What are the benefits of becoming a Customer of Choice? Does the amount of spend with the supplier dictate the relationship as much as previously? What do suppliers want to see from their buying community, and how can you become a Customer of Choice?
First, let’s kick-off by defining what a Customer of Choice actually is. It is, simply, a company which, through its practices, positions itself to receive the best access to ideas, resources, and innovations from its suppliers. It’s a company acting in a way which will get it chosen as a Key Account.
Marco Nink, senior consultant at Gallup Management Consulting, points out that there are 5 main benefits to having improved supplier relationships and being recognised as a Customer of Choice:
These are all great wins within a buyer and supplier relationship, and could be crucial to the overall success of a businesses. But David Rae, of Procurement Leaders, reveals that when the audience were asked, at a Procurement Leaders Masterclass in Singapore, whether they considered themselves good customers only 3 out of 100 delegates raised their hand. But if we don’t consider ourselves good customers, will our suppliers? So why, despite all the benefits, are we missing out on the opportunity to become Customers of Choice?
It may be because we’re misunderstanding how exactly companies pick their Key Accounts. Traditionally buyer-supplier relationships were dictated by money. The more a company spent, the better they were treated by the supplier. This doesn’t hold true anymore. As I’ve discussed before a price-centric focus is one of the biggest frustrations for Key Account Managers. Well now people are beginning to recognise that a focus solely on cost is short-sighted, and deters from overall value creation. Suppliers are more likely to prioritise a company whose views on overall value are aligned with theirs. Now money isn’t the only thing we should consider when attempting to become Customers of Choice.
So what should we consider? In their book, Key Account Management: The Definitive Guide, Malcolm McDonald and Diana Woodburn highlight 3 elements which are prioritised when companies select key accounts.
Financial outcomes are, of course, still relevant when selecting key accounts but, as Diana and Malcolm’s book shows, overall value is a key priority for suppliers. Instead of a focus solely on cost-reduction, suppliers are thinking strategically. They’re considering their stakes in the relationship, and whether they are considered a ‘trusted partner’. Mutually beneficial collaboration is being heralded as a priority, and everyone is focused on overall value creation, and how it can be reaped through SRM.
