If You Want Good Customers, Create A “Good Partner” Strategy
People are obsessed with attracting the “right” customers. Usually this means offering all kinds of discounts to their most profitable accounts.
But trying to win high-value customers by lowering prices is a losing game. Not only do you sacrifice profitability, you’re building conditional, shallow relationships. They’ll leave as soon as a competitor underbids you. If you want to build long-term loyalty with high-value customers, you need to stop thinking like a vendor and start acting like a partner.
“Be a partner” is more than a feel-good cliché. It’s a competitive strategy that emphasizes value rather than price. It’s a more sustainable approach because it doesn’t turn every deal into a race to the bottom. And unlike price discounts, value is something your competitors can’t replicate quickly or easily.
Most businesses use “be a good partner” as a motto and not a strategy. But talking points and motivational posters won’t change behavior or results. By spending a little time with your customers and your business data, you can develop an organized “good partner strategy” complete with concrete action steps and measurable outcomes.
Good Vendors vs. Good Partners
The real difference between a vendor and a partner comes down to objectives. Good vendors care about customer satisfaction. Good partners care about customer success. That may sound like motivational fluff, but it has a profound difference on strategy.
For instance, let’s say your millwork customers are facing cut-throat competition on custom jobs. They need to complete orders faster, or they’ll risk losing business. A good vendor would help by prioritizing on-time deliveries. A good partner would look for ways to speed up order-fulfillment, such as offering next-day shipping.
This isn’t just about “going the extra mile.” There are hundreds of ways businesses go above and beyond for their best customers. But a friendly sales staff and special pricing won’t help your millwork customers finish custom jobs any faster. Next-day shipping will.
Building A “Good Partner” Strategy
Listen to Your Customers
This is not a one-size-fits-all process. Your customers’ priorities are unique to their market, competition, and business goals. The more you know about what they value, the more you can align your business with theirs.
You need to find out two basic things: what your customers value most and their opinion of your performance in these areas. Collect this information through one-on-one conversations, group lunches, mass surveys, or a combination. (Make sure to prioritize feedback from your target audience. Trying to build loyalty with opportunistic customers is a losing game.) You should have some way of quantifying the responses, such as multiple choice surveys or rating systems, but personal feedback may give context to the numbers.
Pick the Right KPIs
Once you identify which value is most important to your customers, you need metrics that quantify how well you’re delivering that value. These will form your scorecard. The variations are endless, but here are some suggestions:
- Product Quality: rate of returns, product waste, % of dead inventory
- Service Quality: support tickets per cycle, average length of service phone calls, human errors
- Dependability/Follow-Through: backorders per cycle, rate of on-time deliveries, inventory record accuracy (IRA)
Whatever metrics you choose, make sure they relate directly to your customers’ goals. Remember, this strategy is about their success, not your bottom line.
Turn the Scorecard into Strategy
When you’ve picked your metrics, run a few reports and establish a baseline. Determine where you have opportunities to improve and start coming up action steps to boost your performance. Consider a range of options, from the ambitious to the obvious. You could speed up the picking process by implementing cycle counts in your inventory system or simply moving the ticket printer to a more central location.
In addition to improving your current processes, brainstorm new ways to deliver the value your customers want. For instance, say your customers really care about staying on schedule. On-time deliveries are obviously critical, but if you implement software that allows them to track shipments or get updates about deliveries, they will likely appreciate the extra visibility and assurance that everything is on time.
If your current infrastructure can’t support big changes, you may need to make some capital investments. (For instance, you may need to purchase new equipment to make next-day shipping possible.) You (or others in your company) may be reluctant to invest in this project. After all, if customers are currently satisfied, a big capital expense may seem unnecessary. This is where you need to go back to the idea of price vs. value. Competing on value makes you very “sticky” with your customers. If you excel at answering their most important needs, they’ll be less interested in shopping around for other suppliers. When done correctly, you’ll create a significant barrier to competitors trying to break into your market. Purchasing new equipment may hurt short-term profitability, but nurturing customer loyalty will generate value for years.
Planning for the Future
As you work towards becoming a better partner, continue to survey your customers to make sure your efforts are on track. You may work hard to reduce backorders, only to discover customers don’t notice the difference. If a particular strategy isn’t resonating, consider changing or refining your metrics. The scorecard is a helpful tool, not your ultimate objective. Your goal isn’t to get an “A.” It’s to deliver the value your customers want in a way nobody else can.
If you’re looking for a project that delivers an immediate, measurable impact on your bottom line, then a partnership strategy is not the plan for you. Profitability is not a strategy. It is the result of a value-based strategy. Long term, you will gain more of your customers’ business by listening to what is important to them.
You don’t have to be perfect to be a good partner. You just need to excel at the things your customers care about. Using surveys to build a scorecard and create long-term strategies may require some short-term investment, but if done correctly it will pay dividends for years to come.
Carl Lamb is Vice President and General Manager for Snavely Forest Products, a national leader in the wholesale lumber and building products industry.
Henry German is Market Teams Manager for DMSi.
This article originally appeared in Building Products Digest.