October 20, 2016

If You Want To Tick A Business Leader Off ...

... then tell the business leader that the business the leader manages is going through a "Losing Season".

Here's an example.
  • Last Year Net Sales = $75,000,000.
  • This Year Net Sales = $77,000,000.
  • This Year Pre-Tax Profit Percentage = 4.1%.
Using my equation, this equates to a 7-9 season.

This is a very common story in the world of catalog marketing. Several years of tepid co-op performance stunt long-term growth ... and tepid co-op performance leads to an expensive cost-per-new-customer and ultimately a low pre-tax profit percentage. The cataloger is too-married to the co-ops to get out from under the relationship ... and the relationship yields a 7-9 record ... and that's when business is good!!

In other words, the strategy is ultimately going to get the CEO fired ... just give it time.

You should hear what happens when I tell an Executive that they're performing at a 7-9 level.
  • "That can't be right! Sales grew! We're growing! We're winning."
  • "Look, I'm going to get an 80% bonus this year. We're fine."
  • "We're profitable. Lots of folks aren't profitable. Look at Sears, for instance."
  • "We haven't posted 10% pre-tax profit since 1993 - Amazon won't let you post 10% pre-tax profit because they took away all of our pricing power. It's their fault."
  • "Go back and re-score our business - we think we're an 11-5 team, and we think we have the metrics to convince you we are an 11-5 team. For instance, net promoter scores are high and customer engagement is high. Use modern metrics and you'll see that you are wrong."
Nobody wants to hear that they are failing.

But a 7-9 record is a failing record. Sure, you do some things well. But you do more things wrong.

And I get the Sears argument. So I scored Sears for the past decade. Are you ready for this? Grab a seat.
  • 2006 = 7-9.
  • 2007 = 5-11.
  • 2008 = 4-12.
  • 2009 = 4-12.
  • 2010 = 5-11.
  • 2011 = 2-14.
  • 2012 = 3-13.
  • 2013 = 3-13.
  • 2014 = 2-14.
  • 2015 = 2-14.
Oh. My. Goodness.

So, yes, your business isn't like Sears.

But your business isn't like Nordstrom, either. During the past ten years, Nordstrom posted 9 winning records, 7 playoff-caliber performances, and 1 championship-caliber performance (2006). That's borderline excellence.

An objective view of your business help set proper expectations. And for so many catalogers, we're rationalizing that 7-9 and 6-10 seasons are "good" seasons. They're not. Not even close. And we don't want to acknowledge what a 7-9 or 6-10 season means, because then we have to evaluate our role in producing a 7-9 or 6-10 season, and that's not much fun.

P.S. Hillstrom's Rebuild is available on Amazon - click here to purchase.

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