Thursday, December 08, 2005

Vendor strategy affects customer satisfaction

An often overlooked contributor to poor customer satisfaction is a company's vendor/supply chain strategy. In talking with a mentor of mine, Jake Levy today, we talked about the importance of strong vendor relationships in delivering a consistent customer experience and positive surprise. In fact, Jake takes it even further. He posits supply chains can do more to damage a relationship with a customer than any sales person can.

Here's his argument. The typical company loses 10% of its customers per year. This is horrible, but that's where it is. However, if a company has a major supply chain disruption or quality issue, that one event can cause a lot more than 10% of customers to leave. True, very true.

There are two implications to this: CEO's, general managers and Supply Chain executives need to recognize and eliminate the possible impacts of changes in suppliers to the end customer's satisfaction and experience. Small changes that cause unexpected customer surprises can wipe away all economic benefits derived from the vendor switch. Organizations that don't take a holistic view of the interrelationships of actions across various functional siloes can unwittingly hurt their businesses.

The second implication is for sales executives. By recognizing you are vulnerable to unexpected problems with suppliers that affect customer satisfaction, you should be more diligent and proactive about improving communications with current customers NOW before these problems occur. Otherwise, you will lose customers when you shouldn't.

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