Good Buy or Good Bye? New Sources of Profit

Profit

As we know, profit is no longer solely defined or derived efficiently in products, services, warranties and or credit card interest gains. Today, profit pools are inclusive to “d-o-w-n-l-o-a-d-s” of apps, widgets, movies, music, games, etc. Digitalization, miniaturization, low cost glass for cloud access with wireless mobility is driving dramatic and dynamic change in profit opportunities.

Intense predatory competition is also leading to dangerous commoditization within every market place. Pressurizing margins, destroying slow moving product slugs; morphing market dreams into painful market risk. Manufacturers, frankly entire industries stand at a technology crossroads. Our heavily traveled opportunity fork in the road offers an expensive and very clear choice: “innovate to survive or search for alternative avenues for growth.”

Kinetic game changing technology onslaughts from formidable product goliaths are reshaping industry demand curves with disruptive, highly consumer demanded innovations. These companies clearly innovate to grow, innovate to survive. And these global leaders are no longer simply providers of our home, business and mobile tech lives but rather creators of our living dreams.

These competitive challenges and changes often cause a crises of confidence through corporate hallways. Causes and reveals a confluence of risk factors to best re-define and re-align towards potential growth. Demands aggressive change, kinetic investments… demands opportunity through more risk, demands a market pylon where profitable margin pools are assiduously visible, can be attained.

Of course through all this change and disruption is vast opportunity. And as we know, the very best opportunities lie in danger otherwise every brand would be successful in every market. It’s all about the pillars of successful pull-through defined as building formidable consumer demand, defined as hyper-targeting those with the will, the need and the means to vote for your product, your brand: willing to pay a few extra profitable pennies for the experience. Or it’s all about the opposite: poor consumer demand generation causing poor profits, no future; time to move on to another industry opportunity, time to lower your brand-to-price value in the language of earth scorched pricing. The four opportunity or loss pillars experienced by all brand competitors across retail and internet shelves are:

“GOOD-BUY!” The only real competitive, sustainable advantage in business is your ambient product and brand reputation known as a good buy. The promise or demise of products and brands is rapidly matured through consumer social site report cards aggregated and morphed into either more or less sales opportunities. The goal of smart marketers is to polish the mettle of your performing product line winner daily. The metric relationship between brand-product value to price-pull advantage is your greatest demand generator. Now just engine with smart promotional and awareness advertising and “here come the profits.”

“WHOOPS!” Entering a new market without mature brand recognition, without proven push and pull spinning shelf space, without product differentiation-advantage, but hyped by niggling, purse proud, cheeseparing price advantage, is difficult at best.

“TOUGH LOVE!”  You gain shelf space but product turns are nothing more than tombstones in the eyes and pocket books of consumers. In essence, you now have the largest museum of failed products on the planet, you are respectfully in the profit recession business and you cut, cut, cut your price of course destroying your margins, potentially your brand.

“GOOD-BYE!” Your forecasts are legitimately and dramatically diminished by the retail and or .com merchant based upon anemic unsustainable failure. Your price point continues to fall to try and re-engine pull. “Sorry says the merchant, your product is wasting valuable and profitable shelf space.” And then the crushing words are spoken. “Good-bye!”

As we know, retail shelf space, at least brick and mortar space (as opposed to the endless aisles available on the internet) are a fixed, highly valuable and expensive resource for both retailer and manufacturer. The pecuniary relationship between shelf push and  pull with respect to managed turns, margin and forecast metrics, competitive price drops and drive period promotional stimulants is key to ensure success.

From a merchants perspective, (your most important partner and counselor) across the cold steel of the P&L, there are several key shelf management metrics depended on to best auger potential opportunity, to best ensure a win – win successful product engagement. The following merchant principles are based upon tried and true accounting and product marketing disciplines. Best of breed merchants, true retail pantheons smartly examine and metric the following seven for mutual success:

  1. Calculate shelf space profitability in the language of space costs, product turn forecasts, product turn productivity (per square foot).
  2. Competitive line logic tied to price-profit elasticity especially with respect to consumer drive periods and competing market forces.
  3. Meticulous and logical product forecasts and on time delivery tied to promotional stimulants, profitable turns and smart shelf investments.
  4. Brand and product value differences tied to line logic between each brands product line brand positioning, pricing, item profitability, prior success or failure, brand maturity and market demand.
  5. Associated costs for selling, stocking, storing and transporting especially for new untested product categories and or brands.
  6. Incorporation of competitive price elasticity among brands in the same category, competing for the same consumer.
  7. Exam of consumer brand loyalty to determine pricing and inventory forecasts, expected inventory demand.

Highly professional merchants best auger results through a deeper profit possibility dive. This includes marginal analysis modeling and the relationship between a products share of space and its current competitive market share. Clearly geometric programming to category space allocation is a key objective across all on and off line shelf space to deliver profit maximization. Other considerations are shelf space responsiveness based upon store location, size of space, competitive throughput or lack of as well as advertising commitments to ensure traffic and sales pull through. Merchants think and know: “increases in product productivity will deliver increases in shelf space profitability.”

Disruptive global manufacturing leaders, those who are the smartest and can constantly articulate product profitability through advanced, fresh technology on retail and internet shelves will continue to thrive. They will continue to drive their once formidable competitors into new markets, into unrelated market opportunities, into tired museums of failed products and intentions.

Every day we listen sharply and learn from the urbane guidance of smart retail merchants whose goals are to always ensure win-win strategies and results. And of course we also listen to consumer social cloud discussions and product reviews where they declare loudly and often: “good-buy or good-bye!”

Peter Weedfald is author of  Green Reign Leadership available at amazon and also available at Barnes and Noble and other book retailers.


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