Working around 'bankrupt' customers

With the news that high street shop closure rate hit 14 a day in 2011, merely confirming the evidence of our own eyes, pragmatic account managers need to leave re-invention of redundant business models to politicians and the taxpayer, and instead focus upon how to work around customers’ on the brink of insolvency, whilst attempting to maintain their own solvency…

If your customer goes bust

Bearing in mind that if a customer owing £150k to a supplier on a 5% net margin goes bust, then the supplier needs incremental sales of £3m to recover the loss, it is obviously in NAMs’ interest to improve their ability to recognise the signs of a customer in financial distress and take adequate precautions. How to spot the signs

Stress-auditing your customer-portfolio

In practice, this means assessing the financial health of the customer portfolio and conducting ‘what-ifs’ on possible casualties.  If replacement sales cannot be found via the stronger players or alternative channels, then the company will need to reduce forecasts and make appropriate budget adjustments.

For realistic NAMs, this unprecedented environment whilst painful, is simply another market scenario, and business is about being able to perform as well as, or better than competitors operating in the same market conditions.

Need for an 'opportunity-attitude'

Despite the fact that confronting ‘doom and gloom’ may be seen as demotivating, we sincerely believe that in the current climate, the NAM role in 2012 is about being able to face up to and optimise reality, failing which someone will do it on their behalf.  It is about being able to perform as well as, or better than, equivalent companies in the marketplace, whatever the circumstances…

As always, business survival and success is about achieving a balance of risk and reward, measured in terms of achieving an adequate profit on the money put at risk in a business.  In other words, being able to achieve at least 15% return on capital employed.  This is driven by net margin and rate of capital turn.  As you know, businesses are either high margin coupled with relatively slow stockturn (cosmetics) or narrow margin and fast stockturn (dairy products), and the key for NAMs is to understand their business model and drive it appropriately.  Incidentally, comparisons with equivalent companies in supply and retail can be made via Companies House or other open domain data.

Working realistically with business reality 

Either way, it is crucial that suppliers find ways of working around the problem of dealing with companies on the brink of liquidation.  The resultant mind-focus will make NAMs very decisive in terms of realistic assessment of customer risk, more sparing in their application of trade funding, more conscious of the incremental sales required to recover investment in their customers and ruthless in their demands for demonstrable compliance in a fair-share partnership.

In other words, if you can make it in this environment, nothing, repeat nothing, will ever be more challenging….or satisfying

Pound Shop Innovation - Moves to the Mainstream?

Given that Marks & Spencer started as a ‘pound shop’ (Penny Bazaar, 1894) and Woolworths followed as a ‘sixpenny store’, it is perhaps valuable to seek signs of innovative pound shop retailing as a pointer for the future, and perhaps move this emerging sector closer to our core trade strategies?   

Key pound shop moves include:

-       Pound shop launches door-to-door home deliveries for a pound a trip

-       Mobile Pound shop sets up stall at local events, offering to recycle ‘your old £10 + £20 notes for something you can use’! Also have a flourishing online pound site 

-       Pound shop van travelling to outlying villages (see pic above)

-       Around A Pound (Newry, N.I.) have a pound shop on eBay and sponsor motorcycle racing

-       East Hull Community transport offering transport at £1 a trip   

-       Amazon offering Super Saver Delivery Filler Items (around a pound)   

Time for someone to ignore the numbers, try a BOGOF and really stop the whole process in its tracks?

For a detailed treatment of the rise of pound shops see Kamcity Library   

Incidentally, we found a number of independent pound shops branding themselves as ‘Around A Pound’. Branding experts will foresee some issues here in that the label will either become generic, or may lead to possible passing-off charges being levelled at rivals.

In which case, this may cause some enterprising legal firms to combat ‘Tesco law’ by offering cut-price legal advice at a pound-a-pop?

Have a legal pig-flying weekend, from the NamNews Team!

Making the 'Size of Deal on the Table' Count in Negotiation?

Given the current financial pressures in the market, no deal with a customer can/should be regarded as ‘one-off’. In fact, all arrangements with a buyer have a knock-on effect and should be factored into the total business performance for each party. By placing the deal in a proper market context, it is easier to add value on completion and ensure a greater degree of compliance.  

In practice it means making the following upfront calculations:

Customer’s share of the category (£,%)

Establishing the customer’s share of the category allows us to allocate an appropriate level of preparation and investment, with a realistic view of both upside potential and consequences of getting it wrong…

Customer’s share of our business (£, %)

Again, knowing that a customer accounts for 15%, rather than 1% of our business has to help us to prioritise all aspects of the relationship and quantify the impact on our sales and net profit, for the whole team...

Our share of their business (£, %)

Realising that we account for less than 0.001% of the customer's business can explain some of the issues with getting appointments, and difficulties in making the buyer listen, but can help to reduce  arrogance-levels on the part of strong branded manufacturers attempting to break into a new channel...

Our share of their category (£, %)

However, when we have 20+% of a customer’s definition of a category, it is obviously useful to move the conversation quickly from share of business to share of category in order to restore our confidence and buyer-appeal.

Size of the deal for them (Sales, Gross Profit)

Only at this stage is it appropriate to calculate specific dimensions of the deal in terms of sales and gross profit. In other words, if a customer is buying £200,000 from us and resells for £250,000, making a 20% gross profit, this £50k limits on the size of the buyer’s potential concessions available for negotiation.

Size of the deal for us (Sales, Gross Profit)

Knowing that our ex-factory cost is 50% of the £200,000 sold to the buyer, tells us that we have a maximum pool of £100k in discretionary funds from which to make concessions, and can provide a basis for fair-share negotiation...  

If the above process still seems over-the-top for a ‘one-off’ deal, then going in blind will probably result in a ‘one-off’ outcome, adding to our overall uncertainty/stress-levels, and doing little to optimise the relationship in these already uncertain times.

As always, your call….

Definition of an expert

My definition of an expert in any field is a person who knows enough about what's really going on to be scared. 

PJ Plauger

For dog’s ears only: TV ‘Viewer’ involvement…

The advert for Baker’s dog food using an ultra high-pitched soundtrack got its UK premiere on 13 February, during Emmerdale. The Beeb monitored the reactions of two mixed-breed C1 viewers at their home at Hayes in Middlesex. The first 10 seconds threatened to be a complete let down, but then barking and mild snarling began to engulf the sitting room. Initial post-advert sales results are not yet available…

Caution: A pet-food marketing pal of mine Ray Wilsmer tried this idea many years ago using a Great Dane lying asleep on a couch in front of the TV. Ray crouched behind the TV with a high-pitched dog-whistle which he blew several times during screening, without managing to awaken the dog…

Eventually Ray crept behind the couch, leaned over, positioned the whistle on the dog’s ear and blew with such vigour that the dog committed a massive social indiscretion all over the couch…

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Working with Love-blindness, a question of context?

A psychology book on How Pleasure Works reveals that most people won't notice the difference between paté and dog food, so long as the latter is suitably presented with the right sort of garnish. And as for our ability to discriminate wine, even experts may confuse a white wine with a red when it is served at room temperature in a dark glass. And we'll enjoy soggy old potato crisps, it turns out, if our chewing is accompanied (over head phones) by the satisfying sound of crunching. In the same way it is difficult to tell the difference between holding hands with someone we love and holding hands with a stranger, unless we can see them.

The importance of context

Obviously, context matters, and so do our attitudes and expectations, and all can be coloured by analysis…

So too a so-called ‘one-off’ deal with a customer. Given the unknown consequences of any agreement with even the most appealing buyer, it is important to convert uncertainty (unknown) into risk (a question of odds) by placing all deals in the context of the overall market i.e. understand and compare the profitability of the customer with other customers, starting with the major multiples. 

Only with this ‘big picture context can we remove the blindfold, explore the implications, and quantify the risk of exchanging values with the beloved buyer.  

All else is detail….

Calorie-burn via the Eat Fit Cutlery Set

Add another dimension to your multitasking mealtime workouts?

At £69.99 for the knife (1kg) & fork (1kg), this cutlery/dumbbell mash up is designed for fitness fans with a sense of humour…
It also illustrates the essence of creativity, the random combination of entirely different concepts, well executed...
All it requires is a suitable catchphrase to propel it into the Adslogan Hall of Fame...
So  much for the easy part..
Time to make an appointment with Tesco and do some heavy lifting?

Getting the numbers right in logistics, like Walmart

                                                                The shrinking army...

Napoleon's invasion of Russia 200 years ago illustrates just how badly things can go wrong when the supply chain implications of moving a 400,000-man army are underestimated.

It is not enough just to get your forces from A to B - you have to keep them fed and watered as they go, or suffer the 95% casualty rate experienced by Napoleon on the Paris-Moscow back-haul trip.

Napoleon planned to take his supplies with him.

This was a logistical operation of quite staggering proportions, requiring a wagon train of no fewer than 26 battalions - eight equipped with 600 light and medium wagons each, and the rest with 252 four-horse wagons capable of carrying 1.36 tonnes (a grand total of 9,300 wagons).

To pull these wagons and to transport his cavalry and artillery he had gathered 250,000 horses, all of which required 9kg (20lbs) of forage a day.

And yet the figures did not add up. (More)

Walmart was different

We all put Walmart’s success down to discounting, but it was the company’s specialisation in logistics — borne out through obsessions with efficiency, information and distribution that made Walmart what it is today.

Fully 60% of the entire U.S. population lives within 5 miles of a Wal-Mart location and 96% are within 20 miles, all co-ordinated via a data warehouse as big as the Pentagon…

Obsession with individual stores’ weekly performance data

Successful EDLP was driven by obsession with individual stores’ weekly performance data, aimed at rooting out inefficiencies, either within their own operations or those of suppliers. Through this sort of detailed and obsessive scrutiny, Walmart concluded that they themselves could handle most external operations better, cheaper and faster, causing them to identify logistics as their primary expertise. 

See results in terms of fuel efficiency, milk transport, Sustainable Product Index and LED lighting design-upgrades here.

Logistics just a means to an end

For Walton however, this logistical capacity was largely a means to an end. About the company's extensive data network, he wrote: “What I like about it is the kind of information we can pull out of it on a moment’s notice — all those numbers.”

However, the founder remained focused only on how logistics affected performance — measured in profit....

Why not try a right-numbers weekend, from the NamNews Team?