Fastener Marketing with the 80/20 Principle - Part 1

The 80/20 principle is a powerful tool that can be used in many ways. This is the time of year to employ the 80/20 principle to help focus your planning for 2009.

The simple applications of the 80/20 principle tell us that, typically:

80 percent of our sales come from 20 percent of our customers
80 percent of our profits come from 20 percent of the products we offer
80 percent of productivity comes from 20 percent of our efforts, etc.

Now these numbers might end up being 70/30 or 95/5, but the principle is remarkably consistent, and it provides us in fastener marketing with a strategy management consultant that is objective, reliable, and that doesn't require payment or even so much as a cup of coffee.

The 80/20 principle is completely free and works 24/7. The trick is in finding ways to apply it so that we can maximize its effectiveness. As a matter of fact, you might says that 20 percent of the ways we use the 80/20 principle will produce 80 percent of the results.

So in fastener marketing we can find many uses for the 80/20 principle. Let's start with one of the obvious ones - customer profitability.

If you have a decent database you should be able to print a list of all of your customers (whether you are doing this for your territory as a salesperson, or your district as a district manager, or the whole company as the big cheese)and how much profit (notice I did not say sales) you have made from each. Try the period of 11/1/07 - 10/31/08. That's it. Keep it simple. 80/20 loves simple.

Now sort that list (paste it into excel if you need to) by total annual profit from each customer, with the greatest profit total at the top, and working down to the customer that contributed 64 cents of profit during those 12 months.

Now run a profit total for the whole list, let's say it is $100,000. Now you want to see how many of your customers give you 80% of that profit (in our example - $80,000).

You know what is going to happen, but you still have to do this. You have to see it. Go down the list until you accumulate $80,000 in profit. You will be surprised that you don't have to go very far down the list before you hit that magic number. Now, the portion of customers won't be exactly 20%, but it will probably be a striking figure.

Now, the first thing you should do is find some meaningful way to show your appreciation to those top few customers who are giving you such a huge portion of your profit. Don't call them and say, "Hey, I ran an 80/20 analysis and you are in the top group, so thanks!" but figure out how to make sure the customer feels appreciated, and to make sure you are not taking them for granted.

That is a very important step, but it is only the beginning of how you can use these 80/20 results. So stay tuned for Part 2.

Fastener Marketing and Innovation

I just started reading an article about "Innovation Through Recession", a perfect topic for a cold, bright Sunday morning. Just the first few paragraphs of the article motivated me to get right in here and lay down some thoughts about innovation in fastener marketing.

I know many people think of companies like Apple or Google when they think about innovation, but why not a whole industry segment? Why not strive for innovation in the fastener distribution industry? Just because we don't design or make a tangible product, does not mean we cannot innovate with the valuable services we offer.

I've ranted a little bit in the past about how the fastener distribution industry does not seem to have taken full advantage of new technology. Has the focus of fastener distribution changed since the fax machine and the desktop PC? I've been here at least that long and I don't see a dramatic shift.

It is common for those within an industry to resist change. Part of this stems from that fact that we fear that the change will no longer include us. I remember the rumblings in the late 80's and the 90's about whether distributors would be necessary any more. Would technology replace the need for a classic "middle man" position? Well it hasn't happened, so it probably won't, becuase we are more than middle people. One thing technology has a creepy effect on is waste. True waste is highlighted by new technology, and then it is eliminated. So if we were afraid that new technology would make fastener distribution obsolete, I think we can stop freaking out. We're still here, so it turns out we are still useful after all.

But we still cower a little bit, and we still lay low out of fear that someone will discover our secrets. Just 20 years ago if someone at one of our customers needed information on a fastener product, it was up to us to ride to the rescue and bring them a catalog. We had boxes of manufacturer catalogs in the office and we carried stacks of them in our trunks. "I'm bringing the catalog you asked for." or just "I have a new edition of the ABC catalog" was the big reason for us to show up at a customer. One of the things we loved to do in the 80's because it made us feel important, is no longer necessary. Now, any engineer can look up the information on the manufacturer's website. What will we lose next?

Well, that's the point. If we can lose it and move on as we have, then we didn't need it and it was wasting everyone's time. As fastener distributors, what other unnecessary things do we cling to? What other roles could we let technology or new marketing and logistics methods handle for us? And after we clear out some of the clutter, what new things will we have time and resources to develop?

We all have at least a germ of an idea we could use to add real value to fastener distribution. Ideas that started with "If only we could...", but were quickly squelched as unrealistic. Now is the time to make those ideas into reality. Not only do we have the technology, but in the coming months and maybe years, many industries will be hunkering down and holding back. Let's take everybody by surprise and come up with the newest, coolest innovations when they least expect it.

In the coming weeks I'll throw out some ideas about possible areas where this can happen. Being a marketing fan, I'll explore the good old marketing mix of price, placement, product, and promotion. Let's start with that classic framework and then build some wildly new stuff.

photo by nigelpepper

Funny Fastener Name #1 - Cheese Head

One of the things I like about the fastener industry is the many weird names we have for certain fasteners. This is the first installment in a series about fastener names. Today's subject is the cheese head screw.

This has always been one of my favorites because cheese is a funny sounding word anyway. The cheese head is a cylindrical head that, if you had to describe it on the telephone, you could say looks like a wheel of cheese. You never know, but I don't think that is a coincidence. Maybe it was invented in Wisconsin.

I don't know who came up with it, but I know I saw a lower version of what we're used to in one of the pictures at the cool blacksmith site I've mentioned before, so I know it has been around for over 100 years.

The cheese head is now produced mostly as a metric machine screw (so maybe it was invented in France), with a head height about half the diameter. Also one of the more common head types seen in SEMS screws (screw and washer assembly), it often has a slotted or phillips drive.

A similar head style that is more common in inch-size screws is a fillister head, another funny sounding name - perhaps the subject of our next installment.

Fasteners and Autos - Sibling Industries

We've all heard that the Big 3 U.S. Auto Makers are on the ropes and asking (OK - begging) for some kind of help from the federal government. There is plenty of debate about whether another huge chunk of money from the feds is a good idea or not. I'm not getting in the middle of that. But it does make me think about the relationship between the auto industry and the fastener industry.

By most accounts it seems that no single industry uses more fasteners than the auto industry. And although relatively few fastener companies actually deal directly with the auto makers now, the whole fastener industry has been affected by the auto industry, and vice versa. Think of the fasteners that have been invented just for and by that crazy auto industry. But then think about what the auto industry would be like without a creative fastener industry. I know, fastener people don't get a lot of credit for creativity, but we really should.

Actually it started with the carriage industry back in the 1800's. I came across a great web page about, you guessed it, carriage bolts - and other bolts that were needed and invented for the carriage/wagon/sleigh industry. Go check out the page and scroll down. There are some really cool old bolt drawings and ads.

As demand for more effective fasteners for carriages grew, the fastener industry grew by coming up with creative new solutions. The part some people don't think of is that these new fasteners greatly improved carriage production and quality, so the carriage industry grew, and the fastener industry grew more, and so on and so on and so on...

The drive for vehicle fasteners (pun intended) continued through the 1900's and to today. The now common phillips drive was popularized through its use in auto manufacturing. Many specific drive types were created for the auto industry, and plenty of funky head types and point types, too. We're even moving into some pretty high tech "intelligent" fasteners. Now other industries have all of these fasteners available to them and have found many more uses for them. Think of it - even today, carriage bolts are rarely used to build carriages, but they are used in many other places.

So we fastener freaks owe a lot to the auto industry, but the auto industry owes us a lot, too. Whatever solutions are employed to help the auto industry get out of their hole, I think we should continue to root for them. It's like we've grown up together.

Trade Show Tips

I did one day at NIFS/West and it was not bad. The show itself is run very well. I forgot to bring my badge, but it was a piece of cake to get my badge at the show. No long line, just an easy self serve computer and badge printer. The people who run the show have it down pretty well, and I liked the hotel (and the buffet I tried for lunch was great).

Having spent time inside the booth at trade shows, I know that sometimes it feels like you are just there because your boss stuck you there. At this show there were people in booths who did things to make it obvious that they didn't really want to be there, or didn't care whether they actually talked to customers and prospects. I am guilty of having done some of them in the past, so I understand how it happens. But some things just seem like a waste and will not attract people to your booth:

• Clustering - the people who are working in the booth get in a circle (or rectangle or triangle) and talk to each other, ignoring passersby.
• Zappers - the person in the booth only seems interested in scanning your badge with the cool little electronic scanners they have, and then looks at you like, "Why are you still here? I am going to mail you a bunch of crap you probably don't want, but my boss will be impressed with how many scans I have".
• Munchers - people who have their cup of coffee, or bottle of water, or even their half-eaten lunch, sitting on the display table.
• Downers - this is usually a solo booth person who nobody is talking to and who looks so bored and/or sad that even though you feel sorry for them, you just don't want to go near them for fear that they will suck you into their world of doom.
• Pouncers - more than just a friendly hello, these people start to give you a canned presentation if you do so much as walk within 10 feet of their booth.
• Teasers - they have really cool promo giveaways, but they put them in the back of the booth so you know you have to run the presentation gauntlet to get that pocket flashlight.
• Stuffers - these folks are not so bad. They are eager to give you a bag or some kind of cool promo, but that seems to be all they want to do. They make you feel like you should take your promo and gomo.
• Ringers - The pretty people (sometimes extremely pretty) who are in the booth to smile, be friendly and hand you a brochure, but don't know much about the company and maybe don't even work for the company.
• No-shows - The booth space is labeled, and maybe you really wanted to talk to somebody from that company, but they ain't there.
• Non-English Speakers - I don't have a clever nickname for this group because I don't want to seem mean. I certainly can't say that I have learned much of any other language, but it just doesn't make sense to be in a trade show booth in the U.S. if you don't speak any English at all, unless there is at least one person there to translate.

OK - so I've ripped about 80% of the booths in some way. Am I just being negative? No, of course not. It's just more fun, and maybe more illustrative to point out the DON'T s. But from my perspective having spent all day walking the aisles, here are some easy DO's that will get good results and make the show more fun:

• Have a nice, simple booth that includes samples or pictures of your product(s) or clear simple illustrations of your service(s). Attendees should be able to tell at a glance what the heck you do.
  
• Be looking at people as they go by. If someone makes eye contact, smile and say hello. Maybe ask a quick and easy qualifying question to find out if the attendee might be interested in your stuff. Make friendly conversation.
• If the attendee seems to want a promo item, hand it to the person and maybe give more than one.
  
• If the conversation is worth continuing for both of you, keep asking questions to find out what information is most important.
  
• If you get to the point where it makes sense to get a business card and/or scan the attendee's badge, first explain exactly why you are asking, "We have a great brochure that really spells out what I am talking about. If I can get your email address I'll email it to you." or "Jasper in our Fargo branch is our resident expert on edible insects, he would love to give you a call if I can get your contact information."

Keeping it friendly and helpful makes these things worthwhile for all of us. Even if a few people came mostly for the casinos and buffets at night, we might as well all get as much out of the show as we can by really connecting.

The most important

Don't forget that if you are an American citizen, it is your responsibility to vote in this election. Many people have died protecting our freedoms and one of the greatest ways we protect and preserve our freedom is by exercising our right to vote. Don't take this gift for granted.

Then, when you are done, realize that you have the power to control most everything that goes on in your life. It will matter to you who wins the election, but because you live in America it should not dictate your every day life. What matters most in the success and happiness of you and your loved ones is the choices you make, or fail to make, every day.

Happy Election Day.

Happy November!

Jeez, can you believe it is November? What the heck happened to October?

Well today this blog got mentioned on Fastener Talk. He's got the first real fastener blog, so that was very cool! You probably already know of it, but in case you don't, it is at http://fastenerblog.net

And remember, for any blog it is soooo much easier if you subscribe and have the blog fed to a reader. It's like getting the newspaper delivered to your front porch right after it is printed, instead of schlepping to the newsstand over and over to see if the paper is there yet.

If you've never subscribed to a blog before you just need a reader. There are tons of feed readers, but an easy one is Google Reader. If you already have a free Google account for email or any of their other cool free services, you can use the same login. If you don't already have a free Google account for email or any of their other free services, I recommend getting one.

Beard it Up for Charity

Click here. [Make a beard photo] They'll donate a dollar. And it's fun.

I am waiting in the dentist's office.

I am waiting in the dentist's office. My daughter is going to get a filling. She is distracting herself with a magazine, and I just discovered that I can post to my blog from my phone. How cool!

It made me start thinking about how much has changed since the 80's when the company I worked at bought it's first fax machine. We still had a cardex file where we manually tracked inventory, and orders were typed up on 3 part carbon copy forms.

Now I sit here with a tiny mobile phone, having just checked email, answered voicemail, and looked up sales figures on the internet. I'm not going to go on about how much time has passed, or how old these changes make me feel, because it hasn't really been that long and I am not old.
But thinking about the fastener business, I wonder what these changes have meant for distributors and what they will mean in the future.

If somebody had walked in the front door at Diaco Inc in 1985 and told us that they could give us a small, battery powered electronic device that we could use to check our suppliers' inventory, place an order online, and have the product drop shipped immediately directly to our customer, we would have been stunned. First we would have asked what "online" means. Then we would have all looked at each other and shouted, "We're going to be rich!"

How is it that because the technical advances didn't happen over night, we don't seem to have taken full advantage of them? The distribution business hasn't changed nearly as much as have the tools we use to operate. Maybe we just need some time to catch up. One thing is for sure. Distributors are still a key part of the equation. While manufacturers have used technology to tune up their production operations, it looks like it is up to us distributors to harness technology to transform the distribution end. End users rarely want to deal directly with manufacturers, and vice versa. Distributors know the lingo, habits, and quirks of both end users and manufacturers. We are no longer here just to break kegs into packages and keep them on the shelf hoping to sell them. We are the translators that allow the fastener business to run efficiently. Let's use the strength that comes from that importance, and make changes that benefit everyone.

More to come.

It turns out my daughter didn't need a filling after all. Very happy, we will go home now.
Photo by TheDamnMushroom

Have you screwed up lately?

A friend of mine is writing (right this minute I think) about the concept and strategy of "test often and fail". This made me think of this little story.

My 13-year-old daughter was very nervous before her first practice as a beginner on a water polo team. I wanted to help her calm down, especially since inside I was probably more worried about it than she was. All I could think was that at some point she would surely make a stupid mistake and feel (and maybe look) like an idiot. But then I realized that the first stupid mistake would feel the worst and, like getting a shot, would feel nowhere near as bad as either of us were anticipating. So I had what I think was a creative parenting brainstorm and told my her that being a beginner she would surely make a mistake that would make her feel really really stupid - for only a moment. I strongly urged her to make that first really stupid mistake as soon as she could and then get on with practice. This calmed her down for two reasons. First, being a teenager she is not allowed to believe that I know what I am talking about, so when I say that she will feel stupid, I am probably way off base. But I think it also sunk in for her that the first stupid mistake will come, feel bad, and go. She saw that first mistake for what it really was, a brief, uncomfortable and necessary interruption on her way to having a lot of fun and becoming a much better water polo player.

After each of her first few practices I would get a report from her about what went on and then I would ask, "But have you made your first stupid mistake?" I jokingly acted disappointed at her reply because it actually took a few practices before she had a chance to make a really stupid mistake, and by the time it came she had long since stopped worrying about it. I think she was glad to finally make that first stupid mistake because it really wasn't so bad, she survived it, and it was easily outweighed by plenty of good moves that she never knew she had in her.

Besides being super proud of her, I realized that I need to practice what I was preaching. Even - or especially - in business, if you never make that first stupid mistake that means you are not taking enough chances and you will not gain. That glorious stupid mistake means that you are pushing hard enough to actually gain ground. It not only gives you an opportunity to learn from the mistake itself, but it is a clear sign that you are heading somewhere.

We all have memories of stupid mistakes from early in our careers. We can laugh about (most of) them now, and they help us realize how far we have come. I clearly remember starting in the fastener business as a packager and making a stupid mistake because I could not tell the difference between a fine thread and a coarse thread nut. I remember it because now I know it was such a simple thing, but it was the starting point of learning more about fasteners than I ever thought I would know. I was willing to dive into that job, knowing almost nothing about the product. I took chances and made plenty of mistakes along the way as a necessary part of learning and progress.

Now I am a big shot fastener specialist and very comfortable in my role. But that is the trouble. For the last few years I haven't been looking for the next big mistake, instead I have been skillfully avoiding it. Twenty years from now I would love to look back on today with the same sense of accomplishment and that I now have looking back to 1988. So now as I ponder my to do list for the day or week or month, I look eagerly for the area where I am most likely to make a stupid mistake because I know that is where I am most likely to be making worthwhile progress. Even working on this blog is very new and very public, so I expect that I will make a stupid mistake and be embarrassed at some point (if I already have, don't tell me, I'll get there soon enough). But I am doing my best to transform that weird feeling in my gut from fear into excitement since I trust that it all leads to something good.

(Oh did I mention that my daughter became a starting varsity player as a freshman and has a bunch of new friends on the team? All because of my brilliant advice, of course.)
Photo by estherase

You Might Be a Fastener Freak if...

My name is Andy Pels. I have been in the fastener distribution business since 1985. I might be like many of you. I didn't dream as a child of being in the fastener business, but here I am. And now it looks like I'm sticking around.
Yes - I am a fastener freak.

You might be a fastener freak if:

• while you wait in an elevator, just by looking at the heads you identify the diameter, material and style of every fastener in the elevator, and you even think you know the lengths.
• When you shop for an appliance you turn it upside down and/or look in the back of it to see what fasteners are used.
• When you are in a stadium seat and look down at the ground, you don't care so much about the beer and soft drink residue, you just think to yourself, "Wow, four anchor bolts on this seat times 50,000. Nice."
• It bugs you when you have to go to the hardware store to get a fastener, but while you're there you get mistaken for an employee and help 3 or 4 other people find what they're looking for.
• You always have some kind of fastener sample on your desk - and in your pocket - and a cupholder in your car - and on your dresser...
• It makes you twitch when somebody calls a bolt a nut, or vice versa.
• You don't like that there is not a universally agreed upon explanation of the difference between a bolt and a screw (even though everybody in the industry thinks they know it).
  
• You don't care that normal people around you think this is all weird.
  

Fastener Freaks - please add your own in the comments section. Subscribe to this blog and let's keep the conversation going!