Holding on for dear life

You distribute branded products or services on a regional level. Or, you represent a manufacturer or licensor in a specific industry.

On the one hand, you are proud (and thankful) to have such a strategic relationship. On the other hand, you know you are too dependent for your own good. To make things worse, every year, your supplier demands more sales or concessions to carry the brand or he or she will add more distributors or cancel your contract.

What can you do? You can’t risk trashing the relationship, but you can’t let your margins erode any further. The options for replacing your supplier with a competitor are bleak, at best, so start by remembering that your supplier works with you and consider these factors:

  • You are great at building relationships that your vendor cannot or will not.
  • Your supplier has tried and failed to perform your function.
  • The Internet hasn’t delivered the business it hoped for.
  • Your service, expertise and market knowledge are invaluable to your vendor.

The last point is your salvation. Whether you charge for it or not, your experience in your marketplace is your best and highest use. How you choose to exploit this will dramatically impact your success.

Here are some great things you can do to reduce the threat of the supplier Goliath in your David business.

Keep detailed records of more than just your customer transactions. Understand their preferences, attitudes, interests and behaviors.

Focus on tightly defined market niches. Understand the 20 percent of your customer base that provides 80 percent of your revenue. Know them cold.

Determine what part of your customers needs are unfulfilled by the supplier’s brand and what part is filled by the service you provide. Remember, a brand creates greater demand for a “one-size-fits-all” product or service than does an unbranded product.

The converse of this is good news to you because a brand cannot meet all the needs of its customers to the same extent. There will always be a segment of customers whose needs are not completely met by the manufacturer’s brand.

Focus on these differences and the customers whose needs are not fully met. With these customers in your gun-sights, start adding value and services to keep them:

Become their advocate in disputes with the manufacturer.

Provide guidance, service, installation and warranties over and above those of the manufacturer’s.

Reinforce your personal relationships with this segment at every chance. Communicate often and provide information of value.

If you build an incremental, stronger relationship with the best customers of your business and your supplier’s brand, you will regain clout with your vendor. Remember, your relationship with your customers is why your supplier does business with you.

In fact, it is likely that if you were to sell your business to your supplier or someone else, the purchase price would depend on how good your customer relationships are.

No matter how bullied or exploited your supplier may make you feel, it is more important how your customers feel about you. Those relationships are always valuable. Ironically, it is exactly that reason that also gives you power in working with your brand supplier.

So stand up, stand tall and serve your customers well. Andy Birol ([email protected]) is president of PACER Associates Inc., a Solon-based firm that provides expert advice to owners and leaders who need to grow their businesses. He can be reached at (440) 349-1970 or at www.pacerassociates.com.