How valuable would it be if you could gain preferential access to scarce resources? What would it mean for your business if suppliers brought their latest innovation and thinking to you first? And what could be achieved if you only worked with the best people from your top suppliers and could secure preferential pricing?
This is all possible. You don’t need to be the largest account, you just need to position your business as a customer of choice.
I’m not talking about a key account. From a supplier’s perspective, a key account may simply be client with a large spend, perhaps even a well-known brand. These accounts are not necessarily customers of choice. They may have low margins, be challenging to work with and may not appreciate a suppliers value add.
Customer of choice status is harder to secure. There are relatively few for any one supplier. In some instances as few as five, making it a highly competitive position to hold.
Consider this — would you allow your organisation to willingly give up hard-earned, best practice information to your customers if they did not value what you do? I highly doubt it. Yet that’s the position that suppliers frequently find themselves.
Does your business value key suppliers as highly as customers? Do you think you should? Let’s consider that for a moment, customers bring revenue and key suppliers bring the necessary inputs. Without customers you have no business but yet without suppliers you have nothing to sell. It doesn’t matter if it’s goods or services, your key suppliers are the life blood to your business. Sure you could change suppliers but if you keep down that path you may well develop a negative reputation and will find it infinitely harder to be considered as a customer of choice.
“So what’s in it for my business” I hear you say.
- Preferential access to scarce resources. Securing supply in a ‘buyers’ market is one thing, it’s an entirely different matter when goods are either rare or extremely expensive. Just stop and consider what would happen to your operations if your key inputs were not available. Could you still supply your customers? Then ask yourself, why would a supplier choose to supply their goods to your business over your competition? You have to present a compelling reason if you really want preferential access.
- Innovation potential. What products could be created, what markets could be entered if your business was given the first right of refusal to the best thinking of your suppliers? The thing is, they’re not just going to throw this knowledge around, there will be a careful assessment of all current and potential clients to determine who would be best to work with. Ask yourself, how many confidential innovations are your suppliers working on? If you don’t know, if you’re unable to list the critical projects, I can guarantee one thing, this information is going to your competitors.
- Preferential pricing. If your business is the first point of call for all supplier developments, if the two companies work collaboratively on new projects then this is often accompanied by favourable pricing. Clearly the first to market benefits attached with new technologies or ways of working also regularly carry development costs. Thankfully paying for this development can be structured in many ways that does not necessarily penalise your business for taking the leap on something new.
What Suppliers Look For
Positioning your business as a candidate for customer of choice status requires a deliberate and planned approach. There needs to be a demonstration over time that your business is the right company for a supplier to engage. So how can this be done?
- Account profitability: The account (your business) needs to be sufficiently profitable for a supplier. This does not mean a supplier operates carte blanche with its prices. Pricing needs to have sufficient margin to make the account attractive and to allow for development however exorbitant margins should never be tolerated.
- Alignment of vision and direction: The two companies need to have similarities in where they are headed. It makes working relations so much more compatible if you are heading for roughly the same goal. The path you take will no doubt be different but a common objective makes for easier discussion at the leadership level.
- Behaviours: What comes out of the mouth of procurement, business leadership, operations etc, needs to align with the actions taken. Proof is always in the pudding so make sure that your business truly is easy to work with, engaged, receptive and inclusive. Don’t forget the simple things like, doing what you say, paying those invoices on time and leaving adversarial behaviour at the door.
- Potential: Your business may not be the largest account, in fact in may not even be the highest profile brand. However, does it have growth and development potential for a supplier? Can they see how your business can be an integral part of their future? Profit and revenue for today is one thing, profit and revenue for tomorrow is an entirely different prospect.
Let’s not put to finer point on it. Suppliers are looking for and need customers of choice. So you have a decision to make, it can either be your business that works with, collaborates and co-creates with a supplier or it’s your competition.
- Identify your important suppliers. How can you position your business as a customer of choice?
- Stop and consider what suppliers think of your business.
- Does your business see suppliers as important as customers? Why? Why not?