ARE YOU FANATICAL FOR YOUR CUSTOMER?
ARE YOU FANATICAL FOR YOUR CUSTOMER?
A real life story
I was the VP of Finance and Operations of a manufacturing/distribution company that early on recognized the potential of one of the big box retailers. Early in the relationship, we extended a higher line of credit to this customer and allowed them additional days to pay. We could not afford to do this for all customers, but we believed that this was critical to developing a partnership with this customer. This arrangement was known by only a few of this customer’s employees.
Another action we took was a commitment that we would always ship 97% of their order within three business days. Our customer ordered every two weeks. If they were out of stock on an item, this was a lost sale. Their customer would go to another retailer to buy that item, as it usually was something they needed immediately. We were not always able to completely fill every order, but we always shipped enough to keep the product in stock until we could complete the order in few more days. We were so committed to this that we would actually go to their competitors’ stores, if necessary, buy the items needed, repack them and ship to our customer. Many of these were commodity items that generally were unidentifiable as to the source when unpackaged. While our selling price to this customer was the same as our competitors’ price, we did not give the customer as large an advertising allowance as our competitors did. So our value-added service of guaranteeing less product outage helped offset the net higher price our customer paid, cemented our relationship with our customer, and gave us more profitability than our competitors. As above, only a few senior managers were aware of this arrangement. Most of our customer’s staff thought that pricing was the same.
We also redesigned the packaging to help the ultimate customer distinguish which model or price level of the product they needed. These products were sold in various price/fitness-for-use levels. Instead of their retail consumer having to find a sales person to determine which item they needed, they could read the packaging information to see which model would fill their particular need. While this was done for one customer, it benefited all customers. Only our focused customer knew why the packaging was changed, because this change came about from our sales staff’s discussions with their store mangers.
These actions gave us a preferential relationship with this customer for many years, with significant volume increases as their company grew and resulting profitability increases.
Building these special relationships will take effort on your part. You need to work at understanding your customer’s business. You must meet with your customer and explain the relationship you want to develop with them. If they agree, many more meetings with them will be necessary to understand their markets and their opportunities. This will become a team effort.
Your employees will need to know that this customer is high on your company’s priority list. All customers need to be treated as special, but this one needs to be identified as one that will get even more special consideration when necessary.
As your customer succeeds due to your assistance, your profitability should also improve. This should result in a long term relationship for many years where each party considers the other a partner. This is a true “win-win” for both of you.
ARE YOU FANATICAL FOR YOUR CUSTOMER - To learn more about this author, visit Bill Boyer's Website.
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This is an unusual question. Are you so interested in the success of your customer that you, assuming that you are getting fair margins and prompt payment, will help him grow his business? There should be some customers whose growth would prove to be such an asset to your growth that they become a priority for your organization. You should learn all you can about their customers and markets so that you can develop new products or modify your offerings to help this customer grow. Since markets are so diverse, there may be other things not product-related that should be done to help your customer be differentiated in his market. Only you and your customer can determine what these are. This should solidify your relationship with them. An added bonus is that these changes may secondarily benefit your other customers. And if helping your selected customers could be perceived as a problem by your other customers, there are ways to keep the special treatment confidential.
A real life story
I was the VP of Finance and Operations of a manufacturing/distribution company that early on recognized the potential of one of the big box retailers. Early in the relationship, we extended a higher line of credit to this customer and allowed them additional days to pay. We could not afford to do this for all customers, but we believed that this was critical to developing a partnership with this customer. This arrangement was known by only a few of this customer’s employees.
Another action we took was a commitment that we would always ship 97% of their order within three business days. Our customer ordered every two weeks. If they were out of stock on an item, this was a lost sale. Their customer would go to another retailer to buy that item, as it usually was something they needed immediately. We were not always able to completely fill every order, but we always shipped enough to keep the product in stock until we could complete the order in few more days. We were so committed to this that we would actually go to their competitors’ stores, if necessary, buy the items needed, repack them and ship to our customer. Many of these were commodity items that generally were unidentifiable as to the source when unpackaged. While our selling price to this customer was the same as our competitors’ price, we did not give the customer as large an advertising allowance as our competitors did. So our value-added service of guaranteeing less product outage helped offset the net higher price our customer paid, cemented our relationship with our customer, and gave us more profitability than our competitors. As above, only a few senior managers were aware of this arrangement. Most of our customer’s staff thought that pricing was the same.
We also redesigned the packaging to help the ultimate customer distinguish which model or price level of the product they needed. These products were sold in various price/fitness-for-use levels. Instead of their retail consumer having to find a sales person to determine which item they needed, they could read the packaging information to see which model would fill their particular need. While this was done for one customer, it benefited all customers. Only our focused customer knew why the packaging was changed, because this change came about from our sales staff’s discussions with their store mangers.
These actions gave us a preferential relationship with this customer for many years, with significant volume increases as their company grew and resulting profitability increases.
Building these special relationships will take effort on your part. You need to work at understanding your customer’s business. You must meet with your customer and explain the relationship you want to develop with them. If they agree, many more meetings with them will be necessary to understand their markets and their opportunities. This will become a team effort.
Your employees will need to know that this customer is high on your company’s priority list. All customers need to be treated as special, but this one needs to be identified as one that will get even more special consideration when necessary.
As your customer succeeds due to your assistance, your profitability should also improve. This should result in a long term relationship for many years where each party considers the other a partner. This is a true “win-win” for both of you.
ARE YOU FANATICAL FOR YOUR CUSTOMER - To learn more about this author, visit Bill Boyer's Website.
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 Bill Boyer (Visit Bill's Website) Bill Boyer has over 35 years experience working with businesses, from small to major international corporations with extensive experience in operations, distribution and finance. Bill has held CEO, COO, CFO, and other VP positions with Burlington Industries, The Disston Company and Hickson PLC and other corporations. He has also been an individual coach/consultant with many smaller corporations. Bill holds a BS in Industrial Management from the University of Richmond, and is a graduate of executive programs at the University of Virginia.
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