Introduction
As many businesses plan their post-COVID future, they re-evaluate the companies they buy from. The buyers are looking for several improvements, including:
- Lower costs
- Better quality
- Shorter delivery
- Innovative products and services
- More resilient relationships
When they find an opportunity to achieve all or some of these objectives, they evaluate the cost of switching and change when the numbers work.
Note: To read more about switching costs read Managing Switching Costs to Improve Customer Acquisition and Retention
Definitions
A supplier provides products and services to a buyer. They view their relationship as just a set of balanced financial transactions. The employees of some suppliers may feel like the relationship is more vital than a purchase order. Still, the organization’s cultures are not necessarily aligned, and their primary focuses are on selfish benefits.
A partner becomes an extension of the buyer and provides solutions that help the buyer achieve their desired outcomes. Both sides are committed to each other and strive for win-win outcomes.
Here is an example from the popular American television reality show Shark Tank. One of the sharks, Kevin O’Leary, will say to almost all the presenters on the show. “It’s all about the money,” or “All I care about is making money,” or “I send my money out and expect a return.” Kevin is a supplier, although he says he will work hard to grow the business because he cares about his return.
On the other hand, sharks like Mark Cuban and Lori Greiner frequently say, “I will bring the following resources to help you grow,” or “The other offer is better than I was planning, so I am out,” or “I don’t want to take so much equity because you will then work for me and that’s not why you started your business.” They both look for a win-win investment; they want to become true partners with the presenters.
How to find out if you are a supplier or a partner
As with most questions concerning how customers perceive your business, the best way to find out is to ask them; many companies have an active voice of the customer (VoC) program and routinely collect feedback about both tactical and strategic performance. Just add a simple question like “When you think about company X, do you think we are a supplier or a partner?”
I recently completed a project for an OEM where I surveyed customers about several concerns like satisfaction, loyalty, service contract preferences, and how much value my client created for their customers. In parallel, I sent the same survey to key employees of my client but had them answer each question the way they thought their customers would respond. I then compared the results of both groups. Gaps that became obvious were areas that needed to be brought into alignment. Here are the results:
And one customer replied, “Service is a partner, but sales is barely a supplier!” Aren’t customers great?
My client has lots of work to change their culture concerning how they deal with customers.
A true story about being a partner
My first job as a VP of Service was for a networking equipment company that made very reliable equipment used in all mission-critical applications. Think banks, airlines, defense systems, stock exchanges…you get the picture. And the service business was a profit center. One day one of our best salespeople called me and said, “My customer at X bank thinks you charge too much for your services. When can you come down and talk with him?” Early the next week, I flew to Atlanta.
I met the salesman and my local service engineer for coffee before we got on the elevator to the Network VP’s office. After the obligatory 3 minutes of small talk, we got right to why I was there. The customer’s concern was that he thought we should install new equipment at no cost, and he gave me his reasons. Instead of getting defensive, I just asked, “How many racks of equipment will you be buying this year.” He said two. And what about next year? Again, “two.” I said, “As long as you buy two or more racks of equipment in a year, I will not charge you for the installation.” He immediately agreed, and there were smiles all around. So far, so good.
Then the VP said, “Thanks for realizing that the customer is always right!” I quickly replied, “That is a retail concept. Our job in the B2B world is always to try and make our customers successful. If we think you are going to do something that would not turn out as you expected, we are obligated to try and prevent you from making an unwise decision. If we fail to stop you, our fallback is to try to make your decision work.”
My salesman and service engineer became pale and started looking for someplace to hide. The customer was shocked because nobody had ever said anything like that to him. After about 10 seconds of silence which felt like 10 hours, he smiled and said, “I appreciate what you said, and I completely agree.” He and I shook hands and went across the street for an enjoyable lunch he had paid for.
That is what a partnership feels like.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization improve your customer’s experiences, please contact us or check out some free articles and white papers here.
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