L4L, Share DTC, Mark Downs, Space Density, 4W-Contribution, … there were far too many brand performance metrics to manage brand distribution easily. And now with social media & the internet arriving, another set of 10 KPIs are supposed to be important.
Next year’s planning arrives soon with many new priorities for your business agenda 2018. It’s likely you have already far too many topics to focus easily, but allow me to suggest one more topic. I promise it will be done after a day, or will create you some enlightenment towards your true needs & priorities. All you have to do is ask 10 members of your team one question. Their answers will give you the key to a year with better focus, an increased performance and potentially 50% less management reports.
So what do you have to do?
Are You a Bush Pilot or Do You Schedule Your Flights?
How long have you been in your current job? If it’s more than 3 years, you can probably manage the strategic and operational tasks with some routine. You ‘fly’ your job like a bush pilot, with a natural confidence that you’ll arrive safely within the given set of challenges.
If you have a job like mine – assisting to grow brand distribution channels – there is routine as well. You change the work place every few months, but after 20+ brands you learn that three things repeat themselves almost everywhere in the lifestyle brand industry:
- An unbelievably high share of working hours is invested to have a customised PowerPoint presentation or Excel document, to explain the ‘true’ state of the business.
- ‘KPI-Mania’ and confusion on definitions of what the most important key performance metrics are to focus on, and
- because of the two bullets above, no transparency and joint clarity which is important
In the early days of a brand’s development, things are very different. When sales growth is high, profitability is almost automatically ‘given’, companies tend to have little reporting or brand performance metrics and for good reason. Why waste time finding out whether profits in Japan are 2% points lower than in the US, if both are clearly above 20%? Reports or KPIs are not as necessary and managers know their direction.
Things start to change when growth slows down. It is the arrival of more Excel spreadsheets, more KPIs, more reports & more need for control. From now on, much will be done to analyse and to force managers to ‘fly on schedule’. It almost seems there is a correlation between success and the number of management reports: “tell me the number of reports you create and I will tell you how successful you are with your growth path”.
KPI Reality in ‘Flying’ Brands
To be fair, operating lifestyle brand distribution in a balanced and financially successful way is one of the most complex business models. You operate three core distribution channels (wholesale, retail, ecom) in 40+ very different countries.
Within that distribution matrix, local markets require different distribution models (i.e. own, distributor, franchise, concession). If your business reporting would cover all of that, a €250 million brand easily reports more than 100 profit centres. In that situation, you naturally become tempted not to bother too much about details. But the truth is, each of the brand channels and distribution models have their own way of growing successfully and generating profits.
You Have Too Many Brand Performance Metrics – We Guarantee it!
It’s most likely your brand has left the ‘bush pilot mode’ and is ‘flying out of schedule’. Does your monthly staple of reports and KPIs look like the cockpit of a Boeing 737, with too many instruments and KPIs to watch? Are you drowning in KPIs?
I assume you don’t see it anymore, because you have a natural sense of flying. But how is your team doing, the new retail area managers you hired 2016? Do they understand their cockpit?
Take a basic performance metric such as ‘retail personnel’ – your area managers receives more than 10 reports on that topic monthly. There is the P&L from finance, the time tracking reports from the staff scheduling system, a personnel cost report from HR, the controller’s report showing sales per working hours. Reports come in different formats with different definitions of brand performance metrics: cost as occured, with part time salaries; costs are reported against budget; against last year; in absolute numbers; in ratios; and some more fancy KPIs. At month end your area manager has absolute full transparency, but a lack of clarity.
You better believe that described report tsunamis happens quite regularly. We found retailers with 70 stores where area managers received 27 reports within one month.
New Year’s Brand Performance Metrics Fitness Program
How can you be sure it is definitively different at your work place? There is an easy way to find out. Do just one tiny self-check today. When you go for lunch, when you have a meeting, when you meet somebody from your team in the elevator, ask just that one question:
“What is our most important brand performance metric, where do you find it and how have we done lately?”
The important thing is to ask and listen only, and to avoid any discussion for the moment. Collect the answers and observe how it changes your perspective on whether you and your team have joint clarity. Ten people, 1 question and 30 minutes of your time and you gain a key insight into how to enhance your focus in 2018. That 30 minutes lets you know for sure whether you are ready to ‘fly’.
If you find the unlikely and you and your team have a 70% overlap in answers – congratulations! If you are like the regular brands, the diversity of answers will guide you to more clarity and get your 2018 flight ready for a smooth take off.
I wish you a successful ‘engine check’ and a smooth growth flight in 2018.
Guido is a dedicated KPI & brand performance lover who has been working as a manager and consultant on brand analysis and growth strategies for more than 20 years. As founder of Team Retail Excellence, he assisted entrepreneurs and managers to focus on the important KPIs. Guido is currently writing a book titled “Best Practices for Brand Growth Management”. You can reach him best by email.