Bruce Merrifield, President — Merrifield Consulting •profit analytics •2020 Vision •distribution management best practices •APIC Conference •sales practices •marketing practices •management strategies •industry perspective •distribution industry trends •sales management •business math for distribution •sales training Wednesday, October 18, 2017—In this video interview, Bruce Merrifield and Randy MacLean discuss how sales has changed over the years, delving into Randy's career history of designing sales compensation programs. "Randy has had a varied and interesting career," Bruce said. "He's had a lot of jobs – including ones in programming, sales, and sales management – and owned quite a few companies. This included getting involved with sales compensation programs pretty early on which meant that he's had a bird's eye view to how sales and sales compensation practices evolved over time." Randy discusses how he took a break from software for about a decade and spent most of that working on sales compensation programs for some Fortune 100 companies, including some major wholesale distributors. It was devilishly tricky work trying to find a good balance between incentives and how to translate the money being paid out for the profit that came in. "How many of those plans were based on easily accessible financial numbers, including margin dollar and margin percent, as opposed to line item profit analytics where we actually know the net profit or loss of every customer?" Bruce asked. These plans were based entirely on financially accessible numbers because the technology wasn't available to compare it against actual profits. There was no way to run those calculations, so instead we had to create some very complex programs to simulate what those profits might look like. That's all changed now thanks to line item profit analytics (LIPA) where we can calculate the actual profitability on every sale, territory, product, and customer. This is what the best companies have long considered to be the Holy Grail. It's something that people would have paid a fortune for, and yet now it's available to even some of the smallest companies! "When a typical WayPoint Analytics client starts to use the service, how many of their territories are profitable?" Bruce asked. Usually less than half of their territories are profitable. While the number sounds shocking, remember that they've been using a model that was developed before we had the technology to know what was really going on, which forced people to make educated guesses. However, because everybody was suffering from that same problem, it was less of a competitive disadvantage at the time. For instance, the distributor may have reached the conclusion that any sale with a 22% margin will be profitable. This number may have been based on what seemed like reasonably good information and valid on certain transactions at one point, but odds are that it's been carried forward and misapplied all these years. More importantly, LIPA has proven that you can't rely on just a gross margin number since cost-to-serve (CTS) can vary widely. A 22% gross margin is great when your CTS is lower than that, but a sale with a 22% gross margin and a 35% CTS means that you're losing money. If you've been relying solely on gross margin for all of these years, you're going to discover that you have a lot of unprofitable sales. Even worse, you're going to discover that you've been paying a commission on many of these unprofitable sales. Recognizing the significance of CTS is the first step in reforming that business so it will be more profitable. And it's important to recognize that the way your company handles sales and its sales force will need to change to compete in today's market. The sales model from 40 years ago involved a guy in a car, driving and knocking on doors and bringing back orders, and you apply that to all of your customers. In the days when the margins were a lot higher than they are now and the cost structures were a lot lower, that was a viable strategy. Back then, everybody was also operating under the same handicaps as far as sales practices and information went. Now that better tools are available, distributors who choose not to use them are putting themselves at a severe disadvantage. For more information about Bruce Merrifield, visit: www.merrifieldact2.com |
The 6 Attributes of Super-Profit CompaniesThe 2nd of 3 lists defining the markers of Distribution companies outpacing their peers. The 5 Things Customers Want (brief)The 1st of 3 lists defining the markers of Distribution companies outpacing their peers. Beyond Business IntelligenceRandy MacLean explains the differences in business intelligence systems, and how to know what you're getting with each kind. A Culture of Innovation Starts at the TopSteve Epner and Randy MacLean discuss topics from Steve's book. In this video: How to Innovate. Staying Effective in the Changing World of SalesThe top business know not only how to innovate, but where to spot opportunities where innovation will bring the greatest results. LIPA: Prophet of Customer NeedsSee how implementing LIPA can give you the bandwidth to be more accommodating to your customers with analytics-based service excellence Getting a Deeper Understanding of CostsRandy MacLean and Bruce Merrifield of WayPoint Analytics discuss different levels of cost analysis, and why deeper analytics can bring much greater benefits. Optimizing Salesforce Pay Through Deep Data AnalysisCompanies are developing more and more sophisticated approaches to sales compensation and here Bruce Merrifield and Randy MacLean examine the trends. Webinar: Profit-Based Sales Incentives (part 1)Webinar: Quantum Sales Compensation - How to Create a powerful new kind of sales incentive plan Using Profit Analytics to Manage Your Sales ForceUse profit analytics to help drive radical profit gains by balancing volume, margin and service costs for every account, doubling and tripling territory profits Sales Force SpecializationDiscussion of how the most successful companies are adopting specialized sales functions, achieving superior results. How Distributors Should Rethink Their 2017 Sales Growth PlansWaypoint Analytics uses line item profit analytics to dig deep into the numbers, and Waypoint users learn both bad news and good news about their customers. 9 Steps to More Profitable RelationshipsDiscussion about a 9-step process aimed at transforming a transactional relationship with an account into a partnership. Profit Value-Based Customer SegmentationRandy MacLean and Bruce Merrifield of WayPoint Analytics discuss profit value-based customer segmentation. Gross Margin Percent: A Poor Indicator of ProfitabilityMany naturally occurring, high gross margin percentage accounts and high gross margin percentage SKUs are operating profit losers. The Advantages of SegmentationA discussion of the benefits of segmentation and how this approach can help distributors achieve far greater levels of profitability. How to Turn Big Data Into Big Profits!Top companies like Amazon can leverage big data to predict consumer buying habits. Bruce Merrifield discusses how you can do this too! Gross Margin Percent: A Poor Indicator of ProfitabilityMost distributors have naturally occurring, high gross margin percentage accounts and high gross margin percentage (small dollar pick) SKUs. Protecting Your Core BusinessHow to identify and protect the accounts at the core of profits. Triage Customers & Set Priorities to Increase PerformanceRandy MacLean and Bruce Merrifield sit down for a talk about the issues and opportunities, tactics and strategies for increasing profit performance. Increase Profits: Rank Customers and Act AccordinglyHere is a case study in which the lowest gross margin percentage niche was the most profitable and the highest gross margin percentage was the loser. Discussing the Enterprise Account Selling Model (#3)Continuance of the Enterprise Account Selling Model video series. Refers to a preceding video. Drawn from Bruce's presentation at APIC on March 1, 2016. Discussing the Enterprise Account Selling Model (#2)A continuation of the discussion between Bruce Merrifield and Randy MacLean over Bruce's Enterprise Account Selling Model (part 2). Discussing the Enterprise Account Selling Model (#1)Bruce Merrifield and Randy MacLean discuss Bruce's Enterprise Account Selling Model, as presented at APIC on March 1, 2016. Getting Your Salespeople to Negotiate SmarterUsing the negotiation process to achieve CTS savings, allowing you to offer your customers lower prices while leaving the table with a larger profit. Increase Innovation with a Rule and a ToolBruce Merrifield discusses the Wheel of Learning and how this simple tool can catapult you forward with innovative thinking. Cost-to-Serve Math: Why Gross Margin May Fool You Every TimeThis video by Bruce Merrifield and Randy MacLean describes why you can't rely solely on gross margin to determine profitability. Working on Your Best AccountsWhat to do with your top accounts. Gross Margin FixationA fixation on gross margin – without looking at cost-to-serve (CTS) – has blinded countless distributors and limited their ability to achieve profitability. Amazon Tactics: Know Your SKU Profit Winners and LosersSee why your most profitable 200+ items are typically popular commodities with lots of picks for lots of customers with a high average sales dollar per pick. A WayPoint Client and Whale Curve Success StoryLearn how this distributor was able to massively ramp up its profitability even as it lost many of its customers. Cost Structures: What Makes for a Good Sale?Learn why distributors can't simply rely on gross margin when determining whether a sale will add to the bottom line. Changing Sales Strategy Using LIPARandy MacLean talks about the emergence of a new sales strategy. Why You Should Sweat the Small DeliveriesA discussion on how little extras can sometimes add up to a lot of infrastructure cost in wholesale distribution companies. Increase Innovation with a Rule and a ToolLearn how to boost your company innovation IQ by adopting the Anti-Nitpick Rule and the Wheel of Learning Tool. How and Why Amazon Drives Change for Catalog OperatorsCatalogs still exist, but they have gone online. In this video, Randy MacLean and Bruce Merrifield outline the changing reality of catalog operators. It's Not Who You Think It IsRandy MacLean discusses key profitability metrics for QPM. Why You Should Be Optimizing InventoryRandy and Bruce explain why it's important to optimize inventory in the same way you optimize personnel and other resources toward the best profit opportunities A Two Step Strategy for Being Number One in DistributionIn this video, Bruce Merrifield turns the tables on Waypoint President Randy MacLean, and asks Randy to strategize on how to beat the competition. Using WayPoint's High Volume Account Report to Increase ProfitRandy discusses the benefits of the extraordinarily valuable High Volume Account Report. Prioritizing Your CustomersA discussion of the perils of a cookie cutter approach when it comes to sales and service in the wholesale distribution industry. How Customer Segmentation Unlocks Hidden ProfitsBruce Merrifield of WayPoint Analytics teaches the importance of customer segmentation and the insights it can offer your distribution company. The Element of PricingIt's not necessary to compete with AmazonSupply on pricing when you've got your ordering and delivery systems, fill rates and customer service at a high level. Quantum Profit ManagementRandy MacLean introduces the core principles of QPM and illustrates how it's the most effective way to run a business. The Benefits of a Cost-to-Serve Math ProgramHave you had trouble conveying the importance of CTS to your team? Learn how this course provides an affordable and convenient educational solution. Why Come to APIC?What is the value of the APIC conference for a business, and why does it stand out above other education programs? Making Money by Giving Away ProductBruce Merrifield and Randy MacLean discuss profit strategies for wholesale distributors that will raise their cost-to-serve and profits. Webinar: How to Create a Sales Compensation Plan (pt 2)Webinar: Quantum Sales Compensation Plan Part 2 Webinar: How to Create a Sales Compensation Plan (pt 3)Webinar: Quantum Sales Compensation: Designing Your Plan Webinar: How to Create a Sales Compensation Plan (pt 4)Webinar: Quantum Sales Compensation for the Wholesale Distribution Industry: Launching Your Plan |