7 Simple Ways to Become a Customer of Choice
You might have good relationships with your suppliers. But are they good enough to get you preferential treatment? Here’s your guide to winning them over.
It’s no secret: companies with close supplier relationships during the pandemic were far more likely to gain preferred access and keep goods flowing. Closer relationships help in many other ways as well, especially in support of procurement’s more strategic objectives.
For example, as business priorities shift back towards growth, the top strategy procurement leaders are actively seeking to enable business agility and grow revenues is improving supplier collaboration, according to a recent study by Forrester Consulting, commissioned by Ivalua.
Similarly, a new study by Procurement Leaders on how procurement can support growth found that scouting innovation from suppliers was by far the most important activity procurement can perform to achieve this objective. As companies have become increasingly dependent on suppliers, the need for closer engagement continues to grow. Yet, improving collaboration requires an equal amount of willingness from suppliers and procurement alike.
So how do you become a customer of choice? Naturally, there is some advantage to being a large company and well respected brand. But fortunately, the top factors are actually within an organisation’s control, as a study by Forrester Consulting titled “Collaborate to Win,” which surveyed both suppliers and procurement leaders, revealed. Here are seven simple ways to become a customer of choice:
1) Pay on time
It sounds obvious, but the number one thing you can do is pay your suppliers on time. 88% of supplier respondents to the Forrester survey said timeliness of and visibility into payments increased their willingness to collaborate and share innovations with a specific customer. No other factor was as important.
This is especially crucial for your smaller suppliers who rely on that cash flow to survive.
2) Think beyond prices
There’s so much pressure on you to get costs down. But demanding a discount could end up costing you much more than you save. In fact, 85% of respondents said customers who negotiate harder on price than other customers go to the back of the queue.
Instead of squeezing out that incremental discount, you have the opportunity to look at your relationship holistically and build a true partnership. Just like Amy Fong from Everest Group put it in a recent Procurious article:
“Procurement is now looking at supplier management through a different lens. It is no longer a case of only seeking better prices, beating suppliers down and squeezing them as much as possible. Procurement today is becoming more strategic, rather than tactical.”
What you sacrifice in the bottom line could return to you a hundredfold in the form of prioritisation when supplies are tight, innovation and other collaborative opportunities.
3) Trust their expertise
If you want to get the best out of your suppliers, stop treating them like short-order cooks. Even the most innovative companies would benefit from tapping external innovation.
Wherever possible, be less prescriptive on the good or service required and focus more on the end goal desired. And yes, this can even apply to certain categories of indirect spend. For example, I recall one company was preparing to open a new building: instead of prescribing an exact heating and cooling system specification, the procurement team provided building details, defined climatic constraints and allowed potential suppliers to propose solutions. The final result was a less expensive and far more sustainable system than the default HVAC system.
Your suppliers are experts in their industry. Treat them like partners and they will view you as the same. This is especially valuable in mitigating the compromises between seemingly competing objectives, whether that be cost, sustainability, diversity or supply risk.
4) Support transparency
2020 taught us all the importance of knowing our suppliers. And not just our suppliers, but our suppliers’ suppliers too.
Instead of approaching it as a due diligence exercise, use empathy as you ask your suppliers about their suppliers. Understand their constraints and their own relationships with their suppliers.
And make sure information runs both ways. Procurement teams who enjoy the closest relationships with suppliers actively share company information like projections and forecasts. This helps suppliers serve you better and can even reduce their costs. If you’ve never done this, it might seem odd to share potentially sensitive information. (And obviously you should always comply with your company’s privacy policies!) But your suppliers will appreciate your openness. In turn, it makes it easier for them to work with you, plan around your needs, and collaborate.
5) Eliminate friction
Make it easy to work with you. Your suppliers are busy people, too. Earn your position as a customer of choice by removing obstacles.
That starts with onboarding. There’s no excuse for a slow, difficult onboarding process when technology can make it effortless. The right platform will give your suppliers access to simple self-service options.
Be sure there are no fees, vendor conditions to accept, or limits on activity. Such terms grind supplier adoption to a halt and strain your relationships instead of nurturing them.
6) Go digital and get strategic
Are you like 38% of our respondents who said their collaboration with suppliers is mostly tactical? If procurement’s greatest impact is by being strategic, it’s time to shift supplier relationships beyond tactics and into strategy.
That’s why I’m surprised so many teams still rely on manual processes.They are trying to create 2021 partnerships with the same tools that worked in 2011. In fact, 42% of our respondents said they lacked the right mechanisms to collaborate effectively. Two of the top three challenges to achieving effective collaboration were technological. If you want to collaborate at scale, and improve your ability to react quickly to changing market conditions, you need digital tools that make it easy to share information securely and communicate across different stakeholders.
For example, at the height of the pandemic, many of our customers used Ivalua’s platform questionnaire feature to quickly assess their suppliers’ exposure to the evolving global disruptions and verify inventory levels. Look at the options out there and invest in a digital platform that improves your efficiency, and makes collaboration more strategic. Remember that collaboration does not start and end with a single process (i.e. Sourcing), so beware siloed technologies that have been cobbled together via acquisitions.
7) Reward your suppliers
The final way to become a customer of choice is to acknowledge the efforts your suppliers make to collaborate with you. Have any of your suppliers gone out of their way to help you avoid disruption and solve problems during the past year?
Reward them in whatever way is appropriate. Formal supplier recognition programs at some leading organisations make a big difference. Suppliers especially value these from admired brands as it benefits their own marketing and sales efforts. But small, periodic actions can have as great of an impact. A card or a kind email to a key contact’s supervisor can go a long way towards solidifying your relationship with them. This helps to establish you as a customer of choice, which will minimise your risk of disruption the next time demand outstrips supply.
Establish the right mindset
For the past couple of years, we at Ivalua have captured the many reasons professionals #loveprocurement My all-time favourite quote is:
“I do not source goods and services; I source relationships.”
It’s so true, and your ability to become a customer of choice depends on it. Focus on building mutually beneficial relationships, and you’ll naturally increase your standing with suppliers. With the right mindset, actions naturally follow.
For more detailed strategies for maintaining strong supplier relationships and establishing supply chain sustainability practices, read the latest report from Procurious and Ivalua, Sustainable Procurement: Driving Exponential Impact Across the Supply Chain.
