When the conversation is about baseball, golf or tennis, before long someone will probably mention the "sweet spot" -- that perfect point on a bat, club, or racquet that produces the most effective result. Good equipment is an essential component in the search for the sweet spot. So is a good player. If either component is missing, the results will probably be disappointing.
It seems to me that "sweet spot" is also a great way to describe an optimal supplier/customer relationship. When a good supplier and a good customer get together, the result is productivity and mutual benefits -- the business equivalent of finding the bat's sweet spot.
It's not hard to find lists of characteristics a customer should look for in a good supplier. They include things like:
Understands customer needs
Provides quality products
Prices fairly
Keeps commitments
Provides support
Delivers on time
Communicates effectively
We all know there’s much more to the customer/supplier relationship than the customer ordering and the supplier delivering. The synergy between customer and supplier, much like between bat and hitter, is critical to finding the sweet spot for your business. That said, it stands to reason that suppliers need to evaluate customers much as customers evaluate them. (Other than credit approval, when was the last time you saw a customer evaluation survey that determined whether a prospect qualified to become a customer?)
That started me pondering what, really, is a good customer? How do we know we’ve found a customer that is squarely in our business’s sweet spot? Or, for that matter, how do we know we’ve found our sweet spot?
While sometimes good customers just land on our doorstep, more often they come to us through hard work. The following questions can help define where the sweet spot is and what customer will hit it:
How many customers can our business support and to what level?
What is the most profitably sized customer for our business?
What value-added services do we provide, and who is most likely to need them?
Are there any limitations we need to take into consideration when deciding whether to present a proposal to a potential new customer? Warehouse facilities; sales personnel; conflicts with existing customer requirements?
Is this a one-time or occasional purchaser, or is there potential for an ongoing relationship?
Do we have, or can we acquire, the resources to meet this customer’s needs?
What is the revenue potential for this customer?
Will the revenue from the customer justify the time and expense to support it?
Is this relationship likely to expand to additional products and services?
Are the customer's requirements compatible with our business philosophy?
These kinds of qualifiers can help us, as suppliers, identify customers with the potential to connect with our sweet spots. But like the relationship between a bat, club, or racquet and the person using it, there are intangibles that come into play. At the top of the list of intangibles in the supplier/customer relationship is mutuality. Suppliers have to be willing to make the extra effort, but so do customers.
A commitment to the partnership and trust are important elements of a good supplier/customer relationship. Good customers participate actively. They provide clear direction, communicate regularly, and make their expectations known. And like good suppliers, good customers keep their commitments. This is the only way to move from suppliers to partners.
There's no formula that will guarantee that every prospect that becomes a customer will land squarely in our sweet spot. However, knowing where that sweet spot is, and seeking customers who fit our "good customer" profile, will make it far more likely. It also helps ensure that the customer will become a raving fan and great partner.
Do you know your sweet spot? Do your customers/suppliers know what it is? What kind of differences would you see in your business if both you and your customer had that sweet spot match?
Todd's article raises great points. One thing we've tried to get in with clients is the concept of "exchange in abundance." It basically means delivering more than what's expected, which many suppliers strive to do w/ their customers. However, take note of the word "exchange." It's a two-way flow. So if you're providing outstanding value that's beyond "spec" that's fine, but you also have the right to expect something back beyond the purchase order or payment.
Clients will often balk at this (to use a baseball metaphor) and throw me some resistance. "We already have a pricing structure with these accounts," they often say. "We can't simply notch up our pricing."
No. probably not, yet the concept isn't about cash alone. Exchange can come back in the form of referrals, success studies, testimonials, opportunities to present to other divisions if the company is of a certain size.
When you get this type of ethics in, the relationship with the customer improves even more. People by nature do not like to be "out exchange," at least not the ones worth doing business with!
This is a good article, Todd... sometimes I do wish something like a "Customer Evaluation Survey" actually existed!
I think I know what our sweet spot is... and I think our better customers are aware that they're good customers as well. Really, it's usually fairly obvious if you're in a good supplier/customer relationship I think: both parties benefit, there is little conflict, everything runs smoothly and performs well, etc.
While it would be nice if there was some proven method of always hitting the sweet spot with your customers, I don't believe that to be realistic. Plus, the experience wildly varies, sometimes we have customers come in that turn out to be a great match from day one, other times we have to work with an organization for literally years before we find that sweet spot. And sometimes we just never connect.
To expand on the sports analogy you opened the article with, you can't always hope to hit the sweet spot: you're going to foul off some pitches, hit a few pop-ups, maybe even fly out. Like baseball, I think if you feel like you're in the sweet spot with 33% or more of your customers, you're doing well.
They're all important questions to consider, though I think much turns on the fifth one. If the customer is one who would come in for the long term and not just as a one time deal, then one has to consider if his/her needs can be met down the road. Also a loyal customer, certainly, offers a much better return on the investment of acquiring a customer than one who shops anew each time without considering past experience. But loyalty cannot be taken for granted, and businesses have to keep earning the right to keep their customers with competitive pricing and good service.
I"m wondering though, how easy is it to find real good customers, how about the possibility of building good long lasting customers out of those that are only concerned about the services or products the receive, and not about the company in particular.
Todd you are right, the 6 points you mentioned (Understanding customer needs,…….., Communicates effectively) are very valid and if we are analyzing nobody is contribution more than 70-80% of the customer expectations. Because, it’s purely a business, they wants’ business with profit and better ROI, nothing more than that (no commitments or poor after sale supports). That’s one of the reasons of failure in building relations in supply chain. Trust and confidence are major factors in build up supply chain and inter personal relations.
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Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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