Last year, I reported on the complex logistics surrounding Santa’s Supply Chain. This year, I want to unwrap the broader business model of Jolly St. Nick and how he miraculously delivers the goods year after year.
360-degree View: “Children of all ages”
Like all successful businesses, Santa built his around the customer, in his case “Children of all ages.” He was the first global business to segment his customer base with a 1:1 marketing strategy that involved talking to customers individually (usually sitting on his knee) to get a real time demand signal. Santa was also one of the first to use social channels to get a true 360 view of his customers. That’s right boys and girls, even Santa is on Facebook and twitter. How else could he know if you are sleeping, awake, bad or good?
You better watch out… for new channels
Social media isn’t enough. Santa is always looking for new channels to enter in order to remain competitive. I hope he’s aware that online retail e-commerce spending topped $1 billion for the first time on Black Friday 2012, and all estimates suggest Cyber Monday sales will also set new records. According to the Adobe Digital Index, online shopping on November 26th — Cyber Monday — grew 17% from last year to hit $1.98 billion, approaching $2 billion for the first time. Mobile transactions grew 100% from 2011 to make up 22% of all Cyber Monday sales. But good Old St. Nick has kept up with the times. You can access him via the C2S (Child 2 Santa of course) channel at: firstname.lastname@example.org. That said, his preferred “down the chimney” channel has yet to catch on with other companies.
Be good to your business, for goodness sake
Santa has an unblemished reputation for “delivering on the promise” and delighting the customer. With a firm deadline to hit (December 24th) there is no margin for error. A study by CMO Council of the global top consumer brands found that only 4 out of 10 top brands retains 50% or more of their “highly loyal” customers. Yet Santa defies these odds. In fact, I have yet to see a twitter rampage about poor customer service. The sentiment analysis about Santa is always overwhelmingly positive.
Big data: Naughty or nice?
But how does Santa actually maintain such an accurate customer database? A recent IBM study reports that 2.5 quintillion (17 zeros) bytes of data are produced every single day, and that 90% of world’s available data has been produced only in the past two years. With over seven BILLION records, his “Naughty OR Nice list” is a festive example of “big data” at its best.
HR in the “North Pole”
Santa’s HR package is probably very good. He appears to have a tireless and loyal workforce (the Elves) with almost zero turnovers (Buddy the ELF did leave for personal reasons). However, I would imagine that this hiring policy leaves a lot to be desired when it comes to ethnic diversity. Could Santa be “sizeist”? The influx of staff required to lead up to the holiday season must be an HR nightmare. It was recently reported that in preparation for Cyber Monday and the holiday season, Amazon has hired an additional 50,000 employees to work in its 40 fulfillment centers across the country. If Amazon needs that many people, how many Elves would Santa need? And as “Santa’s little helpers” are also dispersed around every mall, shopping centers and
department store around the world, I am sure that he must be leveraging an HR system “in the cloud”.
Santa’s financial health is one of biggest business mysteries. I have never seen a bill or an invoice from Santa. Have you? From what I can gather, he gets paid in “milk and cookies” and sometimes the occasional carrots to feed his reindeer.
The Jolliest Manufacturing and Distribution Facility
Santa’s manufacturing and distribution facility (the North Pole) is believed to be the largest single manufacturing plant in the world. With the global population now surpassing 7,000,000,000 people, of which around 35% are children, it averages over six million presents every day of the year. As a result, inventory of billions of end products are built up towards the peak season (Christmas) creating the ultimate warehouse management and make-to-order challenges.
A Demand Driven Sleigh
Based on this sheer volume, Santa must deploy a demand-driven approach, as he requires visibility into real time demand signals, some of which are truly real time as he picks up the “Dear Santa” letter at the foot of a chimney.
This brings me to the logistical and fulfillment challenge of visiting every customer / location combination in a 24-hour period. By leveraging different time zones, it is a 31 hour delivery run. I have calculated that Santa has the task of optimizing a transportation route that visits 822 homes a second on Christmas Eve. This means he is averaging 3,000 times the speed of sound!
With only one driver for the “miniature sleigh, and eight tiny reindeer” he obviously turns a blind eye to Hours-of-Service (HOS) rules. This is not to mention the challenge of an aging driver workforce, as Santa is rumored to be well past retirement age (1700 years old).
Obviously, Santa has a quite unique business, that nobody has managed to replicate. He has been a leader for hundreds of years. From one “believer” who hopes he continues for many more…
Follow me on twitter: @howellsrichard
This story originally appeared on www.forbes.com
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