Everything solved

California teaming with promise

29 Aug 08

I first met Bob Mairena, the chief of Office Solutions (OS) at the SPRichards Advantage conference in San Diego last month. I heard about the rapid progress of this Orange County dealer when enquiring about the progressive members of the TriMega group. I asked if I could visit to do a Proficiency Profile on his company and at first, he wasn't keen on the publicity.

I'm glad I persisted and in mid-August, I went along to their Yorba Linda facility to meet the VP of sales and marketing Mary Greenwood. I was delighted to discover that OS are a tremendous example of the new eco-productivity provider model, I have been banging on about for many years. OS bore an uncanny resemblance to the new breed of best practice PROPS (Providers of Office Productivity Solutions) that are rapidly emerging in the new office productivity industry.

OS are a $30m in sales, stockless dealer established in 1984 serving the Southern California market south of LA. They are first call with United Stationers and are members of the TriMega buying group. The have grown rapidly in recent years to employ 90 employees  mainly engaged in sales and distribution. They have just opened new offices and a distribution point in San Diego  to create a stronger base in the region. 2008 has been their slowest year to date, hit badly by the real estate and credit crunch in California.

We discussed the key market differentials of OS. Greenwood was clear:

• Sustainability and environmental practices
• Personalized customer service
• Single source of a wide category of products
• Customer service that is measurable.

 Sustainability

OS offer a complete recycling service for their customers. They collect packaging, computer hardware/TV's, cell-phones/chargers, printer cartridges and batteries, then sort by recycler when items are returned. OS campaign to reduce carbon emissions and provide information to enable customers to measure their carbon footprint and how to reduce emissions in their everyday workings.

In their ethical drive OS works closely with local communities and charities. Bob Mariena was one of the initial founders  and first president of META (Making Education The Answer) mentoring Hispanic youth in SoCal. Bob also serves on the board of St. Joseph's Ballet a nonprofit dance academy for low income youths. OS also supports the City of Hope, the biomedical research and treatment institute;

Personalized customer service

OS organise dedicated customer service teams with the 25 outside sales representatives backed up by 9 customer service reps and 19 truck drivers. They provide specialist service in office supplies, IT consumables, furniture and interiors, FM supplies and print management,

Single Source Systems

OS has expanded its portfolio of products and can offer 30,000 items backed by knowledgeable local service teams and United's LA RDC. One local source of a wide source of original branded products, complete with next day delivery and eco-collection service gives OS a massive advantage in Southern California v. big-box players.

OS has just upgraded its webstore to a new generation version and now receives 40% of sales online. This is a major advance and promises to drive increased sales volume and order size.

OS has also upgraded its marketing and promotional programs since Greenwood's arrival and they now work closely with manufacturers directly to co-ordinate the best user offer and incentive programs for users and salespeople.

Customer service measurements

They are passionate about customer service and target and monitor anything they can be measured and proved: telephone answering time e.g. 6 seconds to reach a human contact, voicemail return time, query turnaround time and next day delivery reliability.

OS conduct customer surveys every 2 years and do individual service performance reviews with customers on a quarterly basis.

This is high touch strategy is not new but the comprehensiveness of the follow through is impressive and up there with best practice in the industry. Whilst other top performers boast $400,000 sales/employee ratios, OS has invested more in customer service which has lowered their productivity.

The Future

OS will be investing in CRM systems and emarketing programmes to drive more users to the new webstore. The OS teams commitment to providing personalized service across an expanding portfolio of office productivity services is a winning formula. Add to this the genuine sustainability drive and we can see Office Solutions becoming the #1 Office Productivity provider in Southern California.

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BuyOnlineNow tops US productivity league

The high ticket…
high growth performer

The rapidly emerging search marketer
and original brand champion

25 Jul 08

What is it with the State of Minnesota and leading US companies? There are 19 Fortune 500 companies there including retail leaders Best Buy and Target. In the fast growth health sector Medtronic, United Health and Ecolab and financial powerhouses Ameriprise, Travelers and US Bancorp. In OP manufacturing the mighty 3M and Smead. In OP superdealer community S&T Office, Innovative Office Solutions , Bertelsons…and now BuyOnlineNow.

BuyOnlineNow.com (BON) exploded onto the scene this year. Until recently many of the OP industry's leading manufacturers were not aware of the pure internet player from Rochester (MN) that relied primarily on the wholesale services of United Stationers and SPRichards. That is about to change BIG time as they realise what a powerful OEM brand ally they can now partner with…when all the market talk has been about own brand.

BON came to my notice this year when I read a profile in Simon De Groot's Independent Dealer ezine. I was impressed with their rapid growth and wanted to find out more. Bob Herman (pic above) is the CEO, an ex-technology professional who started the business back in 2000. His inspiration was the legendary Irwin Helford and he wanted to create a special company with the same degree of marketing prowess he interpreted from Viking's huge success in direct marketing.

BON recorded sales of $18M in 2007 and this year is on course to achieve $30m…up a massive 66%. Sales per employee the basic productivity measure (including an add back adjustment for truck drivers) is $578,000…the best we have recorded in the USA. So how do they do it? What makes them different? What are their measures of success?

The first thing I was struck by in speaking with Bob over the telephone, was his grasp of the numbers; his strong sense of customer orientation and making it easy for them to 'buy online now'. In other words to make the 'browse and buy' web experience as simple as possible.

A power of a specialist

BON has 50,000 active customers with furniture unusually 43%/sales, equipment 14%/sales and office supplies relatively low at 35%. New areas of development include breakroom and jan-san supplies which has risen rapidly to 8%/sales.

This specialist reputation is growing and being rewarded in BON's high average order values (AOV's). The AOV's of most  internet OP resellers is in the region $100-$150. BON' AOV is $200+ reflecting the higher ticket merchandise. Interestingly, a quarter of customers place orders via telephone, and here customers spend an AOV of $500+. Moreover, repeat customers…2 orders plus who represented a third of total sales placed AOV's of $1100.

This is a great endorsement for the power of the human touch on high ticket items. Taking a leaf out of the irwin's 'personalisation' playbook, even though you don't meet the customer face-to-face, create the next best thing via an easy 'personal' touch via the experience on the telephone or the web.

BON partners with some of the great brand names of our industry. These include: HON, 3M, Fellowes, Global, Safco, Acco Brands and Avery. Intersetingly, it also supports innovative manufacturers who may not be getting enough market exposure e,g, Lion Office Products. There are up to 20 manufacturing partners at the moment and this is expected to rise rapidly now that they realise that Bob is indeed an original brand champion.

In fact, commodity products, like paper and ink cartridges, are only a small percentage of overall sales with the clear focus on being a specialist office solutions source rather than a regular OP reseller.

The business philosophy is simple. Create an easy, simple 'browse and buy' experience that 'you would wish to enjoy yourself'. No distractions, no switch sells, no accessories…just make it easy to find what the shopper is looking for, with the proper supporting information in user friendly language to reassure the shopper…and then speed to the check out. Pricing is positioned competitively.

Technology edge

BON's key market differential is facilitated by a fast and highly functional webstore design. Bob employs a team of 9 IT developers to ensure that he maintains this cutting edge. This is a key advantage which we feel will be progressively realised as they continuously upgrade the user experience going forward.

BON has made rapid strides with its highly focused specialist model and plans for this to continue at the same rapid pace. Bob is targetting $100m by 2011…even a supreme optimist like me will be impressed, but not surprised if he pulls it off.

When we discussed key measures of the BON business Average Order Value and customer service reliability were paramount in Bob's mind. They track execution from acknowledgement to dispatch to delivery keeping customer informed at each stage. At the webstore browsers can see straight away the 5 Star Customer Rating Service continuously updated rates BON an impressive 4.8/5.

***Manufacturers pay attention…tap into your new brand champion, but make sure your end user marketing message resonates and captures the imagination of users. Too many ads fail to entice, engage or are simply not memorable…the important link from airport poster ad to web browsing.

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The inside story on the
BREAKTHROUGH UK Marketer of 2008

Eco-Champion Commercial

A living laboratory of eco-productivity

16 July 08

Last week we travelled to meet the #1 brother and sister business partnership in the UK OP industry, Arthur Hindmarch and Simone Mann at the burgeoning superdealer Commercial Group of Cheltenham in beautiful Gloucestershire.

Commercial Group won the BREAKTHROUGH UK Marketer of the Year Award for 2008 and the following is an updated profile on the progress of the UK's best practice example of an office productivity dealer in action.

About 10 years ago, Dudley Stationery/US Office Products met with the  Commercial  team with a view to a takeover. Their clumsy approach proved to be the inspiration that drove the partnership, Arthur, Simone and technology chief Alastair Adams to create the UK's leading and most progressive office productivity dealer.

Goal: The complete office productivity solution'

Commercial started business about 18 years ago and focused primarily on direct telephone stationery sales in the south west midlands region. The Dudley approach caused the inexperienced team to check out what it would take to build a Dudley equivalent themselves. They studied the OP market hard and set about creating a new model in an intelligent way. They questioned all the basic tenets and called upon all the experience help available to them. Arthur's father Michael provided invaluable help during this phase drawing on his extensive knowledge and stationery dealer experience.

They decided early on that providing  'the complete office productivity solution' was the ultimate goal and set about achieving this step by step. Early on in the planning stages it was decided that Simone, the ex-Olympic standard backstroke swimmer, would lead the development of the office supplies division.

Building on a foundation of SMB/SME (10-500 employees) customers serviced by outbound teleservice Simone started to look seriously at how to win contract stationery business. One major block was their heavy dependence on the use of wholesalers. How could they compete buying at wholesale prices?

Stockless stars

Commercial's main wholesaler at the time was Kingfield, so they consulted with the then chief Alan Hickman about how to tackle the contract stationery market together."We decided to compete aggressively, share cost information, establish the winning market price and share the margin…a true partnership approach" explained Arthur.

"It was all new business for Commercial and Kingfield (hereafter referred to as Vow) so there was little to be lost and much experience and knowledge to be gained. We developed better presentation methods, slick matrix pricing models, improved supplies management systems and custom reporting. We were on a steep learning curve." stated Simone.

"We then set about streamlining and automating logistics. We sub-contracted the stocking and warehousing to Vow. Vow deliver to our warehouse in Cheltenham or direct to our clients. When they deliver on our behalf the vans, the drivers and the delivery documentation take on the Commercial brand image," said Simone.

We carry minimal stock and have involved Vow as our partners in all aspects of our growth and development. This has created a number of innovations which has enabled Vow to introduce new services to their dealer network e.g PACT contract pricing, the Rapide direct delivery service and the OPIPS internet solution.

Commercial tops £25M ($50M) in sales

Commercial has grown rapidly over recent years and now services 300 'contract' clients on a national basis plus 1000 SME customers. Office supplies sales have grown rapidly to £19M. What is more the stockless model has boosted productivity to £217,000 ($435,000) per employee. Total group sales are now £25M ($50M)  with 75% of orders processed online further boosting productivity performance.

"Simone has done a terrific job in driving the office supplies division to new heights each year. Our excellent service and deep relationships with our contract system clients means that we can reach beyond the buyer to introduce new ideas and services which help their executives focus productively. We conduct regular business reviews with customers which allows freer communications and trust which proves invaluable when defending attacks from the power channel players", enthused Arthur.

Bluecare monitoring

Arthur himself, a true entrepreneur like his father, also excels in the sporting life and is a keen water-skier. Arthur focuses on innovation and development projects, helping Simone to improve the Vow service model and establishing the business interiors service currently a modest £750,000 business. "Simone is the real sales and marketing champion" says Arthur, "I focus on the investments going forward".

Commercial's office technology and servicing division was established 18 years ago under the leadership of director, Alastair Adams. The division is now a £6M business including Sharp copiers, Citrix and Appsense technology solutions.

A new feature which really sets Commercial apart from most office dealers is their network solutions and technology monitoring service.

The new control centre provides a technology monitoring service branded Bluecare. Here systems installations made by Commercial plus many more customers own systems are continuously checked to avoid downtime, identify faults together with remotely controlled remedial action. A true innovation which has enhanced customer's confidence in Commercial way beyond the supply of paperclips.

The living laboratory of eco-productivity

Commercial provides  a real insight into the future model of an office productivity dealer…the PROP (Provider of Office Productivity – full details in Office Megatrends 2008). The investment in smart offices, fitness and refreshment areas, up to the minute business interior environments and of course the "space-age" Bluecare control centre (see below) make Commercial a living laboratory of office productivity.

In February 2007 the company embarked on an ambitious three-year plan to reduce its total annual emissions of 1,078 tonnes of greenhouse gases by 75%. Accomplishing that means tackling its fleet of 54 company cars, 12 vans and 13 grey-fleet vehicles. Including commuting mileage, transport accounted for an astonishing 89% of Commercial Group's emissions. The Commercial  fleet was switched to run on waste vegetable oilbased biodiesel - 'it's not an agrofuel, but made from products that would have been destined for landfill,' Simone adds - and the company installed a bunkered fuelling station at its Cheltenham headquarters which is supplied with locally sourced biodiesel.

The group is aiming to cut over 700 tonnes of CO2 emissions from its fleet operations by 2010 and one year following its green fleet review,
'We have invested to do this. New vehicles and facilities cost money. But I believe that within the three-year programme we will see our investment back with a profit. I believe we will see savings to the tune of around £50,000 per annum' stated Simone.
Open House
All customers are encouraged to visit and experience the wonderful hospitality and enjoy an insight into how offices will look going forward. The people are buzzing in an open environment as Arthur proudly shows visitors around…pausing to ask pointed questions and introduce everybody.

One thing visiting customers won't see is office supplies stock…apart from a couple of pallets of paper there is none…a far cry from the stocking imperative of yesteryear when customers were taken round boring warehouses to see stock on shelves. Commercial introduces customers to the people… the real service providers…the living solution not the process.

Yes, Commercial is an exceptional example of tomorrow's dealer...a mini-model version version to match strides with the trailblazing WBMason in the USA (see previous profile).

peter@proficiencyindex.com

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Sargent Simplicity

Fascinating interview with the
OP industry's most admired CEO

19 June 08

Last Thursday, I was privileged to visit the chief of the OP world's most admired reseller…Ron Sargent of Staples. My sense of timing was immaculate and coincidental. The day before Staples had inked the deal to acquire Corporate Express for $4.8Bn (inc debt).

The new combo will bring sales in 2008 to around $28Bn…$16Bn in delivery, making the 'retailer' tag the minority share of sales for the first time. My purpose was to enquire about his philosophies, his mantra, the driving forces, the current and future trends in what we both agreed is a fantastic marketplace.

A native of Fort Thomas, Kentucky, he was educated at Harvard and received an MBA in Business Administration.

Sargent is the son of a mechanic who ran his cars to reach 100,000 miles before changing. Out of respect to his father he purchased a Camry in 1993 and decided to run it for 200,000…today the mileage is rapidly approaching that mark at 190,000+ and Ron has a decision to make.

People…people…people

We discussed the Staples advantages in the marketplace today and moving forward:

First on the list was a fanatical focus on the customer.  Everything starts and ends with the customer. Considerable energy and research continues to be invested in understanding what they want…then gearing everything to achieve customer satisfaction.

The #1 KPI that Sargent monitors by store or by service location is the Customer Service Index or 'CSat report' which measures fulfilment, after service queries. "If CSat performance ratios are high, sales and profitability generally look after themselves" said Sargent.

Secondly, developing and nurturing talented people is crucial. "We have a great blend of youth and experience in the team. In fact, the top 50 executives in Staples have been with the company for an average of 12 of its 23 year history.

Prominent leaders like Mike Miles the COO, Joe Doody head of the delivery business, Jay Baitler the contract business chief, and  John Mahoney the CFO have all served as hands-on examples for over 12 years in what is a remarkably successful business.

We talked briefly about the turnaround in Europe and particularly the UK. As is his self critical nature, Sargent admitted that "we got it wrong". Up until last year, we struggled to make money and the OfficeWorld integration took much longer than planned.

Last year we took on Peter Birks to head up UK Retail, after he had departed Office Depot. The effect has been fantastic with double digit growth and major steps taken towards our 7.5%/sales profit goal.

Philosophy

Most leaders have philosophies that become guiding principles in determining success. Sargent's quickly stated that 'simplicity' and 'making it easy for customers to get what they want' light the way forward for Staples.

The 'That was easy' tagline has worked marvellously in communicating with customers and with employees. It is a classic line which captures the emotion of satisfied customers and provides a simple mission statement for employees. Brilliant, and something that creative agencies would do well to note, rather then the nebulous stuff they often come out with.

The "Easy" button which sits on customers desks and when pressed responds with a "That was easy" squawk has been a revelation. Over 3 million have been sold at $5 each, with the proceeds going to the Boys and Girls Clubs of the USA.

"Move forward 20 miles/day…keep making progress" that's our relentless mentality

The future is bright

We discussed the OP market and future trends.

Sargent believed there would be more consolidation in the industry at manufacturer and distribution level. The takeover of CXP from 1 July would mean that Staples would be closing on $30Bn in sales during 2009, twice the level of Office Depot, and given their downward spiral, almost 4x OfficeMax's sales.

Sargent wouldn't comment on my prediction that he should follow up with the acquisition of Lyreco, now that it was clear they were for sale with a $2.5Bn price tag. I still feel it will happen though, once they have digested CXP in Europe.

The second trend that Staples was majoring was the development of own brand. This had been a major success story with sales in excess of 30%/total mix. Not only were Staples covering the everyday brands, they were investing heavily in sub premium brands, like the new 'M' brand. This range will cover stylish stationery, filing accessories and luggage.

In answer to the inevitable question of conflict and competition with its major suppliers, Sargent was clear: "We will always support innovative manufacturers…we will not squeeze space in favour of our own brands… we monitor sales returns/square foot on merchandising space and discuss solutions with our manufacturing partners" were just some of his responses.

Mastering Information technology was Sargent's third trend. I took this as technology in embracing ecommerce developments and product developments in terms of gaining productivity in the office. Certainly Staples position as the #2 internet site behind Amazon has proven Staples ability to keep pace with ease of use IT with their webstore which in the delivery business represented 77% of volume in Q1'08 or $5.6Bn in total in 2007.

In addition we reported on Staples investment in warehouse handling robots to improve speed and accuracy in order processing.

In answer to my question about the future of the independent dealer Sargent was positive. He related the story about the widespread view in the 90's that dealers were dead or dying. Yes there was a fall from 14000 dealers in the USA in the 80's down to 5000 in the late 90's. Today of course, that number has increased slightly and dealers are showing a renewed energy to grow. Sargent added a crucial rider: "Dealers will thrive if they embrace ecommerce and open webstores".

Jack Miller at Quill the US mail order house, who were acquired in the early 2000's was a tremendous force too. Jack has now retired, but his extended family lives on in Quill, now Staples most profitable business. Also in mail order of course, Sargent fully appreciated the genius of Irwin Helford at Viking.

In the manufacturing community, Sargent was very respectful of the innovators and gave special mention to Jamie Fellowes at Fellowes…Mr. Integrity and the legendary Jess Baum at Avery Dennison.

Outside influences include Jim Collins author of best sellers 'Built to Last' and motre recently 'Good to Great'.

We got Soul
Another example os Staples innovation and pulling things together into a cohesive whole is the Soul programme. "It reflects our commitment to corporate responsibility. It's a holistic approach to business that recognizes the close connection between our financial success and our desire to make a positive impact on our associates, communities, and the planet by joining together the following areas: diversity, the environment, our community, and ethics. It's how we do business—that's Staples Soul." described Sargent.

These eco and ethical initiatives are trail blazing and best encapsulated in their commitment to this programme.

CRM the key to success

One of main features of Sargent's quarterly webcasts is his reference to "share of wallet" when referring to progress with the delivery businesses. He recalled the early days when customer relationship management (CRM) was introduced as a means of driving new category sales with existing accounts.

Tom Stemberg and he were discussing ways of communicating more effectively with B2B customers and decided the most effective means was via databased marketing...building profiles, identifying gaps by determining potential spends in each product category.

"Most definitely one of the keys to Staples success" enthused Sargent. What gets measured gets done!

We discussed integration options…again this was a topic under priority review, and therefore "no comment". We have expressed the view that apart from CXP's huge presence in Australia and New Zealand, the smart move would be to overlay the highly respected Staples brand asap in Europe and USA.
Boomtown Boston Best
Early on in our conversation, we discussed playfully his conflict of interest between the NBA (basketball) finalists: Boston Celtics who at that point were 2-1 up against the LA Lakers, who play at the Staples Center in LA. Ron answered diplomatically, "I'd like the series to go to 7 games" to maximise the PR!

Celtics went on to crush Lakers 131-92 in the 6^th game. This means that in sports Boston is well up there with Red Sox, the current world champions in baseball and New England Patriots, after an unbeaten season just losing in the Superbowl to NY Giants.

Apart from sports champions of course, Boston is now home to the OP world's champion reseller Staples, and the #1 independent megadealer in the US W.B.Mason, who of course sponsor the Red Sox.

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Fortune Magazine Interview
HP's new hero Hurd

Why HP's EDS deal looks like a smart move

By Jim Fortt, Fortune magazine

16 Jun 08
We're sitting under a canopy of trees on the patio outside Mark Hurd's office, and the man looks ready to hit someone. Earlier in the week, when word leaked out that Hewlett-Packard planned to buy EDS for $13.9 billion, a chorus of Wall Street analysts started second-guessing the deal - and by extension, Hurd's judgment as HP's CEO.

EDS has too many expensive employees, went the conventional wisdom. It's less profitable than HP. Its culture is broken. An acquisition will only drag HP down. That the pundits aren't cutting him more slack clearly irritates him."I already know the math," Hurd says, trying to keep his voice down. He's about to host a lunch for HP's board to meet EDS chief Ron Rittenmeyer, and the group is just out of earshot. He continues in his emphatic whisper: "This work will get done."

Truth be told, maybe Hurd has earned the benefit of the doubt. After all, he has pulled off a remarkable three-year turnaround that has made HP the biggest tech company on earth - $104 billion in sales last year. Part of doing that was pulling off acquisitions, including HP's $24 billion purchase of Compaq (which was even bigger than EDS). No, he didn't come up with that deal - his predecessor, Carly Fiorina, did but he made it work.

Almost since the day he arrived at HP, Hurd and two deputies - Ann Livermore, head of enterprise business, and Shane Robison, the strategy chief - have been discussing ways to radically expand sales to big corporations, and EDS does that nicely. That's not the whole plan, of course; HP has a huge and growing consumer side too. "When you look at the total opportunity for us, it's somewhere north of $1.2 trillion. The consumer's a big piece of that," Hurd says. In fact, no other tech company offers a broader array of products to both companies and consumers. The issue really is shoring up both sides of that equation.

Back to the enterprise-technology side for a bit. Servers, big hardware, expensive software and services - the best way to move that kind of product is to have an army of consultants in your employ, which is precisely what companies like EDS, Accenture, CapGemini, and others  have. And if you're an IBM or an HP and actually make some of the gear as well, you get paid twice: once for consulting advice and again for equipment.

Before he can start serving up IT value meals, however, Hurd will have to bend EDS to his will, and that won't be easy. Long before Rittenmeyer took over last summer, EDS had fallen from its swashbuckling glory days back when H. Ross Perot, its famous founder, ran the place.

Hurd faced a similar challenge when he arrived at HP. The company had drifted from the course set by its founders, Bill Hewlett and Dave Packard, a philosophy that came to be called the "HP Way." The pair were renowned for rewarding employees with perks like profit sharing, flextime, and tuition assistance, but they also believed in holding managers accountable for their numbers. Growth and profits came first. By the time Hurd arrived, maybe not so much.

To change things, Hurd has imposed a hardheadedness that Bill and Dave would applaud. He laid off 15,000 employees in his first year on the job. To restore accountability, he gave executives more control over their budgets but also tougher standards for managing them: They must cut costs from slower businesses like black-and- white laser printers and invest the savings in fast growing areas.

Top execs can expect Hurd to interrogate them on minute details of their performance, question their projections, then set them loose to solve problems. "We're kind of taking the handcuffs off - we had a lot of handcuffs on before," says Dan Forlenza, a VP in the PC division.

A big part of the cultural change Hurd is trying to ram through is improving consumer marketing, which hasn't been HP's strongest suit. (Old joke in Silicon Valley: If HP had invented sushi, it would have called it "cold, dead fish.") That means better HP ads - and possibly even HP retail. The company has been working up concept spaces that look a lot like Apple Stores, down to the white décor. Is that the future? Will HP open its own stores?

Not quite. To avoid straining relationships with retailers, executive VP Todd Bradley and PC marketing head Satjiv Chahil are experimenting with boutiques inside the places people already shop - essentially the strategy Steve Jobs tried (and ditched) before building his own retail empire. HP's retail so far has been a limited engagement: A small U.S. electronics chain, Micro Center, is opening HP minishops; a higher-profile test will begin in August, when an HP boutique opens in Harrods in London. And there is actually one standalone HP store - but it's run by a third party and is in South Africa.

Whatever happens with the retail effort, what impresses (non-Wall Street) observers like Andreessen is that Hurd has his huge company moving with agility and taking some risks. "People who like being efficient and like winning tend to like working for Mark," says Andreessen. "He's injected the energy and discipline the company needed to come back." Back on the patio, that energy and abundance are set to maximum. But lunch is about to begin, and Hurd dials down a notch. Before getting up to join Rittenmeyer and the board, he smiles. "As you can see," he says, "I'm pretty motivated." 

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9 Jun 08
During a hectic stretch in the waning days of May, Vyomesh Joshi (VJ), Hewlett-Packard's high-energy printing chief, was darting around Europe and the Middle East. On May 29, he was in Düsseldorf, Germany, to unveil a line of high-end machines aimed at newspapers and publishers. Within days, Joshi was off to Dubai to promote HP's printers for the reams of pages consumers are expected to print as the booming city gets wired for broadband. HP will announce a batch of three more HP printers in New York tomorrow.

If the jet-setting and product announcements convey a sense of urgency, they should. HP's consumer printer sales have declined four of the past five quarters, including a 3% drop in the three-month period that ended Apr. 30, amid slower-than-expected demand for digital-photo printing.

Quarterly profits were flat at $1.2 billion. Some Wall Street analysts expect revenue in the larger imaging and printing group run by Joshi to grow less than 5% in the fiscal year that ends in October, compared with growth of 6% in 2006 and 2007.

Make no mistake. Joshi's imaging and printing group is HP's most profitable and is expected to supply a quarter of the company's sales and 40% of profits this year. But its bread-and-butter consumer inkjet printing business has been showing signs of weakness, and Chief Executive Mark Hurd (pic right) has made no secret of his dissatisfaction with the performance. "We could have done better than we did," Hurd said during a conference call with analysts on Feb. 20, referring to a 5% drop in consumer inkjet sales. "And just to be very blunt, I'm not real happy about it."

Fighting Trends
VJ, a 28-year HP veteran who's credited with turning HP's printing group into an industry powerhouse, has a multipronged plan for injecting sizzle into the group. To jog printing sales by the 4% to 6% HP has promised Wall Street, Joshi is investing in overseas markets, targeting commercial printing shops that have yet to embrace digital technology, and trying to push consumers to make more printouts of photos, boarding passes, maps, and other content from the Web. "We need to add $1.5 billion in revenue each year," Joshi says. "It can't come from one particular segment."

Success could bolster HP's stock price and reassert the prominence of Joshi and his division within HP. Even as the U.S. economy has slowed and corporations have delayed IT purchases, HP has performed better than peers including Dell, thanks to cost-cutting and growth in its overseas operations. But the performance of imaging and printing may be among issues "keeping investors to the sidelines," says Jayson Noland, an analyst at Robert W. Baird. HP's printing revenue, he adds, is "slowly stagnating. …It's certainly been a concern on Wall Street." The company's stock has declined 5.7% this year.

Several analysts blame the drop in HP's inkjet printer sales on consumers who are doing less home printing of digital photographs than the company was expecting. "They were hoping that with the explosion of digital cameras, people would find printing at home a big convenience," says Shaw Wu, a senior analyst at American Technology Research. Instead, consumers find that matching the inks, paper, and software settings to print photos from home is too complex, and the quality often doesn't match what they could get at a store.

Expanding hard-drive sizes, photo sharing by e-mail, and the emergence of digital photo frames have also led many PC users to view photos on their screens rather than print them out, analysts say. "These are trends that are tough for even HP to fight," Wu says.

Joshi denies that consumers sacrifice quality by printing at home, and blames falling hardware prices for lower retail printer revenue. The consumer business looks more robust when you include sales of ink and other printing supplies, which grew 8% in the second quarter to $4.8 billion, he adds.

A Visionary Executive
To bring the rest of the business up to par, Joshi will draw on what analysts say is a reputation for visionary execution. Joshi, 54, joined HP in 1980 as an engineer in the company's instrument group, working on plotters that produced text or graphics by moving a computer-controlled pen across a page. By the mid-1980s he was working as a manager in the printing group, and ran the company's inkjet business by 1999.

The executive is credited with helping HP annex new markets such as multifunction and large-format printers, and took over the entire imaging and printing group in 2001. Since then, printing revenues have grown 46%. "VJ's had a tremendous success record," says Jonathan Eunice, founder and principal IT adviser at industry consultant Illuminata.

Joshi, who analysts say is heavily recruited for industry jobs, thrived under former CEO Carly Fiorina. In January, 2005, she put him in charge of a group that combined HP's printing group with its big PC division, partly inherited from Compaq, which it bought in 2002, in order to better pair sales of the products. "Carly leaned on him a lot," says Roger Kay, founder and president of industry consultant Endpoint Technologies Associates.

Five months later, after taking over as CEO following Fiorina's ouster, Hurd undid Fiorina's move, leaving Joshi in charge of printing and imaging. The marketing-savvy Joshi and the no-nonsense, micromanaging Hurd have distinctly different approaches, analysts say. "He's an idea guy," Baird's Noland says of Joshi. "Investors feel like he gets a lot a free rein to go and try lots of stuff. And that's not really Mark Hurd's style. …They're very different personalities."

Analysts also draw contrasts between Joshi and Executive Vice-President and Chief Strategy & Technology Officer Shane Robison. Robison, who came over in the Compaq deal, is responsible for cashing in on HP's sizable patent portfolio, and has flourished under Hurd. "He has the ear of the king," Kay says of Robison.

Still Dominating the Printer Market
Joshi's organizational power could be less substantial than it was in the days when the printer group supplied nearly all of HP's profits. "With Mark Hurd's arrival, [the printing division's] importance has diminished," says American Technology Research's Wu. "Does it weaken VJ's position within the company? Maybe."

Asked whether he's on the hot seat from Hurd to fix the printing business, Joshi says it's "not true" he is feeling pressure, pointing to the printer group's revenue growth and operating profit. Indeed, HP is still dominant in consumer and office printers. In the office printing market, Joshi is moving the group into "printing services"—managing fleets of printers for customers including 3M, United Stationers and law firm Wilson Sonsini Goodrich & Rosati.

But consumers' reluctance to print lots of photos at home, combined with competition from Eastman Kodak, which in 2007 introduced a line of home printers that use lower-priced ink, has forced HP to cut prices steeply for some of its ink cartridges, some to as low as $10 to $15, according to NPD's Baker. "They don't want to leave all those dollars sitting inside their printers," he says. It's important for HP to keep ink sales humming: Ink, paper, and other supplies accounted for 63% of the printing group's second-quarter revenues.

"When you look at all of the Web applications, printing is often an afterthought," says Joshi, who also sits on Yahoo's board. HP's Snapfish, an online photo-printing service, already sits behind the photo sites of Wal-Mart Stores , Walgreen , and others, and represents the group's Internet-oriented future. HP is also incubating new businesses in its labs. A project called BookPrep aims to let consumers purchase scanned copies of out-of-print books, annotate them with their own content, then print out the results.

With the clock nearing midnight in Düsseldorf, Joshi looked back on his good fortune. "I've been with HP 27 years and I love HP," he says. "We've been very successful." If the success is to continue, VJ's new bets will need to pay off as well as his old ones have.

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All action hands-on heroine

Motivator Mulcahy's mighty makeover

Feminine touch revitalises Xerox

3 June 08
Anne Mulcahy has turned round the fortunes of the one-time copier giant. Her feminising of the group — appointing women to senior posts and nurturing staff has made a real difference. The woman who revived Xerox, one of America's best-known technology corporations.

Mulcahy, 56, is a bundle of energy, one of the most powerful women in global business, paid $13m last year, but so friendly and loquacious that it's easy to forget the scale of what she's achieved. She took the top slot at Xerox, once the most famous name in office equipment, when it was teetering close to bankruptcy in 2001. One of her first acts was to cut the workforce.

Now, rising revenues, $1 billion in net profit and a new sense of purpose as a service business have put Xerox back on top again. Last year it even brought in the British government as a customer — Xerox heads a consortium that won the £400m, seven-year contract to handle all print and related services for the Department for Work and Pensions.

More than that, though, Mulcahy has altered the feel of her business, appointing women to the key posts of president and research chief at Connecticut-based Xerox. Ursula Burns, her No 2, is African American.

 Meanwhile Mulcahy, a 32-year Xerox veteran, is pulling plaudits from the same journals that belittled her chances seven years ago. "Yeah, well, outsiders thought I was the last person you would put in to make changes. The press was not very flattering." She narrows her eyes with mock menace. "There are people whom we will never forget. . ." Then she whoops with laughter.

American by birth, Irish by roots Mulcahy has a verve that is easy to warm to. Tall and angular, with an even sharper sense of humour, she is a renowned organiser and motivator who has rebuilt Xerox on twin goals of consistency and cash flow.

However, she is also a hard woman to pin down, usually ducking the press and nearly always on the move. We meet outside Dublin, where she has just flown in to host a Xerox conference on sustainability for European customers and staff. It's a very Mulcahy event, espousing the green cause, while spotting the business opportunities among the doom-laden prognostications.

On the Xerox corporate jet, Mulcahy apparently spends more time handing out drinks and snacks than sitting still. "Customers and staff" is the key Mulcahy mantra. Inside the company, she is known for never forgetting anyone's name. "That is job No 1 for me," she says, "followed by meeting customers to see how we're doing. Everything else is so far distant in terms of meaningful impact."

Walloped by declining market share, $18 billion debt, and an accounting scandal beginning to brew, it posted a $273m loss on $18.75 billion revenue in 2000. That forced its board to ditch one chief executive, bring back a retired one, and then support his choice of Mulcahy, a former head of human resources running desktop printing, as the right person to clean up the mess.

Mulcahy was not even on the board when she was picked. Fortune magazine later dubbed her "The Accidental CEO". Few thought she would take the tough actions the company needed. She started by closing her old division, and then transferred half the company's production to outside contractors, slashing costs, refocusing the firm on service and sellable innovation.

Her technique was to be brutally honest with staff, and appeal to their sense of loyalty, even as they shifted out of Xerox. She also rode that storm over Xerox's accounting methods — the Securities and Exchange Commission forced it to restate five years of revenues prior to 2002. And she won over bankers, begging them not to pull the plug. With sales now rising again — above $17 billion last year — her actions have been vindicated. And it's doubly satisfying because, as she says, she really loves this business.

"It's unusual, lots of people spend their entire careers here, you get a sense of mission beyond just a job." More so for Mulcahy whose husband — her second — is a retired executive who spent 35 years at Xerox. And her elder brother, Tom Dolan, is senior vice-president, global accounts, at the firm. Isn't that awkward, having your big brother down the table from you? Not at all, says Mulcahy, there's never been a conflict. "He's a great supporter."

She says her upbringing among boys also gave her a head start in business. Her father was a writer, her mother a housewife — "the best multi-tasker you could base yourself on," grins Mulcahy. Both parents pushed her on. "I talk to women who feel guilty for working and I am just the opposite, I would feel guilty for not working."

"The interesting thing about Anne is she has a working knowledge of everyone's discipline," says Larry Zimmerman, Xerox's CFO formerly at IBM. "She was even acting CFO for seven months. You also see less focus on status and power round here. I don't know if it's a woman thing or just her leadership style, but she's very inclusive."

That, says Alan Charnley, Xerox UK's managing director, gives her an uncommon bond with staff. "She is the mother of the company, in the nicest way. She has a unique ability to touch people."

Others could be feeling that touch soon as Xerox is on the acquisition trail again, targeting what Mulcahy calls vertical services. "Mortgage platforms, litigation, healthcare, education, anywhere there is a lot of documents."

It is also trying to diminish the world's addiction to paper — part of its green agenda. Xerox has even invented self-erasing paper, which scrubs itself clean within 24 hours. That could give someone a shock. "Around 45% of what people print is good for one day," she says. "Print less, use digital documents rather than paper, make documents smarter." Hence Xerox is pouring money into research, competing head-on against Hewlett-Packard/EDS, Toshiba, IBM.

Mulcahy is confident that Xerox can ride any economic slowdown. "More than half our revenues are now outside the US, global diversification is a great place to be, developing markets are booming." And will we see more of her, now Xerox is on the rise? Unlikely. Other executives say she has never wanted "rock star status", preferring the company to get the attention.

_______________________________________

25 May 08

Best Buy store No. 952 is in Baytown, Texas, set amid the cul-de-sac subdivisions and big-box strip malls of Houston's metropolitan sprawl. In Best Buy's nomenclature, Baytown is a "Middle America" location, tailoring its pitch to value-conscious family folks.

Lately, however, the employees at this store have noticed a different stripe of shopper: Eastern European workers from cargo ships or oil tankers, temporarily docked at Baytown's busy port, are spending their precious shore hours scouring the store's aisles.

They take a 15-minute cab or shuttle ride to stock up on iPods and Apple laptops priced cheaper than back home. To speed their shopping, the Baytown Best Buy has moved the iPods from the back corner of the store to the front, paired them with overseas power converters, and simplified the signage. Since the changes were made over the holidays, cash register receipts for the boat workers have ballooned by 67%.

Customer centricity
As the economy slows, Best Buy is encouraging its outlets to go off script. Sure, European boat workers are a microscopic niche. But when multiplied by Best Buy's more than 900 stores, the retailer believes such bottom-up insights could have an outsize impact on sales growth. In a sense, the national chain is trying to go hyperlocal, asking on-the-ground employees to spot fresh customer groups—North Carolina retiree clubs, newly returned soldiers in Georgia—that would otherwise pass far below the radar at Best Buy's headquarters in Minneapolis.

The move is the latest step in Best Buy's four-year-old "customer centricity" strategy, which assigned each store to one or more categories such as home theater geeks, soccer moms, and average-Joe electronics shoppers. Each store was asked to woo these often overly broad groups with tailored product mixes and services. "In some cases, we were right," says Shari Ballard (pic right), the EVP U.S. stores, "and in others we were totally wrong."

Local ingenuity and insight is contributing to a relatively rosy forecast from Best Buy, considering so many consumers are on the ropes. At a time when a full tank of gas costs more than some DVD players, executives still project a growth rate of 1% to 3% at stores that have been open at least 14 months. Many local managers, they say, predict even greater growth.

Sceptical Wall Street analysts

Wall Street has been raining on this picture. "Welcome to Sunny Minneapolis," wrote one dubious analyst. "An Outlook that Would Make Mao Proud," wrote another, harking back to the over-optimistic steel production targets in Mao Zedong-era China. Several question how much faith should be put in forecasts from store managers who are also being prodded by executives to achieve better numbers.

Retail analysts generally applaud Best Buy's "centricity" strategy, which has helped separate it from rival Circuit City currently an acquisition target of Blockbuster. Yet some doubt the local efforts will go far enough. Big worries about consumer spending, says Morgan Stanley analyst Gregory Melich, aren't going to be offset by putting more Polish-music CDs in a particular store—as one Chicago Best Buy recently did—"because you find out 25% of the people there are native Polish speakers."

Analysts also worry about the outlook for new must-have gadgets. With the exception of video games, most of this year's new devices are "evolutionary and not revolutionary," says David Schick, an analyst at brokerage Stifel Nicolaus. Of particular concern are big-screen TVs. Melich believes TV sales and related warranty and equipment purchases, which he estimates made up 40% of Best Buy's $2.2 billion operating profits last year, could drop for the first time in seven years. Best Buy declined to comment.

Taking much of the heat from Wall Street is Ballard, who has run Best Buy's U.S. stores since September. She's trying to give local managers more leeway to set sales strategies, inventory levels, and product mixes. That may sound like Retailing 101: Give customers what they want. But it demands complex math from a big-box retail chain built on standard operating procedures, negotiated shelf-space deals, and headquarters-generated "planagrams," or floor plans. Big companies "make strategy creation this elitist space," says Ballard, 41, who started with Best Buy as an assistant manager in a Flint (Mich.) store.

Frontline flexibility
The latest moves are just starting to upend Best Buy's rigid, top-down planning. Early this year, Savannah (Ga.) store manager Richard Gamble learned that more than 10,000 soldiers from two nearby Army bases were due to return home by September. He quickly assigned a team of employees with armed-forces family members to plan for the troops' arrival; the group selected seven product categories, such as Nintendo Wiis and flat-screen TVs, that had either launched or fallen in price since the soldiers deployed. Gamble asked Minneapolis to increase his inventories of those goods by 40%. It complied, and he is expecting a sales lift from the bigger stock.

Local store managers are even influencing Best Buy's merchandising tactics. After getting numerous requests from troops set to redeploy, Gamble's military team placed an order for Panasonic Toughbooks, rugged laptops not usually carried at Best Buy stores. While he couldn't stock them for sale, he persuaded HQ to send him a few for display so soldiers could try them before ordering online from Best Buy. Such a request would have been "virtually impossible" two years ago, says Gamble. Even with a new store opening nearby, he expects the military push to help raise his sales this year by 7%.

Taking much of the heat from Wall Street is Ballard, who has run Best Buy's U.S. stores since September. She's trying to give local managers more leeway to set sales strategies, inventory levels, and product mixes. That may sound like Retailing 101: Give customers what they want. But it demands complex math from a big-box retail chain built on standard operating procedures, negotiated shelf-space deals, and headquarters-generated "planagrams," or floor plans. Big companies "make strategy creation this elitist space," says Ballard, 41, who started with Best Buy as an assistant manager in a Flint (Mich.) store.

Frontline flexibility
The latest moves are just starting to upend Best Buy's (CEO Brad Anderson pic left) rigid, top-down planning. Early this year, Savannah (Ga.) store manager Richard Gamble learned that more than 10,000 soldiers from two nearby Army bases were due to return home by September. He quickly assigned a team of employees with armed-forces family members to plan for the troops' arrival; the group selected seven product categories, such as Nintendo Wiis and flat-screen TVs, that had either launched or fallen in price since the soldiers deployed. Gamble asked Minneapolis to increase his inventories of those goods by 40%. It complied, and he is expecting a sales lift from the bigger stock.

Local store managers are even influencing Best Buy's merchandising tactics. After getting numerous requests from troops set to redeploy, Gamble's military team placed an order for Panasonic Toughbooks, rugged laptops not usually carried at Best Buy stores. While he couldn't stock them for sale, he persuaded HQ to send him a few for display so soldiers could try them before ordering online from Best Buy. Such a request would have been "virtually impossible" two years ago, says Gamble. Even with a new store opening nearby, he expects the military push to help raise his sales this year by 7%.

The chain's shift in mindset requires a delicate balance: Adjustments spurred by local insight can boost sales, but they also can add risk and expense to operations. Of course, Minneapolis continues to roll out its national plans, but to fortify local insights the retailer is handing out financial modeling software so store managers can try "what-if" scenarios. Still, some changes have flopped.

Relocating GPS devices to a different spot in a New York store did nothing to boost the products' sales. And local changes to "endcaps"—the display at one end of an aisle—have risked angering suppliers that paid for specific shelf space.

Some local novelties entail a lot less pressure. After the chairman of a local retiree club called the Golden Boys bought a HD TV at the Mooresville (N.C.) Best Buy, store manager Walt Goney invited the club's members to come by at 8 a.m., two hours before opening time. Eighty-five members showed up for a hand-holding session on switching to digital television. They bought $350,000 worth of TVs and equipment that morning. The cost to Goney? Just $99 in labor, plus coffee and doughnuts.

Editor's Comment
Great lessons from the frontline at Best Buy. Sales in 2007 were $36Bn and they are making moves into the UK with Car Phone Warehouse and are rumoured to be checking out acquisition of ailing DSGi, the Dixons, Currys and PCWorld chain.

This is a great story of hands-on leadership…allowing local management to innovate and take ownership of their stores. We feel a similar phenomenon is happening at Staples in Europe where local management leadership has turned around sales and profitability.

If we review the last 20 years in the OP industry we can identify that greater success comes from this 'hyperlocal' style: Irwin Helford at Viking, Bill Pitchler at Eastman, Nate Gold at Publix, Joel Spungin at United, Tom Gallagher at SPRichards, the Spicers wholesaling phenomenon in Europe, and recently of course Sargent, Eric Bigeard at Lyreco now the US leading independent megadealer Leo Meehan at W.B.Mason.

Read the 'Hands-on Heroes' story in Frost Bites this week.

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Soulful Staples
Committed to corporate responsibility

8 Apr 08

For a giant company, they have managed to stay close to their customers by organising the company into responsive customer focused divisions: the contract division both National and Business Advantage; their SMB delivery/mail order division inc Staples Direct and Quill; and of course the original retail Staples superstore division.

Whenever Sargent speaks, he discusses customers and employees. Staples bring them together as partners through various marketing programmes to suit the customer.

High touchpoints include the 'That was easy' button, the CRM system, the highest level of online ordering in the industry - 75% overall…90% on contracts; own brand ranges which reinforce the brand; innovative store initiatives e.g. copy centers.

Moreover, their eco and ethical initiatives are trail blazing and best encapsulated in their commitment to corporate responsibility…their Soul programme. Here's how they describe it:

'Staples Soul reflects our commitment to corporate responsibility. It's a holistic approach to business that recognizes the close connection between our financial success and our desire to make a positive impact on our associates, communities, and the planet by joining together the following areas: diversity, the environment, our community, and ethics. It's how we do business—that's Staples Soul.

Diversity
Reflecting the face of our customers is embedded in our culture. Our associates and customers are diverse, which helps us ensure that our workplace is one of inclusion and acceptance. Our commitment goes beyond race and gender to include developing a diversity of thought and experience. It also extends to sourcing office supply products and services from diverse minority and women–owned businesses.

Environment
We seek environmental excellence, by developing and sourcing environmentally preferable products, providing easy recycling services for our customers and associates, supporting energy efficiency and renewable energy, and educating stakeholders about environmental issues.

Staples broke new ground last year ground when it opened Miami's first green retail building registered with the U.S. Green Building Council's LEED (Leadership in Energy and Environmental design) program. This first store of its kind for Staples.

Staples is committed to sustainable business practices throughout our organization, and we make it easy for customers to make a difference for the environment - what we call EcoEasy," said Royce Reed, regional vice president of sales and operations for Staples stores in South Florida. "Sustainable building design helps us conserve natural resources, reduce waste and create a healthier environment for our local communities. It's also good, smart business. When completed, the 2121 Biscayne Staples will make it easy for customers to get the office products and services they need, including many eco-friendly products and recycling offerings."

Staples says it is the first national retailer to offer everyday-in-store recycling for computers and other office technology.

The company says that consumers can bring computers, monitors, laptops, printers, faxes and all-in-ones to any U.S. Staples store, where the equipment will be recycled in accordance with environmental laws. All brands will be accepted, regardless of whether or not the equipment was purchased at Staples, for a fee of $10 per large item.

Staples says that all of its 1,400 Copy & Print Centers in the U.S. are now using recycled paper certified by the Forest Stewardship Council as the standard offering for black and white copy and print jobs - a first for a national copy and print operation.

Staples (COO Mike Miles pic left) now offers more FSC-certified paper than any other office supplier, providing both 100 percent and 50 percent post-consumer waste recycled content choices."These FSC-certified recycled content paper products are another way that Staples makes it easy for customers to make a difference for the environment-what we call EcoEasy," said Mark Buckley, vice president of environmental affairs at Staples.

Reporting
Read and download our 2006 Staples Soul Report, which describes our corporate responsibility initiatives, accomplishments, and future objectives in detail across our diversity, environment, community, and ethics programs.

Proficiency Group will be highlighting ythe postive aspects of Staples Soul at the BREAKTHROUGH Conference on Thursday 17 April at the Ricoh Arena, Coventry. See Programme and Booking Form click here.

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8 steps to doubling  
customer loyalty
Checking the pulse of customers
using RAPPORT Score Surveys.

15 March 08

Dealers need to not only generate the leads that will turn into new customers, but also retain existing customers. The key is knowing which customers are happy…and which need a little more attention.

Most marketers are aware that whilst price is an important differentiator…70% of defecting customers switch business away because of a lack of attention or a breakdown in relationships.

See here how a large OP dealer in the US used positive marketing tools to create an online survey and telemarketing strategy built on a scoring system. The strategy added a new tool to its customer-retention effort while doubling their loyalty "score." And increasing business by 22% in 2007.

The Challenge
Shirley Brown, knows that keeping customers happy leads to contract renewals. This $30M in sales dealer, spent years building up a strong customer base for its Brown & Brown (B&B) office products business. (Names changed to protect confidentiality)

Brown wanted to add to her team's collection of customer-retention tools. "We position ourselves in the marketplace as being a quality provider of  office productivity services. It's very important to know that we deliver to clients what we promised them."

They decided that a formal feedback system was needed to take the pulse of their customers. They wanted a mechanism that would highlight potential problem areas needing immediate attention and one that outlined new strategies to improve service delivery and marketing and sales efforts.

The Campaign
Brown and her team, including marketing manager Christine Brook created a customer-survey programme based on the RAPPORT Score system.

The technique provides a loyalty "score" by asking clients to rate how likely they would be to recommend her dealer's services to others. The RAPPORT CRM programme provides guidelines allowing dealers to adapt it for their own customer-retention efforts.

Brown's team incorporated Score into a campaign that used online surveys and telemarketing follow-up to seek feedback about B&B's service. The campaign helped them target new customer-retention efforts. Here are the 8 steps they took:

Step #1. Create online survey
Score is built on one question similar to this one: "How likely is it that you would recommend us to another company?" Respondents provide a rank on a scale of 0-10, with 10 being the highest.

B&B's online survey asked three questions:

1.   A variation on the basic Score question, "If a colleague asked you for a referral, how likely is it that you would recommend B&B as a service provider?"
2.  For respondents who provided a rank of 9 or higher, the survey asked, "What does B&B do particularly well to earn your recommendation?

Step #2. Email survey invitation
All of the key contacts within each B&B customer were sent an email inviting them to complete the online survey.

Client contacts came from the company's database, including:
    -    Admin and purchasing managers

-          IT managers, accountants

-          Secretaries and PAs

-          Corporate decision makers

Client contacts were told that the process gave them a chance to describe their experience working with B&B and offer advice on how the company could improve and develop its services. They set a goal to survey all their Most Valuable Clients (MVC's spending over £500/month, $1000/month)twice a year -- typically in the second and fourth quarters.

Step #3. Target non-responders
15 days after sending out initial survey invitations, Brook's team sent a reminder email to clients who had not answered the survey.

One week after that reminder email, the sales team called clients who still had not responded. A customer service associate invited them again to fill out the online survey, or offered to collect their answers immediately over the phone.

"We found that some people respond better to a phone survey, rather than an Internet survey," says Brown.

Step #4. Compile survey scores
Brook's team first calculated their "Score" based on the RAPPORT question. The scale:
o Scores of 9-10 are labeled "advocates"
o Scores of 7-8 are labeled "neutrals"
o Scores of 0-6 are labeled "detractors"

Scores were compiled for individual customers, as well as tracked across all customer responses to determine the company's overall score. A score is calculated by subtracting the percentage of detractors from the percentage of advocates.

Step #5. Follow-up interviews
While calculating the scores, Brook's team flagged all survey responses that included a negative comment to the question: "What would B&B need to do to earn a better recommendation?"

Brook's team examined the nature of the negative feedback to determine which director to conduct a follow-up interview. They dug deeper into the problem.

For example:

- If the negative feedback related to a broad B&B or distribution issue, the operations manager would call

 If the negative comment related to a specific customer experience, the interview would be assigned to the sales director

Each client contact making a negative comment received a follow-up call. Managers assigned to follow up with specific clients used a feedback form that included questions to help them conduct the interviews and places to record customer responses. Team members were instructed to complete all follow-up interviews within 10 days.

Step #6. Analyse results
After the follow-up interviews, Brook's team analyzed the feedback forms to find specific causes for dissatisfaction.

Their goals:
o Determine if the cause of problems was strategic or operational
o Help identify the best courses of action to address problems

Results of that analysis were presented across the company, with an outline of specific ways different teams could improve customer satisfaction. For example:

- The management team received recommendations on how to address problems that appeared in a range of different customers. For instance, new training programmes were recommended for client-facing employees.

- The marketing team examined responses to shape new campaigns that addressed specific customer concerns.

Step #7. Send thank-you email
After the analysis, the team sent out a thank-you email to clients who completed the survey. The message came from the company MD/CEO, who outlined specific changes the company has made, or is making, as a result of feedback from the survey. "If you want a high response rate, you have to close the loop with the client," says Brook.

Step #8 emarketing campaigns to fill gaps
A by-product of the surveys was information picked up on services offered but not taken. RAPPORT had enabled Brook's team to identify product gaps e.g. IT consumables, packaging, business gifts, coffee services that were on offer but not communicated effectively to user choosers. Specific permission based email offers were then tailored to suit particular types of customer.

The Result
The goal of the RAPPORT Score programme is to convert detractors and neutrals into advocates. On that measurement, Brown and her team have seen B&Bs score double since late 2006.

But the real key to the customer retention campaign, says Brown, was digging deeper into the causes of customer dissatisfaction and developing specific strategies to address those causes. "It has a very direct impact on our business. You really have to follow through and action the different facets of the program. You can't just send the survey out and forget about it.

The survey response rate in the high 60-70% range has provided plenty of feedback for the team to work with. Some of those comments have yielded significant improvements and new tactics:

- One survey uncovered a particularly low score from one customer. After interviewing the client, the cause of the problem appeared to be the working relationship between the client and the B&B account manager. The company assigned a new account manager to work with the client, and the score for that location went up 31% with sales up 22%.

Innovative relationships

Customer intimacy…the route
to positive entanglement

15 Feb 08

I visited Jennifer Smith the chief at Innovative Office Solutions, Burnsville near Minneapolis in December. I'd heard about the progress of Innovative from Jeff Gardner at Maximum Performance and United so I asked if I could take a closer look.

The new PROP in action

I met with the charming and elegant Jennifer (see pic left) and her operations and marketing chief Jason Player (pic right). We spent a couple of hours together…enough to convince me that Innovative were up there with the top dealers in the US and UK who were consciously moving from the traditional products approach to the new PROPS model…providers of office productivity solutions. This was a treat…a PROP in action in Minnesota…word was spreading like wildfire.

Here are the relevant extracts  from our interview:

What are Innovative's Key perfomance dimensions? Sales in 2007 were $15m up 7% on 2006 with plans to reach $18m in 2008. Employee totals (full time equivalents)  are 39 -  17 of the original team are still together. Employee retention is at the core of our relationship-focused customer approach…Innovative's core business model.

We started in 2001 with 19 people and almost 7 years later we have sales of $15m and starting to grow rapidly. Our productivity levels are not exemplary at  $385,000 employee, but we feel we're set to grow 20% with the talented people we have, boosting productivity to $462,000…up there with the best!

Employees first…customers second
By empowering individuals in all aspects of the business, we have developed a unique, action-oriented approach to providing office supplies and furniture to our customers nationwide.  Customer innovation is fostered at every level by our professional team who have individually experienced the" Big Box" mentality of our competition.  Shared goals, pride and independence reinforce Innovative's ability to exceed customer satisfaction, cohesively service accounts and grow the business.

Maintaining a high performing talented team makes sure we deliver what customers want and enables us to take initiatives in meeting their future needs.

What is your Employee Retention Rate? 92%. (That's fantastic! Editor. A high retention rate i.e. 90%+ generally translates into a high customer retention rate of a similar rate. Currently Innovative's customer retention rate is 86%)

What are the 3 specific key market differentials of Innovative?
What differentiates Innovative in the marketplace is simple.  Relationships! Relationships!  Relationships!  We pride ourselves on the relationships that we develop with our customers, vendors and with each other.  Relationships truly make the difference.  Because of the strong relationships that we have with our customers our customer retention rate for 2007 was 86%.

What are your primary marketing tools:

For New Client acquisition

For new client acquisition we use lead generation and telemarketing programs.  These programs can be a big cash outlay at first but we have had a 200% ROI over the last year and a half …Gross profit generated in relation to the cost of the reaching the customer. We are also a pilot dealer for United's Consumer Marketing System (CMS) program which is getting underway now.

For existing client development? How do your measure retention and share of potential spend?

For our existing client development we measure retention by our trend reporting system. If an existing client has not bought from us in 3 months we reach out to them with and e-mail or postcard coupon offer.  The reps are very involved as well and they follow up with a phone call and then they report back to their manager with reasons for loss where applicable. 

To make sure that we are penetrating our existing accounts we run product class reports monthly and each quarter we promote a different category that incorporates flyers, website promotions and follow up calls.  We also incorporate the product class report into our business reviews with our clients.

How many contacts do you aim to reach within each account e.g. IT manager. accountant, Facilities Manager. HR manager, ExecPA's etc.?

 We have 1783 live customers with 4000 email addresses. This is strong but we now plan to take a positive look at our emarketing systems with a view to greater personalisation, greater promotional frequency and improve the customers/users webstore 'browse'n'buy' experience.

We have an excellent marketing chief (Jason Player…an English man of course). He has been with us from day one.  You have to have someone dedicated to marketing the company's products and services. 

Jason works closely with sales force to build the contact database. At our regular sales meetings he will highlight by customer the gaps in the contact names we require in order to maximise our promotional effectiveness and share of customers'potential spend.

By building and maximising our contact database, obtaining their email addresses, we can with permission develop a closer more intimate relationship with our clients. The more contacts, the higher the touch and the higher degree of 'entanglement'…making it very difficult for one person to oust Innovative when we have a bad day.

How do you conduct promotions? Direct mail, email, teleservice? What are the most attractive incentives to users, buyers, salespeople.
We have found the best success with current promotions is to take the team approach.  When we launch a promotion we try to have as many team members involved as we can to ensure the maximum return.  So for example in the quarter that we  promote the Jan/San category, we will use United's direct mail piece and couple it with a Website promotion, flyers (in paper and e-mail format) for our drivers and sales representatives to hand or send out. Then we list all current customers that do not buy that category and organize our customer service people to call and offer them a coupon code to enter  when they place their next on-line order.

Do sales people sell in Innovative programs  or productivity systems to save clients time, money and space or product?
Our sales people here at Innovative never sell product.  It is always a solution based approach. We ask our sales people to complete a Star Profile on their prospect/new customer. This is a full intimate analysis of the customer's wants/needs and preferences. The philosophy adopted is 'listen, absorb and respond'. This enables the whole innovative team to tailor the service and personalize the marketing.

Currently, Innovative do segment their customers by SIC type but do not measure potential spend using the differentiated rates…the next step in customer intimacy and determining their share of customer potential

What your favoured measures of profitability, productivity, marketability?

We score all our customers and sales reps on an 'efficiency model'   Customers are given a rating and measured against other customers.  We score them on Average Order Size, Returns Rate, On-line purchases and Average Days to Pay.  We also monitor their gross margin.   We give STAR awards to sales reps and customers for their performance.  For the customers all of these measures are presented to them at annual business review.

Looking at your sales analysis…Furniture is strong at 25% of your sales mix. Why?

Furniture is strong because we have partnered with Evolve Furniture Group (see pic). Evolve  produces office systems, seating and storage designed to meet today's business requirements while maintaining a firm commitment to save and protect the environment.  Evolve maximizes the use of material that would otherwise go to landfill.  Evolve panels are 100% recyclable at the end of their lifespan.  An estimated 82% of an entire Evolve panel is made from recycled and environmentally friendly material.

What are your  future development plans?

We have three key areas of development we are working on:

First, we are committed to a green agenda and will hold an EcoExpo in May for our customers. The theme will be 'Cut costs…Cut carbon' and will involve our key wholesaler and manufacturer partners latest products. We will present the 4 step eco-productivity programme enabling customers to reduce their acquisition costs and partner with us in cutting carbon emissions by single sourcing and rescheduling delivery frequency.

Secondly, in March we will be introducing our new Green Mountain coffee programme…a real and ethically sourced Fairtrade coffee service.

Finally, we are conscious that we have made strong progress in building our user database and we now need to use it. We plan to reach the users more frequently e.g. weekly, with relevant emarketing promotional campaigns. These will be permission based, office lifestyle designed and  personalised emails from our reps to the users. The final step will be to enable users to place orders online via the webstore with minimum clicks.

We are excited about developing greater customer intimacy and providing eco-productivity solutions to our growing portfolio of customers. A truly Innovative future.

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Commodity distribution
service 4 years on

Wholesale success stories from is.group

 is.group, the 280 members strong US dealer group based in Indianapolis has reported a strong growth in the use of its RDC distribution service.

The service was controversially introduced back in January 2004. Some larger sized and many stockless members left in droves. The concept was taken from the Europa commodity wholesaling service initiated in the UK  back in 1995, but latterly was struggling and winding down.

Membership at the time was c650 …there was a mass exodus over an 18 month period down to 280 members. Most of the leavers were either larger dealersin well served regions (by manufacturers) or moving towards the stockless model. Nevertheless,it was bad news throwing is.group's future into doubt.

Once the 'core' supporting membership stabilised and the service was transferred and managed by specialist IT wholesaler Synnex in late 2006, things changed for the better. Efficiencies in terms of service levels have  improved, dealer confidence raised and operating costs reduced, causing greater commitment from members to the commodity wholesaling service.

"is.group's RDC model might not necessarily be a good fit for every dealership but with all of the evolutionary changes that it has gone through it is certainly worth visiting for a look or test drive." Said CEO Mike Gentile.
 
Is.group asked 3 members to comment on the service over the past few years. Here's what they had to say.

Ken Schroeder, Friends: "Switch to RDC's Generates $8,000 in Monthly Savings"

We calculate we've saved about $8,000 a month as a result of buying direct versus wholesale. That's net after we pay th is.group fees, though it doesn't

reflect any additional benefits from year-end rebates.

We're also able to be more competitive in the marketplace. Paper and toner are the chief indicators today of how we stand price-wise in the eyes of the customer. We've got to be competitive on those items. They're high dollar SKU's and we've got to buy that product as cheaply as we can. And that's one of the big advantages of the RDC program.

One other key benefit is that it's made us able to respond to new product trends far more easily. Look how fast change happens in our industry today. New items are continually coming in and old ones are going out. We've got to constantly be adjusting our mix and making sure we're always stocking the right things. That's much harder to do if you're buying everything direct with larger minimum and longer turn intervals.

In March of 2007, we started using the RDC program again on a Test Drive basis and three months later, re-joined the organization. Looking back on the past few years, there's no question in my mind that if it wasn't for the buyinggroup and the RDC program, we wouldn't be in business today. It's become very important to our dealership.

We've gone from being a dealership that sourced about 65% of our purchases from the wholesaler and did 35 direct to one that's now buying 45% from the wholesaler and 55% direct. And the amount of direct buying we're able to do continues to grow.

Overall, we figure using the RDC's has added somewhere between 3-5 points to our gross profit margin. We're stocking about 20% more SKU's than we were before the RDC's, but our overall inventory investment hasn't grown, because our turns are so much better. We're over 400 miles from the New Jersey warehouse that services us but we still get most of our orders in just two days and that's made a big difference.

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Phillips are long term members of is.group since 1991 and support both the D2000 and D5000 catalogs and the group's distribution and emarketing programmes.

Bob says "The Phillips Group"sales of $63m are split equally between supplies, office interiors and document management. In supplies, we are striving to increase our productivity with average sales/employee at $304,000, whilst helping our customers improve theirs. We have 69 employees, with 18 outside sales people and 14 ambassador drivers. This is a crucial part of the 'Phillips philosophy' and our unique edge in the marketplace. We call this our "Secret Sauce".

'Secret Sauce' is an ingenious and memorable icon, ( see bottle pic) developed by the Phillips team to differentiate itself positively from the power channel. The key ingredients are local ownership; dedicated personal attention…an assigned customer account management team; can-do flexibility to special service requests; ambassador delivery service; and rapid responsiveness to the needs of each customer. All these may sound similar to the text book on great customer service but....

The difference lies in the way these are delivered. In a word 'execution' by the highly motivated team which in the words of their customers "go the extra mile" to satisfy clients in saving time and money. The flexible tailored service is best exemplified by their ambassador delivery team who are all uniformed Phillips employees equipped with Nextel telephones for immediate access and order tracking status.

Phillips have advanced on the online ordering front too. Almost 50% of orders are taken online with order values higher than the traditional telephone route. Sales director Tom Smith said "We are pleased with our progress in ecommerce,  achieving average order values of $175 online, compared with $135 via traditional means. We put this down to the success of our 'EZOrder' online system.

Customers love it too. Here is a typical comment :

I have to say your website [EZorder] was extremely easy to navigate. Besides the one on one customer service...you know...speaking with a living, breathing, authentic human being... the coolest feature was the "hold order.". I was able to hold the order, print it, get an okay from my boss, and release the order. Wonderful! Iya Isoke, AUM architecture

Incidentally, take a look at The Phillips Group web-site…one of the best brochure sites in the OP industry in our view…loads of genuine personalities, informative, well structured and laden with customer benefits www.buyphillips.com

"Our goal is to increase online ordering to 75% of sales volume. In this way we can enhance the level of service we give to customers by promoting new services and new product categories e.g. refreshment and hygiene supplies" continued Smith.

The strength of their personalised single source supply system is reinforced  by the Phillips commitment to customising processes and the quarterly or at least half yearly client reviews. "This ensures we stay close to our customers at every level from management to users, to communicate new products, productivity information, eco-friendly developments and of course, any service issues" enthused Smith.

When I met Bob and Tom at the SPRichards Advantage conference earlier this month, I was impressed by the intimate knowledge and grasp of the key performance indicators for the business. Very often dealers can talk about the strength of their personal service and the high performance of their sales people without quantifying the positive effects. This was not the case with the Phillips people. Three of their top sales people: RSM Mark Schopf, Michelle Burger, and Judy Little were in attendance and the motivation and enthusiasm for their customers and the hunger to improve shone through brightly.

It's still a people business and the Phillips people are phenomenal.

peter@proficiency2020.com

19 Aug 07

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First Phase in productivity

Sames' old song…Sames' old success story

27 June 07

Last week, I met with Alan Sames (pic left), the MD of Phase Office Supplies in Chertsey (UK). Alan was MD of the very successful dealer Esse, who grew rapidly in the 80's/early 90's to reach £18m before being acquired by Ofrex Group…now Office Depot.

Well Alan's back with a bang! 6 years ago, he started Phase with ex-Copygraphic top contract salesman Peter Harte.

Today, ageless Alan…as focused and determined as ever, has Phase steaming along with sales of £9.5m employing 13 people. Phase farm out their deliveries to Officeteam, so If we adjust for the £1m/van deliveryman best practice standard they are running at £432,000 ($864,000)/person….not that far behind world leader Euroffice.

What's more Sames is planning to double sales over the next 5 years. These seasoned pro's have got energy to burn…

Essentially Esse

Sames started Esse, back in the late 70's with partner David Embury. They started in David's garage in Chertsey High Street. Embury was the nice quiet one. He looked after the operations admin, stock control, distribution whilst supersalesman Sames went out selling….after commercial accounts.

Sames was trained in the high pressure atmosphere of Olivetti. Successful there, he wanted to turn those skills over to running his own company and extend beyond a single dimension of products to the wider world of stationery supplies, as it was back then.

I met the Esse boys shortly after I took over leadership of Spicers southern sales and distribution operations in 1980. Esse were going places, I was blessed to have a number of dynamic dealers serviced from our Park Royal Distribution Centre…but none more so than Copygraphic lead by Peter Tilley, in Chiswick and the Esse duo.

Sames was the driving force…an impatient, irascible perfectionist…almost fastidious. At the same time he delivered with care and kindness. He looked after his accounts like no one I have met since. The customers' champion would have no hesitation in transferring the pressure to Spicers, if he felt we were at fault on service.

They quickly decided upon a lean stockless model to release Sames into the field with Harte controlling the operational detail. The parallels between Embury and Harte are not unsimilar…both are passionate about customer service, and just get on with the execution of the important service details.

Who would be their 'stockless' logistics/distribution service provider? They looked at the Spicers model but decided to go down the Oyez Straker created, PALS route. Most logistics and deliveries are managed by the 'Officeteam' (was Office Fleet) service for a set fee backed up by Spicers and Kingfield.

The PALS partnership works very well reinforced by Oyez's commitment to "100% reliability" which has provided "unbeatable service" according to Sames. "This has enabled me to focus clearly on selling and account management." And boy does he focus. I met with Sames 2 years ago, when sales were £3.5m…now they are running at £9.5m and rising fast.

Sames' selling approach as you might expect concentrates on the single source proposition for medium to large sized accounts…saving time, money and space to gain 'productivity' for clients, for approximately 100 accounts. There are 4 other sales people in the team plus 5 customer support and a buyer. Most of these key executives are ex-Ofrex and Copygraphic.

Sames is as energetic and ambitious as ever. His philosophies haven't changed either. When asked what makes Phase different he responds straight away with the usual answer "personal service". Before I can say, "But, all dealers say that?", he anticipates me and qualifies his response with convincing emphasis  "So often stated…so seldom delivered". I know exactly what he means…furthermore I know exactly that will be the Phase edge. There's nobody better.

Exceed Your Expectations

Sames shares his philosophy a little more by stressing the attitude running through the Phase team. "Exceed is our watchword" he enthused. "Exceed YOUR expectations…that is what drives our service proposition. That's what our clients buy into…and we make sure we deliver with kindness".

Nothing changes inside the strategy…the outside strategy adapts to the new style of clients' behaviour today. The cleverly named Esse (Sames/Embury) was translated in customers' minds as 'Essentially Esse'. Today the equally clever Phase (Peter Harte/Alan Sames) gains in relevance with the 'productivity' offer to the customer and the resultant gains in efficiency for the business.

Productivity expressed as sales/employee translates as an exemplary £432,000 ($864,000) after adjustment for the addition of drivers at £1m/deliveryvanman. Only euroffice, the London based webstore operator betters this to our knowledge with a comparison of £500,000 ($1m)person.

The rapidly increasing sales have fuelled plans to achieve £12m+ in 2010, and £15m+ by 2012. This shows that Sames' ambition is undiminished. In fact, I detect a new intensity from the determined supersalesman.

The Phase productivity drive on behalf of its clients is matched by the drive to achieve high rates of productivity and profitability in the business. This makes for a powerful parallel and complementary message: First Phase in productivity!

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Anglo positively aglow with growth potential

Focus, focus, focus: the new personalised productivity provider's success credo.

22 June 07

ADAM…the personalised supplies management system

At the forefront of Anglo's offensive marketing strategy is ADAM a unique single source purchasing and accounting system. Following an initial survey of the prospect client's purchasing and operational processes a comprehensive written proposal is made to the client.

ADAM usually offers a reduction in suppliers, invoice transactions, processing and usage costs. Anglo has won over many Blue Chip clients and maintained their custom with regular service calls and quarterly reviews of cost reduction results v the original proposal.

ADAM works…and clients love ADAM. This obviously has built confidence within the Anglo team that their intimate service model works against the predictable franchised systems of the power channel.

The 'A' team: City slickers …slick operators

The clear focus on winning and servicing businesses in the concentrated City of London market works beautifully. It's very effective from a sales, service and delivery cost viewpoint. See below pic of Albina Elston, customer service team leader. 

Order levels average £125 ($250), delivery costs are low at 5.1%/sales and of  course van utilisation is optimised. Moreover, this provides scope for further service developments which are covered below.

Leaner logistics is the responsibility of the experienced operations chief, Sean Dillon, the ex Spicers Bermondsey RDC distribution manager. Minimal warehousing costs, optimal use of the Spicers' pick'n'wrap service plus a high level of online ordering enable Anglo's cost to serve ratio/sales to up there with the best practitioners in productivity.

There are just 19 full time equivalent people in the Anglo team giving Anglo an outstanding Productivity ratio of £332,000 ($664,000) sales/employee.

Towards greater customer relationship marketing  (CRM)

All the basics then, are in place, with Anglo high up in the 'best practice' league in logistics, productivity, ecommerce and low cost-to-serve ratios. As a result  Anglo's net profitability ratios are up there with the very best in the global OP industry.

For example, a typical client may have 6 different suppliers providing service across a number of categories e.g. IT consumables, there may be 2; FM supplies, say 2; business gifts, furniture. By single sourcing with Anglo, not only will the client save money on acquisition costs, they will be able to help cut carbon emissions.

This happens by requiring fewer delivery vans in, maximising orders placed online and working in partnership with Anglo to consolidate orders to a weekly delivery and maximising local sourcing.

This project will be driven by Burgess in conjunction with operations chief Dillon. In addition, Dillon will be offering another first in our industry. He will pilot over the next 3 months a free collection and recycling system for clients. Initially, Anglo will collect ink and toner cartridges and cardboard packaging after making deliveries and then return to base ready for recycling.

Dynamic action inspiring reports

Steve Newland ex Progress systems house, is the IT development chief. Steve has been very active in support of sales, marketing and distribution by providing new action inspiring reports for the execurive team. These new reports include the weekly operating report focusing on sales, customer service index, order fulfilment and productivity rates; the CRM report highlighting share of customer spend and category gaps; MaxPro showing the pricing/mix balance by customer, and the MVC net profitability quarterly reviews.

A positive future ahead

Anglo's new management team have just completed the finishing touches to their business plan to grow sales to £10m ($20m) by 2010. These plans  will be shared with the whole company at a special meeting in July. Then it's brace yourself time as Glenn's refreshed team blaze a trail towards 'delivering office productivity solutions in a personalised and eco-friendly way'.

Inspirational stuff from an inspired team.

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