CUSTOMER OF CHOICE
ENGAGEMENT
revenue and profitability that meets their account objective. The third, which is more enduring, is suppliers seeking collaborative interactions and ease of doing business to sustain the long- term relationship. When number one is done, it’s done. That doesn’t mean the account is no longer valued but retaining it doesn’t tend to require the same effort as acquiring it. As for revenue and profitability, the account team will no doubt be tasked with growing the account but this is more likely to be achieved by developing strategies to increase value as opposed to selling more. What keeps suppliers working that bit harder is ease of doing business, trust, collaboration and good communication, which enables them to maintain and grow the account with that customer. This is evidenced by hundreds of documented supplier studies. The feedback from years of State of Flux Voice of the Supplier surveys reveals brand and reputation are lower on the list of most valued attributes than many would think. Instead, ‘trust’ – acting with honesty and integrity – and ‘transparency’ – access to information and the sharing of thoughts and ideas – are far more important to vendors. Next they want their relationships to be characterised by a ‘long- term partnership’, clear, two-way ‘communication’, ‘collaboration’ and ‘openness’. Over time this ranking has settled to reveal ‘revenue and profitability’ and ‘brand and reputation’ valued consistently lower than the ‘relationship’ attributes. Brand and reputation is consistently towards the bottom of the list. There’s a big difference between being a customer of necessity and being a genuine customer of choice. The difference is what you get that’s not in the contract. If you don’t treat suppliers fairly and with respect, you won’t get the best out of them. The impact of the Covid-19 pandemic demonstrates precisely why you should aim to be a customer of choice for your most important suppliers.
Access the best to beat the rest
Feature
Major supply chain disruption caused by the pandemic has revealed to many if they are a customer of choice. Having this status secures the best products, services and talent, so it is not only important during a crisis. We examine what you can do quickly to achieve it. T he significance of becoming a ‘customer of choice’ is a subject that continues to divide opinion. For some, the very concept of having to work at improving interactions and relationships with suppliers is difficult to grasp.
trust, transparency, partnership and communication. And customers who demonstrate these behaviours are more likely to get the very best from their supply partners. Here we explain what being a customer of choice means, why it matters and how you go about it.
In this year’s State of Flux SRM research it’s revealed that only just over half of the companies asked believe they are a customer of choice for more than 50% of their key suppliers. For those that are a customer of choice the most frequently reported benefits are, improved account management; preferential pricing; more commitment – the supplier will always go the extra mile; access to the supplier’s best people and resources; more supplier executive focus and engagement and possibly most important – early access to innovation and more drive around continuous improvement. There are typically three stages in play as relationships develop. The first stage is suppliers aspiring to capture business with a strong brand they can add to their corporate CV. The second is their sales team being targeted with securing a level of
innovation or access to scarce components or capacity, to the less tangible – but nonetheless important – supplier top talent or simply a higher level of commitment. In other words, a supplier who is willing to go the extra mile. “Such things are often not embedded in contracts, so they are at the discretion of the supplier. Even businesses that spend a lot of money may not get the best from their suppliers if they have not treated them well.”
It can often be the largest companies who resist any concerted effort because they believe they already hold this status by virtue of their size and brand. However, as studies have shown, working for a big name is more of a motivating factor for suppliers when they are trying to grow their business and acquire prestige customers. Once the business has been secured and they are embedded in the supply chain – often as a strategic supplier – the brand association features lower on the list of their priorities. Far more prized then are the attributes of
What it is
Firstly, how do you define it? State of Flux Chairman Alan Day puts it this way: “A customer of choice is a company that, as a result of its supplier management practices and behaviours, consistently secures preferential treatment from suppliers that often extend beyond contractual obligations.”
Even businesses that spend a lot of money may not get the best from their suppliers if they have not treated them well.
Why it matters
Being a customer of choice is a key attribute in successful supplier relationships because not only do you get more of the good stuff – you get less of the bad: Less risk, fewer disputes and escalations, and more resolutions of any challenges.
He adds: “It could be something as vital as first sight of a breakthrough
State of Flux Chairman, Alan Day
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2020 GLOBAL SRM RESEARCH REPORT
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