March 04, 2015

Profit And The Partner Dashboard

Since I started going down this path after incessant cataloger complaints about co-op productivity declines, I thought I'd show you how one might evaluate the co-ops (and ultimately, every other vendor) within our Vendor Leadership Management framework.

I am not concerned with absolute profit improvement. I care about improvement. If a co-op was wildly unprofitable last year and becomes marginally unprofitable this year, the co-op made an improvement, and deserves to be rewarded for that - not necessarily with increased circulation, but certainly within the constraints of the framework.

In the table above, co-op #1 failed miserably - the loss more than tripled, the ad-to-demand ratio increased by nearly eight points. This is not acceptable. You have to sit down with this co-op and make it clear that this is unacceptable, that there are three co-ops that compete with them, and one of the co-ops (#4) is exhibiting improved performance. Let co-op #1 know that you'll be shifting circulation out of their models and into the models generated by #4.

Co-op #1 is going to have a hissy-fit, folks. They'll say that their performance got worse because you increased circulation, and because you already use more of their names than everybody else. They're going to persecute you for being unfair. Tell them to stop grumbling. Circulation increased for two other co-ops, and their performance either improved or degraded at a slower rate.

I use a score of "50" as average ... so if productivity is the same, year-over-year, then I assign a score of "50". Look at co-op #4 ... they exhibited increased productivity, and as a result, I gave them a score of "60". Co-op #1, unfortunately, was given a score of "5" for the terrible performance they generated.

Share this data with all of your vendor partners. I know, I know, folks within your company don't want to you to share "confidential" data - they'd rather you held vendors accountable without ever telling them if what they do works or not. It's time to leverage your leadership skills - share the data!

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