We all know how important it is to be customer-oriented, but what about business customers so large or important that they can kick you around?
You know the kind of customers I'm talking about—every industry has them. For example, if your product is sold through retailers, you might have to negotiate with such mega-stores as Wal-Mart and Toys-R-Us. In the high-tech field, companies that manufacture components, like microchips, must sell to tough customers like Dell or Hewlett-Packard. In the automotive category, almost all of the manufacturers are large and obsessively concerned with beating their suppliers’ prices down.
One former top executive at a very large technology company with a well-known brand name told me, “[Our company] was always looked upon as the must-win account for every supplier—and we knew that well. So we routinely adopted very tough positions and made stringent demands.”
According to this executive, his firm’s strategy with respect to small suppliers was to “work closely with that company, study them and try to extract as much of the process and knowledge as possible, then fire the supplier and do it ourselves. Overall, being self-sufficient was always a key objective. A few companies managed to avoid this ultimate fate by continually innovating faster than [our company] could absorb, so they maintained the ability to deliver new value each year.”
If you have tough customers, there are four strategies you can use to better manage your relationships with them. Each involves increasing your own company’s relative power, uniqueness and indispensability in the relationship.
1. Customization. Develop a customized service or product configuration that will increase a customer’s willingness to continue buying from you rather than bidding out a contract every opportunity it gets to your competitors. The trick here is to ensure that whatever high-end services you develop can only be duplicated by your competitors with great effort and resources, even if they are instructed in advance (and they will be—by your customer!).
2. Perpetual innovation. Work to stay ahead of your customer with innovative products or service ideas so you will always have something to sell. But remember that the value you bring is innovation itself—not the new products and ideas, but the ability to continue coming up with new products and ideas. Tough customers will do their best to absorb your innovations in order to do it themselves, and will even disseminate your ideas to your competitors to drive down prices. You need to keep the innovation wheels spinning fast without losing control of your costs.
3. Personal relationships. In the end, businesses have no brains and make no decisions. Only people make decisions, and people are both rational and emotional by nature. The individuals within your own company need to have personal relationships with the individuals within your customer’s organization. For example, in the high-tech arena, this might mean developing relationships with the design engineers within a customer’s organization who are responsible for incorporating your firm’s component into the final product. In the retail business it could mean developing relationships with the regional merchandising managers who get promoted based on the success of the programs you help organize for them.
4. Appeals to end users. A highly desirable brand or a product in heavy demand by your customer’s customers will help get your product on the shelf. The “Intel Inside” advertising campaign is designed to create pull-through for Intel. When Mattel offers Toys-R-Us an exclusive arrangement for particular toy models or brand names such as Barbie, Hot Wheels or Harry Potter, it is making itself indispensable. Also, any service you offer that directly saves an end user time or effort can increase demand for your product. Dell’s Web pages that target enterprise customers, for example, not only save money for big customers, but also give Dell a direct, one-to-one relationship with the executives, who actually have the Dell computers on their desks.
What are your strategies for landing a big client? Tell us in the comments below.
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