extra services” in this slide show: http://merrifield.com/exhibits/Anatomy_of_a_Product.pdf.
on “service excellence: at www.merrifield.com: 3.1, 3.2, 3.5, 3.8, 3.9, 3.12,
Footnote # 8: If
you don’t have every front-line service employees – heart, mind,
and wallet – tied into achieving “service excellence metrics”
with heroic extra efforts for key accounts, then it won’t happen. What
are your “people engagement” metrics? My historical turnaround
1. Twice a year do anonymous morale
surveys of all employees. There is, BTW, a perfect correlation between how
effective employees rate their branch manager and the average morale score of
people at a branch.
2. What percent of employees are in
excellent and good category v the few that are in shape-up or out programs
(write them up 3 times, coach them back into “good” with the
P.R.I.C.E system and then fire them with the certainty that even their best
friends – if they have any - will think there was fair, “due
a. For more on “high
performance people management” see:
section 5, esp. 5.7 and 5.10
Modules: section 5
3. What percent of employees got (with
as many tries as needed) 100% on their written and oral explanations of the
“corporate culture” test.
4. What percent of learn-n-earn,
cross-training certifications have been achieved as a percent of the total
5. How many published praising
statements is the location averaging per employee per week? (more on
“praising statements being the oxygen of change and learning
mastery” in articles: 6.3 and 6.4; and, DVD modules 5.1-5.8).