You are more transparent about your cost structure. It is clear that much of what buyers want from suppliers is behavioral. What can differentiate you are these kinds of behaviors:
You are more transparent about your cost structure.
You take a total supply chain management view and are proactive in seeking ways to reduce costs throughout the supply chain.
You anticipate your customers’ needs and give them information to help them make the best buying decisions.
You are innovative and bring new technologies and solutions to customers. You act like a thought partner rather than a supplier.
You are easier to do business with than your competitors are. You are more flexible on how you do business, and you adapt to customers’ preferences, requirements, and needs.
You communicate clearly and frequently, especially when there are issues or problems to resolve that could impact the customer’s business.
You designate key people to work with customers, people who invest the time and energy to really understand their business, industry, and customers.
Your senior executives invest their own time in the customer relationship and demonstrate their commitment and customer focus through action, not words. Francois Gauthier said, “I judge how important we are to suppliers by the amount of time their CEO or other key people allocate to us. When I can get five or six hours of a CEO’s time, that’s great. It’s great behavior on their part and sends a great message. The CEO’s gone beyond what was expected, and this sends the right message to the rest of that supplier’s organization.”³²
You behave like a partner, rather than a vendor, and you avoid using worn-out sales techniques and high-pressure gimmicks to close sales.
Don’t waste my time by taking me to a ball game. That does not help me build my market or improve my business.—Bonnie Keith
These behaviors can yield a significant competitive advantage in today’s markets and with today’s more sophisticated buyers. It seems like common sense, doesn’t it? Surely, everyone who is responsible for sales and customer relationships knows this. Or do they? We were astonished to learn in our purchasing research that a remarkable number of suppliers have not figured this out. They still behave in ways that negatively differentiate them from their rivals. Bonnie Keith told us that while failing to meet contract requirements is bad enough, worse still is not telling customers about it:
Even more of a crime is not communicating when they start to get in trouble or have a failure in their plant or a quality hiccup—and don’t tell you about it! You wind up on the short end and don’t get your materials when you need them. . . . They must give you forewarning. You may have other options, but you need to be aware of the problems as quickly as possible. Furthermore, when they disappoint me, they will find it difficult to recover. You start to build a level of distrust. You no longer find them credible. If you are forced to work with that supplier, you are always putting in safety precautions in your planning because you don’t trust the supplier. That adds a cycle, and a cycle adds cost. And if you can do anything about it, you will get rid of the suppliers who create distrust.³³
Bob Douglass of Triangle Pharmaceuticals concurred that poor communication was one of the worst supplier behaviors. “They don’t keep you informed of problems in delivery, so you’re surprised when a shipment doesn’t arrive. Or, on an annual basis, and unbeknownst to you, they say their costs are going up, but this is the first you’ve heard of any problems. So if suppliers experience problems, they need to inform you throughout the process.”³⁴ In Douglass’s experience, only 20 percent of suppliers kept customers very well informed. Doug Beebe, manager of packaging purchasing for Scotts Company, also said that the typical disappointments come from the failure to deliver and the failure to communicate. “In a world of constant change, failures are inevitable. When we know about them or are told about the risk of failure, we can anticipate problems and plan for them. Some suppliers are better than others at communicating the risk of failure and the reasons why it happens when it does.”³⁵
Another negative supplier behavior occurs when suppliers overcommit and underdeliver. Obviously, this occurs because the salespeople representing the supplier are “optimistic” in their projections because they want to get the contract. Whether or not they intentionally deceive customers, they often create a more favorable impression than reality will allow them to deliver. Dave Gabriel of Tenneco tells the story of a rental car company that disappointed his company in such a way: “When I first came to Tenneco, [Company X] was the car rental company of choice. Then we cut a deal with [Company Y]. We reduced the price by 25 percent the first year, which was great. They offered a lot of features in their selling process, including the issue of clean cars. Afterwards, although we complained and complained, they just could not deliver clean cars. That tainted the entire experience we had with that supplier.”³⁶
Coherent’s Francois Gauthier said that a big red flag for him occurs when suppliers start quoting the contract. “I put contracts in the drawer and hope never to look at them again. It’s a big red flag when suppliers start quoting the terms of the purchase order. When they start doing this, it’s because they are less interested in your business.”³⁷ Suppliers who begin relying on contract terms have, in an important respect, stopped communicating through other means. Instead of discussing and resolving problems, they rely on contract terms to enforce agreements or understandings they’ve had with customers, even if the circumstances have changed.
Pepsico’s Art Schick said that sometimes there is a very amicable relationship leading up to the contract award.
Everyone’s happy and friendly until the contract is signed, then the business relationship starts. I saw one situation where the supplier would do only things in the relationship that were verbatim in the contract. The supplier was manufacturing products for us, and we asked for a summary report, but if that report was not specifically laid out in the contract, they wouldn’t do it. What you think would be a simple request was not fulfilled because they were sticking only to what was explicitly in the contract, and anything more they saw as avoidable expenses. They were looking at the situation outside the context of the relationship, and it hurt them.³⁸
Another disappointment, especially for purchasing directors, occurs when suppliers try to go around them and deal with the people they believe are the “real buyers.” In today’s complex organizations, “going to the boss” may give a supplier a temporary advantage, but it creates powerful enemies, in large part because the purchasing directors can’t do their jobs if suppliers are cutting side deals. Eventually, this kind of behavior will come back to haunt these suppliers because, like elephants, purchasing agents have long memories.
Two other strongly negative behaviors are worth mentioning. First are those suppliers who take every advantage of customers. When supplies are tight, they raise prices to capture as much profit as they can, despite the long-term relationship they may have with a customer and the negative impact price increases will have on the customer’s business. These suppliers may also “short” deliveries to a particular customer because of increasing demand from other customers, despite the loyalty the customer may have shown toward them when times were lean. Art Schick of Pepsico refers to the suppliers who behave this way as supplier predators.
Second, there are the Willy Lomans; the throwbacks to the selling techniques of yesteryear. These are the glad-handing salespeople who waltz in, take you to a ball game, and expect your business but fail to deliver what they promised. One of our respondents said this was the typical approach back in the 1960s or 1970s: “The worst thing is what happened in the 60s. They would come in and buy you a hamburger and take you out to dinner. They’ll send you a smoked ham during the holidays and ask about your family, but when it comes time to deliver value, they are nothing but empty suits. We know who those guys are and don’t care to deal with them.”³⁹
In summary, suppliers disappoint buyers when they behave in ways that are unhelpful, manipulative, guarded, dishonest, or blatantly self-serving:
When they don’t live up to their commitments
When they promise more than they can deliver
When they raise prices year after year without justification
When they conceal their actual cost structure
When they don’t anticipate customer needs and instead expect to sit back and take orders
When they are reactive, do not innovate, and think in terms of products rather than solutions
When they are inflexible in their terms or product/service designs
When they fail to communicate about problems, risks, or upcoming issues
When they don’t invest time to learn the customer’s business
When they rely on the contract to resolve issues rather than dialogue and mutual understanding
When they try to go around the prescribed purchasing channels and avoid the customer’s people who are responsible for supply chain management
When they are predatory in their customer relationships and seek every possible advantage without ever giving back
When they use the “tricks of the salesman’s trade,” such as gifts, dinners, and ball game tickets, instead of adding real value to the customer’s business, as a way to build “favors”
These kinds of behaviors have a repulsive effect on customers. Beyond simply causing you to lose the business, these negative differentiators can lead customers to oppose you actively, not only within their own company but throughout their professional network and in their broader industry. Conversely, there are a number of behaviors that have an attractive effect. These behaviors delight buyers and can lead them to support you actively. Consequently, behaviors that positively differentiate you from your competitors create more customer loyalty.