Why “customer of choice” has never been more imperative
“Customer of choice” status amongst key suppliers grants numerous benefits to the organisations who can secure it. In this article, Vizibl co-founder Alex Short looks at the challenges facing enterprise businesses to explain why the dynamic has never been more important, along with offering his 101 guide to becoming customer of choice.
The global business landscape of 2022 is almost unrecognisable compared to that of 2012. While the UK basked in the glory of the 2012 Olympic Games, the rest of the world was beginning to hesitantly emerge from the worst effects of the 2007-08 financial crisis. But as we think back to that time of relative stability, it would have been hard to imagine what the following decade would have in store for us all.
Within less than four years of the closing ceremony of the 2012 Olympic Games, Britain had narrowly voted to exit the European Union, rocking the very foundations of the most peaceful European political landscape the world had ever known, and leaving the British political system – and the union – in turmoil. Outside of the UK, tensions in North Africa and the Middle East saw us at the height of the Arab spring, with war and political instability rocking the region once again.
Outside of scientific circles, the rest of us remained blissfully unaware of the chaos a pandemic would wreak to both global public health and the world economy. At the back end of 2019, a novel respiratory virus would emerge from Wuhan, which would go on to be declared pandemic by the World Health Organisation in March 2020.
Even since the worst waves of the pandemic, further causes of turbulence and disruption have emerged, all of them with considerable negative consequences for global businesses.
Russia’s invasion of Ukraine in violation of the UN Charter earlier this year poses not only a humanitarian crisis to the people of Ukraine, it threatens famine and supply chain crisis beyond its own borders in the ‘bread basket of Europe’. Outside of the war in Ukraine, other sociopolitical upheavals elsewhere across the globe also threaten further disruption to businesses and their operations, particularly in their potential to throw supply chains into crisis.
Alongside the fallout from sociopolitical upheaval, businesses are also having to reckon with a rampant energy crisis that finds them loaded with increased operating costs as they scramble for renewable solutions. This energy crisis goes hand in hand with a rapidly escalating cost of living crisis being felt globally as real wages fall and wage gaps widen, weakening the buying power of consumers and limiting the earning potential of the organisations who provide consumers with products and services.
And finally, at the time of writing, we are already more than 25% of the way through the most important decade of our lives in regards to the climate crisis. This summer has given us a stark view of the dire outlook we’re facing unless we make significant progress, and quickly. The floods that have ravaged Pakistan since June as a result of climate change worsening glacial melt and monsoon rains have already claimed over 1000 lives, demonstrating the deadly consequences of climate change on vulnerable populations – particularly in the global south. As Pakistan’s planning minister Ahsan Iqbal pointed out, countries with a world-leading approach to climate frequently fall foul of the actions of more “developed” nations; though Pakistan has a very low carbon footprint, it has become, he says, a victim of the “irresponsible development of the developed world”.
With this many crises converging, where does that leave enterprise organisations? Faced with challenges from all sides, it’s never been more important for large businesses to balance competing demands around sustainability, resilience, and cost, whilst also continuing to build the foundations for future-proofing and growth. Never before has a simple fact been more true: we are nothing without our suppliers.
We cannot be competitive without our suppliers We cannot be resilient without our suppliers We cannot be sustainable without our suppliers.
Put simply, we simply cannot BE without our suppliers. As a result, becoming “customer of choice” has never been more imperative, and procurement has an enormous role to play in balancing the competing demands facing enterprise businesses.
Mature procurement functions know full well that there are limits to the value they can generate by focusing purely on the price of the products and services they buy. These companies understand there are new ways to unlock significant channels of value that benefit both buyers and suppliers if they are willing and able to cooperate and collaborate seamlessly. However, to do this there needs to be a dedication to the way of working and understanding that value must be realised on both sides of the fence – not just within the buying company.
What is ‘customer of choice’?
“Customer of choice” refers to a buyer-supplier relationship founded on trust, transparency, and robust communication, in addition to the ethos of mutual benefit. By forging this relationship, both buyers and suppliers gain priority access to one another, and can more effectively deliver on both the goals of the relationship, and on the goals of their individual organisations.
Obtaining of “customer of choice” status helps the organisation deliver on its goals through Supplier Collaboration in a few key ways:
Positive relationships with strategic supplier stakeholders make it easier to drive alignment over shared goals, the vision for the partnership, and how success will be measured. This alignment enables both parties to be clear on what their objectives are and to stay on track delivering against them, in addition to making it easier to flag any issues or areas for improvement as the partnership progresses.
Close “customer of choice” relationships with suppliers lay the foundations for further collaborative work that enables both parties to take action and deliver on the goals for the partnership. This happens through shared projects, initiatives, and opportunities which allow both parties to do the work side by side required to reach the goals of the relationship.
To address the myriad challenges facing large enterprises, existing solutions will not suffice. In order to secure competitive advantage in an increasingly crowded business landscape, innovation will be key to satisfying the demand for fresh new ideas.
Given that suppliers come armed with a wealth of subject matter expertise, knowledge of competitors and even whole verticals, their own talent pool, and an intimate understanding of local markets, the supply base will be a key source of this innovation.
As a result, “customer of choice” relationships are key to innovation potential; this dynamic grants priority access to existing IP and ideation from suppliers, in addition to opportunities to tap their future innovation potential.
How to become ‘Customer of Choice’
Below is my quick 101 on how to collaborate successfully with your strategic suppliers and reap the benefits of “customer of choice” status
Define what you want to achieve
The first step for any organisation is to define exactly what it wants to achieve from becoming a customer of choice. While it seems a simple task, it’s a crucial one that also documents how you should behave when things go wrong. All too often businesses set out with good intentions of working more closely with suppliers and driving true supplier collaboration, however when the going gets tough they return to traditional combative approaches to working with strategic suppliers, and with it they undo all the hard work they’ve previously put into becoming customer of choice.
It’s therefore key to clearly set out what that you’re trying to achieve together, alongside intended behaviours for the relationship. These should be clearly documented with examples of situations that might occur and how they should be handled. This helps to ensure you’re working productively towards these objectives in a manner that will continue to strengthen the relationship over time.
One key example of the buyer side commitment could be always paying suppliers on time and in full, regardless of other challenges the business are facing, and establishing this commitment clearly with suppliers, including documenting the behaviours that should happen on either side should this commitment slip on any given occasion.
Joint business plans
A key part of laying the groundwork for successful Supplier Collaboration is joint business planning. Companies that are successful at this outperform their peers hand over fist.
Joint business plans enable buyers and their suppliers to introduce formal objectives, processes, and outcomes that promote greater alignment between the parties, cementing the strength of the partnership. By agreeing together on shared, achievable, time-bound, and measurable objectives in both the short term and the long term (and deciding on checkpoints and milestones to check in along the way), organisations can instate more effective plans for how to get there.
Be aware that even the best plans need to change and flex over time. For this reason, regular check ins to review goals, progress, and targets are key, and both sides of the relationship should be inputting their feedback to constantly improve and iterate on the business plan.
For a buying company it's imperative that you move away from ‘me’ to ‘we’. The temptation as a ‘separate organisation’ is to use language that is inward-facing, but this encourages directive thinking and makes it difficult to think in terms of mutual value. Understanding your suppliers as partners and communicating in that vein will continue to strengthen the relationship over time – this is not a dictatorship!
In a similar vein, what you speak about is important. While cost will always be on the table, understanding this in terms of cost-optimisation is more beneficial, and much of your communication with one another should be taken up with topics around opportunity, growth, innovation, and productivity.
Development of trust
In many business relationships, trust is thrown out of the window in times of turbulence or need. This has been especially true during the pandemic.
While trust can be quickly eroded, building trust takes dedication and time, and is not something that can be done overnight.
The best approach is to start small and not try to “boil the ocean”; find some simple collaborations that can deliver quick results. This builds the business case for ongoing collaborations, helps secure senior leadership, and shows the value of investing “customer of choice” partnerships. All of this helps increase the momentum of the value driven from Supplier Collaboration over time.
Netting early goals in this way also demonstrates your commitment to the partnership and – perhaps most importantly – your willingness to share gains fairly across the relationship.
Ensuring that information is centralised and shared transparently also helps to avoid traditional boundaries and increase trust over time.
Finally, it’s important to be open and patient, and continue to listen to your partners’ thoughts and ideas. As mentioned above, suppliers and partners are subject matter experts – both in terms of your business, but also of your competitors, of whole verticals, and frequently of local geographies. Not only does “hearing them out” strengthen your partnership, it also promises many un-thought opportunities for your business.
In order to promote the health of the partnership over time, it’s important to assess sentiment from both sides of the relationship. This can be done by simply surveying both internal stakeholders and external partners. This should be undertaken across a variety of core “pillars” – operational function, relational health, and transformational potential being the key three – in order to understand where your strengths and rooms for improvement lie from various points of view.
The results you get will quickly highlight key areas of focus. For best results, this process should be anonymous at the individual level if possible (at least for the first few), allowing for the most honest appraisal of where you’re at. This demonstrates a commitment to hearing opinions you might not like, and doesn’t single out any one individual from the group you have formed together.
Use the data as a “line in the sand” at the start of your commitment to the partnership. Later, you can use this to look back over your first year and beyond. Closing gaps over time will demonstrate that you are making progress towards your goal of becoming customer of choice.
Customer of choice 101: a step-by-step guide
Below is a very quick step-by-step guide you and your team can follow, outlining the key areas to think about in your journey to becoming customer of choice and in what order:
Define internally what you want to achieve from being a customer of choice. This might be reducing your exposure to certain risks, pursuing your ESG goals, or introducing new products and services to meet a specific need. This goal should be aligned to your organisation’s strategic goals as set out in the corporate plan; “customer of choice” partnerships should ultimately serve the needs of the business.
Step two is to identify which suppliers will offer the greatest joint opportunities to create value towards your chosen goal – be that growth through innovation, scope 3 emissions reduction, or supply chain resilience. Outside of your core strategic suppliers (top right in a 2x2 matrix), it's also important to decide how you will work with the other segments. As one example, at Vizibl we love the BCG matrix below when conducting segmentation of suppliers towards the goal of decarbonisation.
Begin the formal ‘alignment’ phase with partners. Here is where you should sit down and agree joint objectives and intended behaviours, and develop a compelling business case for your collaboration.
Carry out a gap analysis between your suppliers and internal stakeholders using a survey that covers the key areas of the partnership in terms of operational, relational, and transformational performance and potential.
Adopt and implement a methodical and structured approach to defining the scope, pace, and targets for all joint projects going forward, informed by your gap analysis. In Vizibl, organisations can set up Value Trackers to capture, measure, and report on all delivered value across these projects at both an individual project level and across the entire relationship.
Agree on how value will be shared between both parties, and ensure that IP agreements are in place to set this in stone.
Invest in resources and infrastructure – namely technology – to ensure that the programme can scale as value is delivered and proven, and establish clear incentives both within procurement, within other functions, and with suppliers, for successful projects.
Hardwire collaboration into all operational processes and implement a robust people governance model. Ensure transparency of data and decision-making. Technology helps enable this by ensuring that all relevant interactions, data points, and meetings are aggregated in one place.
Develop a plan for how to nurture this relationship over time so that initial collaborations do not stall as they grow. Trust, communication, and transparency should be kept front and centre throughout the relationship over the months and years of its growth so that both parties feel comfortable continuing to share knowledge and IP.
Track and measure the progress of the relationship according to the objectives and metrics established in the design phase in order to prove the value of your collaboration and secure sponsorship for scaling and expansion.
As the climate crisis worsens and the pressure grows on enterprises to tackle the true extent of their impact on our planet and its people, I’d like to make the final point that it is not productive to become customer of choice to a supplier that is not committed and focused on delivering against robust sustainability targets. Scope 3 makes up over 80-90% of most large companies’ emissions footprint, and is receiving increased scrutiny from investors, customers, and regulators alike. This puts it high on the strategic objectives list for all forward-thinking enterprise organisations. So if your chosen suppliers are not working with you to deliver on emissions reduction, what use are they to you in the long run?
This is not one-sided, either. There is no better way to become a customer of choice with your strategic suppliers than to use your knowledge, sway, and power to help them deliver against the goals set out in the Paris Agreement. Mutually helping one another on the journey to more sustainable business practices will shore up your competitiveness in a market low on green products, solutions, and corporations, by helping you both satisfy investors and customers, and avoid the significant business risks associated with a slow approach to sustainability.
At Vizibl, we live and breathe the “customer of choice” approach. Our award-winning solutions are helping the likes of Unilever and BP change the way they work with their suppliers. If you’d like to find out more on how to achieve this status with your strategic suppliers, I’d love to hear from you.
For more information on how to leverage Supplier Collaboration & Innovation technology to become customer of choice, visit: www.vizibl.co/platform