Are you recognized by your suppliers as a Customer of Choice? What does in mean to be a Customer of Choice and why is important?
The new normal in sourcing relationships has fundamentally reshaped the nature of client-supplier engagements. It is no longer adequate to defining best suppliers as those who can simply offer the lowest cost, today, with highly integrated of processes and services, the definition must be broadened to include a combination of rational and emotional dimensions that drive benefits beyond the initial agreement.
Organizations adopting a proactive approach to becoming a customer of choice can expect substantial benefits, including higher quality and more reliable service planning, lower cost, improved product development and receive flexible, non-bureaucratic support, during crisis situations. These benefits can you well beyond the initially contracted product or service. In addition, being a customer of choice, allows organizations to reduce their internal efforts to monitor and coordinate supplier activities. Based on this we define a customer of choice as one that, through its practices and behaviours, consistently receives competitive preference from its key suppliers. This can be benefits in terms of quality, cost, support, planning and product development. If you like to learn more on the value of these additional benefits and how it relates to the total value controlled by supplier management we suggest you read our post on the strategic advantage through superior supplier management.
With an emphasis on new strategic priorities, such as long-term sustainability, service continuity risk management, and access to cutting-edge processes and technologies, the benefit of being a Customer of Choice is a new opportunity for supply relationships to yield a strategic advantage for companies. To reap the benefits of being treated as a Customer of Choice organizations need to understand what it is that makes a supplier give them such a preferential status. When you ask your supplier they’ll mostly say that you’re a very important customer to them but the questions is whether it’s really true or that they’re just saying it out of courtesy. And, if you’re not being regarded a true Customer of Choice, what do you need to work on?
So how does your organization become recognized by its service providers as a Customer of Choice. Below you find the criteria that service providers use to select their key accounts. Understanding these criteria will allow you to improve the relationship with your service provider to unlock additional sources of strategic advantage.
- Financial outcomes, refering to past, current and future income streams
- Strategic alignment, refering to how their vision and objectives line up with the customer’s needs and quality standards
- Behavioural dimensions, refering to the customer’s action to signal whether the supplier is regarded as a trusted partner.
The first two criteria are factual, rational and relatively easy to determine. Although the third is much ‘softer’, more emotional and intangible it can be described using the 5 contributing dimensions are described in more detail below.
Refers to the clarity of intents, expectations, risks and outcomes inlcuding the quality of communication and willingness to share information.
Refers to the way of working that are simple and make it easy to do business and, in particular, facilitate the ability to deliver excellence and solve problems.
Refers to the notion of honesty, reliability, fairness and trust in all aspects of the relationship and the ability to overcome problems to reach mutual agreement.
Refers to the value both parties place in the relationship, based on a fair distribution of risk and result.
Refers to the interdependence of the relationship and the recognition of sharing risks and outcomes.
You can use the 3 criteria mentioned above and 5 detailing dimensions to get a better understanding of the extent to which your organization is regarded a Customer of Choice by your main service providers. This insight will allow you to have an open and fact based discussion with your service provider on the areas that need improvement.
Please contact Leadmark if you like to learn more about how to evaluate these factors or which steps to take to becoming a Customer of Choice of you key suppliers.