DEEPER DIVES: Master Time And You Master Everything

Good Morning,

First, as always, thank you for joining.

You’ve probably noticed the operational focus in my writing last week.

It seems like every major retailer is talking about how they are looking to improve, streamline and execute more effectively.

From Walmart and Amazon to D2C Cinderella stories like Rent The Runway.

Cost control is so hot right now.

So, I’m going to share some of my best stuff to help all of you improve your operations.

Matt and I are back Monday morning at 7:00AM ET with episode 2 of Wake Up and Deliver!.

It’s our LinkedIn Live Audio show to kick-off the week. I encourage you to join.

It’s an open forum to support sharing of industry knowledge and perspectives.

We’re kind of funny too.

Also, for all of the new subscribers, the Deeper Dives archive is up to date. Catch up on anything you missed prior to joining.

Also on Monday, me, Jess and Matt are back streaming live at lunch hour (12:00PM ET) for Disruptors Disrupt - The Impact Of Shein & Temu On Our Supply Chains

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Here’s what this issue brings:

• Until someone invents a way to create more time, this is the most important thing you can do for your business
  

• More customers are abandoning their carts than ever before. Check out what the latest polls are showing as to why
  

• Simple solutions could dramatically improve your customer experience and have more people coming back to buy

No Matter Who You Are, We All Get The Same Amount Of Time

There’s one mistake that I see over and over again in the companies I work with.

The price that’s being charged isn’t aligned to what it takes to execute the promise.

And because the price isn’t aligned to what it takes to get the work done, the quality of revenue is less than what it should be.

Eroding the business’s profitability.

The funny thing is that it’s extremely easy to spot.

I usually just have to ask one question.

“Can you show me how the pricing model represents all of the work that goes into fulfilling this promise?”

I’m a huge proponent of Activity Based Costing.

Time Driven, Activity Based Costing that is.

Traditional Activity-Based Costing (ABC) assigns costs to activities based on resource consumption. TDABC simplifies this process by using time as the primary cost driver, reducing complexity and improving accuracy.

Even in situations where the market may require a different pricing approach, I ALWAYS make sure to know the costs based on a time and activity model.

This helps:

1. Understand how much of a delta there may be between the market model and the TDABC model

2. Highlights areas of risk within the activity

Here’s a recent example of how this gets applied to the operational component of a business.

This one is from some work I did with someone who was looking to get into Big & Bulky delivery (also trending these days).

By identifying one opportunity in the requested activity, this service provider could improve the overall daily performance by 3.6% for a run (which extends out to ~$7k yearly).

It also increased the daily capacity of each run from 16 to 21 transactions - further eliminating the need for an additional service vehicle (over $100k in savings).

With this in hand, the provider now has options:

1. Quote at near market rate and be more profitable if they are selected

2. Be slightly more aggressive with pricing and secure the business while still knowing the solid financial position they are in

The best part about Time Driven Activity Based Costing is that it can be applied to any part of your business.

I’ve used it in warehouses.

To develop Transportation lanes.

Improve store receiving.

Once you start seeing time as the constraint, and the main variable to master, you start seeing opportunity all around you.

Creating Your Own Time Driven Activity Models

Setting up a new way to model pricing or evaluate costs can feel overwhelming.

It may seem like you are missing information or don’t have good enough data for the type of precision you may need.

That’s okay.

Getting tighter and more accurate on your numbers is a good thing.

But you most certainly don’t have to be perfect to start.

A build and refine approach often works best.

• Start with full time costs (even if you don’t pay for or plan to use assets and labour in a full time capacity)

• Work backwards from a total coverage or shift perspective

  • 60h / wk, 6 days a week

  • 40h / wk, 5 days a week

  • 4h / day

• Build in all of the individual items that contribute to the expense

  • Labour - base rate, premiums, insurance, vacation, etc

  • Vehicles - lease charges, fuel, insurance, additional accessories, etc

• Use market averages if you don’t have your own information

• Makes assumptions. Keep them transparent and easy to understand. Change them as you get better information

You’ll never be perfect. That isn’t the goal, continuous improvement is.

Consumer Don’t Want Fast Shipping. They Want Free Shipping As Fast As Possible

That headline is a quote from analyst Blake Droesch.

Broadly speaking, I agree.

There are two things that consumers are always looking for.

Certainty and value.

They want to know that they are getting a good value (not necessarily the cheapest price) for their money. And they want to have control and confidence in the decisions they are making.

This recent study from eMarketer struck a cord.

More than anything else, customers are re-evaluating the final value of the offer in their carts.

There’s a general assumption in the industry that customers are willing to pay for additional fees or surcharges - as long as they know what they are for.

This isn’t the case.

Delivery fees, service fees, tips and taxes.

At 46% of the original order, it’s no wonder that more customers are choosing to abandon a purchase when it finally comes time to pay.

There’s a couple of key takeaways from this.

First, all fees and surcharges are associated to the value offered by the seller. It doesn’t matter if the extras come from a partner or platform. A customer is going to evaluate the total price against the product or service that you are selling.

Second, the higher the total cost, the more you raise consumer expectations. Shoppers are willing to dig deeper if they they feel like they’re getting quality products. With every dollar the offer goes you, understand that it will require your product or service to be that much better than competitors in the market.

What Can You Do As A Retailer Or Service Provider?

Keep things simple.

As much as possible, make sure that your pricing includes additional business costs that you incur.

It’s tempting to list at a lower price to draw traffic to your site or store, but those customers that you do draw in with (what seems like) a low price offer, will quickly be turned off by unexpected additional fees.

Be selective of platforms and partnerships.

Since customers will transfer additional fees, surcharges or requirements to your brand, it’s extremely important to make sure that your brand promise and the customer experience you want to provide is aligned to how a partner or platform operates.

If it isn’t, you may be causing more harm to your business than good.

A Product Is Rarely Good Enough To Survive A Bad Experience

Everyone knows the quote

McLuhan's assertion that "the medium is the message" emphasizes the medium itself over the content it delivers.

He argues that the characteristics of the medium shape and control the scale and form of human association and action.

These days, there’s another important message we need to pair with this.

One way that I keep pushing innovation in the work I do is by leveraging my personal experiences as a consumer.

I’m a firm believer that by focusing on similarities (instead of differences) you end up finding more novel and creative solutions to problems.

In world that’s getting harder for businesses to stand out and compete, nothing will kill your brand faster than lackluster execution.

In the video linked to the image, I share why a poorly maintained environment will result in lost sales for a local restaurant.

That’s it for this week. Thanks for being here.