Planes, Boats & PlanogramsHoward Bergman

The Power of the Customer

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.

Sam Walton

Planes

Cost of a Flight$58,050

• Fixed - $46,050– Jets– Airport facilities– Customer service– Mechanics– Pilots– Flight attendants– Baggage handlers

• Variable - $12,000– Fuel– Food

Total Cost = $58,050 Variable Cost = $12,000Total Revenue = $12,800

Ave Cost/passenger (16) = $3628Loss/Profit = $45,250

$800/seat4 rows @

$3,200/row = $12,800

$460/seat11 rows@

$2760/row =$30,360

Total Cost = $58,050 Variable Cost = $12,000Total Revenue = $27,800

Ave Cost/passenger (46) = $1261Loss/Profit = $30,250

Total Cost = $58,050 Variable Cost = $12,000Total Revenue = $58,160

Ave Cost/passenger (112) = $518Loss/Profit = $110

$320/seat10 rows

@$1,980/row =$19,800

Total Cost = $58,050 Variable Cost = $12,000Total Revenue = $77,960

Ave Cost/passenger (172) = $337Loss/Profit = $19,910

$500/seat5 rows @

$3,000/row = $15,000

$300/seat15 rows @

$1,800/row = $27,000

Total Cost = $48,000 Variable Cost = $12,000Total Revenue = $27,000

Ave Cost/passenger (90) = $555Loss/Profit = $21,000

Low Cost Airlines

$175/seat15 rows

@$1050/row =$15,750

$800/seat4 rows @

$3,200/row = $12,800

$500/seat5 rows @

$3,000/row = $15,000

$460/seat6 rows@

$2760/row =$16,560

Total Cost = $58,050 Variable Cost = $12,000Total Revenue = $44,360

Ave Cost/passenger (82) = $708Loss/Profit = $13,690

Total Cost = $58,050 Variable Cost = $12,000Total Revenue = $60,110

Ave Cost/passenger (172) = $337Loss/Profit = $2,060

BOATS

= Our engines

Cost = $80Price = $100Total Profit =

$100

$20

$20

$20

$20

$20

= Our engines

Cost = $80Price = $95

Total Profit = $75

$15

$15

$15

$15

$15 Total Profit = $90

$15

PLANOGRAMS

Maximize Economic Profit

What does a Retailer Need?

Increase Margins

Increase Turns

Increase other sources of income

Decrease cost of capital employed

Decrease cost of operations

Store LayoutY

ard

FoodPharmacy Houseware

Clothing

Planogram

Assortment: What to carry

Pricing: What retail price

Promotion: How to display it

Placement: Where to put it

Supply: How much, how often

Assortment:Variety vs Duplication

1 5 10 15 20 25 30 35 40 50 70

% of Items

0%

20%

40%

60%

80%

100%% of Dollar Sales

Are these items worth keeping?

How many items ? How many sizes ? Will the consumer

switch to another brand ?

$2.00$3.00$3.15 - $3.00 =$0.15

$2.20 -$2.00 =$0.20

$0.15 X 100/month =$15.00/month $0.20 X 50 month =

$10.00/month

$25.00/month

$0.15 X 150/month =$22.50/month

$0.20 X 25 month = $5.00/month

$27.50/month

Maximize Economic Profit

What does a Retailer Need?

Increase Margins

Increase Turns

Increase other sources of income

Decrease cost of capital employed

Decrease cost of operations

Yar

d

FoodPharmacy Houseware

Clothing

The Power of the Customer

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.

Sam Walton

The End

Thank You

$3628

$1261

$518

$337

1721124616

$800

$500$460

$350

MPLS Las Vegas

6:00 pm 7:00 pm

8:00 am11:00 am

8:00 pm11:00 pm

6:00 am 7 am

2 Full FlightsProfit = $42,000

2 Additional Flights 1/2 full

Variable Cost = $24,000Revenue = $44,360

Loss/Profit = $20,300Total Profit = $62,300