20 Practical Performance and Profit Pillars

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Fulfillment

Once you have taken the order and made the customer happy with exceptional service, you have to actually get the product to the customerfast, right, unbroken, secure and at the least cost. Fulfillment is the pillar that can bring you to your knees faster than any other. When you cant ship the product, youre out of business.

I have recently visited a company where I saw something rare and unusual. The fulfillment side of the business is run by the Vice President of Supply Chain. This person knows warehousing and pick, pack and ship. A fulfillment veteran of 30 years and clearly very competent, he described his responsibilities. At this company, supply chain is defined as having responsibility for the product all the way from selection to sourcing to warehousing to shipping to returns and reverse logistics. Clever. I had never seen the traditional role of merchandising combined with fulfillment; yet, it makes perfect sense. His job, he explained, is simply to find, buy, describe and offer the right products, make sure they are in stock when needed, ship them fast to the customers, and manage the returns and replacements as required. He has responsibility for the total supply chain. Of course, he has 30 years of niche experience and understands the products better than anyone else at that company. The value-added comes by combining his skills at merchandising and fulfillment. The customers benefit; the suppliers benefit; and the company benefits. And he is doing the job of two vice presidents.

Whether merchandising and fulfillment are separate or combined, the mastery of product forecasting, advance sourcing, rebuying, inventory control, obsolete inventory clearance, logistics and freight cost-controls, packaging, fulfillment staffing and fulfillment productivity are all components of a main structural pillar of the direct marketing company. When it all works smoothly it is a beautiful thing; when it is broken it is really ugly.

Again, it is that all-telling visit to the mens room. If its ship-shape, the warehouse will be, too. If not, there will be returns stacked to the ceiling and 48 different sized cartons when 4 would work better.

Fulfillment is not a cost-center. Fulfillment is a marketing strategy. When you have world-class fulfillment, you sell more products to more people. When you dont, you dont.

The point: Are you raising the bar on fulfillment to use it as a marketing strategy to attract and retain new customers. Fulfillment, like every other pillar, is about selling more stuff to more people any way you can.

Finance

You have to assure the financial pillar provides cash for operating, investing in the business, and growth. I have seen many, many companies that were under-capitalized; none of them were successful.

The primary use of money is to invest in new customer acquisition across as many channels as make sense for your niche. If that cardinal function is covered, the business will almost always succeed, provided the first Fourteen Pillars have been well-built.

The Finance Pillar is often a shared foundation involving institutional money or investment money. Regardless of where it comes from, it has to be advantageous to the business and it has to be readily available to meet growth opportunities, planned and unplanned. The only way around the necessity of managing relationships with the money-lenders is to be independently wealthy.

I once learned the Mantra of the Four Ms from one of the great direct marketers of our times, Tom Phillips of Phillips Publishing, who was on my board. He said, Success is built with Money, Markets, Marketing and Merchandising, and the first of these is Money. I found that to be true. I also learned from Tom one of the great, timeless finance principles: Cash now is better than cash later in every instance. I found that to also be true. And I observed one of Toms secrets for success. He had very strong CFOs who absolutely understood direct marketing. They knew more about circulation and response and AOV and net present lifetime value than any of the marketers or anyone else. Finance was a core and central pillar and the fulcrum point of the company.

The point: How are you using financein all its nuancesto further the objective of selling more stuff to more people any way you can? Finance is not a tool; it is a lever and the energy it exerts converts to lifting the business to a higher level. The larger the lever, the higher the lift. A business leaders primary responsibility is to provide an appropriate assortment of levers at all times.

Creative

Catalogs, websites, emails, inserts, infomercials, whatever; it all has to be excellent. The creative pillar is built with creative talent, channel understanding, innovation, and testing. Sometimes, being just slightly off-center helps, too.

Internally produced or outsourced, it really doesnt matter. Only the very best creative will create the very best companies. And creative is the full gamut: layout, design, copy, photography, typography, color palette, pagination, navigation, and on and on. Single channel or multichannel, it really doesnt matter. It has to be good and it has to sell more stuff to more people any way it can.

Good creative requires creative people. Catalog people. Web people. Retail display people. Search linguists. Whatever.

The Creative Pillar has been allowed to weaken, indeed, crumble a bit in recent years as we focus more and more of our energies on the online channel. The old creative has been left in place too long without the needed advances. Photography is still too often vendor supplied and catalogs have not advanced much beyond the 1990s. We have been occupied elsewhere with usability, analytics, models and Google. When I do the lengthy and often distressing 40-60 page catalog critiques, the reports are not pleasant for the owners. Most of our catalogs are just another catalog. Only rarely do I see extraordinary catalogs and, when I do, they are always from extraordinary companies.

Look back on the prior 15 pillars. If we are building a company for successful performance and profitability and have gotten this far, why would we settle for mediocre creative? Yet, we often do. We have ceased to value creative as we once did.

It is time to rethink and strengthen the Creative Pillar.

Circulation

Circulation is an art and science. It is mathematical and mystical. It is predictable and unpredictable. It requires an experienced circulation professional to manage it.

In recent years, especially with the advent of the easy solutionAbacuswe have often assigned responsibility for circulation to individuals with little experience in the art and science of list selection and contact management. In turn, these individuals have come to rely on the Black Box for decision-making and, as a consequence, new customer acquisition has, in many instances, weakened.

We are direct merchants. Circulation and all of its intricacies are our prime function. Im not going to go on and on about this; I am on record over the past five years about the importance of partnering with our Trusted Advisors, the list professionals, and recapturing this incredibly important strategic high ground as masters of our own destinies. If you do, you will excel and grow. If you dont, you will perish. Again, its all about choices. Only, this one is so obvious.

The point: The Circulation Pillarin all channelsis what sells more stuff to more people any way we can.

Strategic Planning

A common characteristic of the best direct merchants is that they actually plan where they are going. They take strategic planning seriously and they achieve a collegial understanding of the companys directions among all of the managers responsible for carrying out that plan.

The recent example of an extraordinary business-to-business multichannel company bringing together outside advisors with their management team to craft the Billion Dollar Company planand proceeding with the planforetells that companys future success. It will be a billion dollar company and in less time than expected.

The primary value of strategic planning as a pillar upon which to construct a company is that it unearths options. When many minds and many imaginations are set to the task of describing the opportunities for the future, options appear. And options offer choices.

The secondary value of strategic planning is the unified understanding of the companys future choices. When all twelve oars are pulling towards the same spot on the horizon, the boat gets there faster and without going off-course.

Strategic planning costs almost nothing. It is a non-monetary investment in thinking. Thinkinginnovative thinkingmay well be one of the most hidden, seldom deployed and valuable aspects of figuring out how to sell more stuff to more people any way you can.

Communication

There are a few great direct merchant companies that succeed in communicating, both with customers and with employees. There are far more who do not. Those that do are making a lot of money, in my experience. Those that dont are not.

The two most common failures of the bedrock foundations are lack of focus and lack of communication. They almost always exist side-by-side. Owners are often unsure of the focus and, as a result, unable to communicate the first necessary pillar: Vision. From there, it is nearly impossible to construct the remaining Nineteen Pillars.

Communication moves two directions; perhaps even omni-directional. Clearly, however, it moves from customers to company and then from company to customers. During its round trip, it revolves internally, informing and enthusing every employee with a common culture, attitude, plan, and objective answering the question How do we sell more stuff to more people any way we can?

Board of Directors/Advisors

The final pillar supporting performance and profitability is the board. Whether a formal board of directors or the informal board of advisors, it is the pillar that guides and advises from wisdom.

The board is nothing more than the modern-day continuation of the tradition of the tribal elders. Experience has enormous value. Smart leaders seek wisdom of the elders. Sounding boards, mirrors, and other eyes are essential to the decision-making process. It s good to be king, but its better to surrounded by competent Trusted Advisors.

My formula for any board is as follows: 1) a niche expert who knows your niche better than you do; 2) a direct marketing expert familiar with your channels; 3) a financial expert familiar with the world of money and financial backing; 4) an accountant with direct marketing experience; 5) a representative of the customers who buy your product; 6) a trusted, life-long personal mentor. Some include a lawyer. I dont.

Over the years I have observed and, therefore, concluded that direct merchants with a fully-furnished and fully-functioning board, where all decisions are respected and followed, are far, far more successful than the autocratic companies.

* * *

Those are my 20 Pillars for Performance and Profit. Any company that adopts these foundations will be a better company than those that do not.

As we embark on the most welcome and beneficial event of our year, the MeritDirect Co-Op, and as we are immersed in highly technical and advanced multichannel discussions, I believe someone, now and then, has to say, Wait a minute. Until we focus on these pillars, we cannot achieve the many beneficial things that are in the future no matter what the channel.

These are the elusive and all too often unsung attributes of successful business-to-business direct merchant companies called The Basics. They are important. They are the difference between the ordinary and the extraordinary.

Go forth and multiply!

Don Libey is president of Libey LLC, Cherry Hill, NJ. He can be reached at Libey LLC@Libey LLC.com

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