Just because you have an exclusive contract to provide products or services does not mean you will automatically retain the customer for years. You may continue to provide the current product or service for many years because switching to something else is difficult or risky but you may never get a second opportunity to continue as a supplier.

However, before we discuss a strategy to give you the greatest chance for a long-term profitable relationship, we should first understand what being a sole source supplier really means.

What is a Sole Source Suppliers?

B2B sole source suppliers sell physical products that have unique form, fit or function characteristics. There can be others who sell the same function as your product but it has a different shape and may not be useable in the same locations.  For example, many electrical switches are custom designed in conjunction with the customer so that they fit in a very uniquely shaped space and no other manufacturer wants to design an interchangeable product in hopes of capturing part of the total business (but they could!).  Large software products also can be sole sourced – once you select the basic product, you may find third party add-ons but not alternate suppliers for core functionality.

If you sell to public agencies, the landscape is slightly different.  This is from an Idaho State Purchasing Guide:

A sole source item is described as an item with only a single supplier. Many times agencies send requests for sole source purchases that describe an item made only by one manufacturer, however the item is distributed and readily available from many different suppliers. So it does not qualify for sole source. It has a sole manufacturer, but not a sole supplier. As long as there is more than one potential bidder or offeror for the property item than there is no justification for a sole source determination.
Examples of circumstances, which could necessitate a sole source purchase, are:

Where the compatibility of equipment, components, accessories, computer software, replacement parts, or service is the paramount consideration.

  • Where a sole supplier’s item is needed for trial use or testing. 

  • Purchase of mass produced movie or video films or written publications distributed or sold primarily by the publisher.

  • Purchase of property for which it is determined there is no functional equivalent.

Creating A Retention Strategy

When you are a sole source supplier, you have a unique opportunity to not only continue supplying your product or service, but you also may have the inside track on future purchases your company can provide.  Here are the key components of your retention strategy:

  • Provide what you agreed to provide, when you agreed to do it, at the agreed quality and price.  If your business can’t accomplish these basis objectives, there is nothing you can do to protect the future. Quality, functionality, price, and delivery are table stakes – they get you in the game and maybe even the initial order.
  • Proactively communicate with all the stakeholders in your customer’s organization.  Let them know when there will be a problem and what you are doing to minimize the impact and prevent it from happening again. Let them know when you receive other orders for the same items; people like to do business with winners.  Make sure they know how important their business is to you.
  • Work with them to identify their future needs so you can include these in your development plans.
  • Make sure you routinely collect feedback from all your customers, analyze the information, and create actions to improve your relationships. Share your findings and plans so they know you are listening and care about the relationship.
  • Ask your customers for referrals.  It will be good for your business and reinforce to your customers how important they are to you.

Key Indicator

Businesses love to define and measure key performance indicators.  While recently interviewing a client’s customers, I heard the same thing a few times and added it to my question list.  The new question is “Do you think of XXX to be a vendor or a partner?” I think this is a killer question because vendors are defined as sellers, merchants, or dealers while partners are associates, colleagues, collaborators, or equal. Creating a long-term business relationship requires partnerships.  They give you the best chance of retaining your buyers for the long haul.