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The Vendor Dilemma: Because of Re-Engineering, Vendors Now Must Do More by: Bradley E. Hosmer The following article appeared in "Mass High Tech." Because of corporate re-engineering, business-to-business selling no longer means simply delivering the goods. Increasingly, today's products must be sold along with value-added services that replace functions previously handled by the customer. As a result, vendors worldwide are changing their sales and marketing model by adding customized services. This new business model cuts overall costs to create stronger links with existing customers and it sets the stage for winning new business. As just one example, packaging companies have traditionally offered boxes and supplies to protect goods in transit. Their customers have employed package engineers to develop packaging designs, standards, and specifications. The packaging company's job was to produce exactly what the customer specified. But in the wake of re-engineering, many businesses have now eliminated their packaging design departments, realizing that this function is not a core competence. So alert packaging companies have beefed up their own engineering capability to fill the new gap and to win new business. Consequently, those who have NOT revised their business model have seen established business slip away and found themselves excluded from many new business opportunities. It's a "Vendor's Dilemma" in which vendors today are finding they must revise their standard business model in order to meet changing needs of their customers. This usually means for the vendor undertaking new responsibilities and learning new skills. It also means investment and change. But many companies are moving slowly toward adaptation of these necessary behaviors and their business are suffering and stagnating because of it, even in a time of great economic prosperity. On the other side of the coin, customer companies are proactively managing their changing vendor relationships. They set standards of performance and expect them to be met, for example. This is good news for the vendors who measure up, allowing them to gain stronger strategic position as they take over functions formerly performed by their customers. By providing greater value-added, they strengthen further relationships. With their customers who place them in the category of "vital business partner." The smartest vendors have developed what I call "a toolbox and a process." This means they develop value-added services (tools) on a regular basis, devising ways to use them in unique combinations (process) for each client. They continuously develop new tools and processes, making it possible to provide their customers with an array of services to meet changing needs and markets, and to thus maintain a competitive edge. The result: stronger and more enduring relationships are developed between vendor and customer. One client company of mine, for example, recently identified six large, international companies it wanted to work for on a worldwide scale. They proposed taking over a certain function formerly handled in-house, creating a new vendor business model to make this work. But each of these large target companies is unique, requiring a "one-off," i.e., one-of-a-kind, approach. To market successfully to all six companies, my client has had to develop and implement six separate solutions. One-size-fits-all would be out of the question. Here's where "toolbox and a process" comes in. One-off processes are created for each client using some or all of the tools already perfected. This approach makes it possible to tailor product/service combinations in a practical and economic manner. Everyone gets a special solution, simultaneously building a "solution repertoire" that can be customized for future customers. Though this model represents a more complex sale, all Vendor Dilemma sales are similarly driven by the particularized needs of each prospect or customer. Because so few companies display the same needs, marketing/sales strategies in this area MUST be customized, demanding of course extra effort and creativity on the part of vendors, backed up by the means to perform reliably. Yet companies need to be alert to opportunities for initiating such value added product/service combinations. Companies today that define themselves too narrowly will surely miss the signals that spell opportunity. For example, a packaging company that learns its customer is phasing out an internal packaging design department but doesn't respond that "we can do that for you" is headed for trouble. A competing vendor will swoop in, fill the gap and take away the business. Instead, this packaging company should be developing (without being asked) value added product/service combinations that save its customers time, money, and trouble. On the plus side, I've seen much positive fallout from this changing business model including increased innovation and enhanced performance on both sides. Customers now seek out vendors who can provide them with services they no longer offer in-house, and vendors invent new ways to add value to existing products and services. Despite initial reservations about re-engineering's latest twist of events, the reality has been that many progressive vendors have begun serving their customers better and building true working partnerships, strengthening the vendor-customer relationship in a way that rarely occurred before. These tighter relationships provide superior mutual value to both vendor and customer. Bradley E. Hosmer, CMC, heads The Beta Consulting Group in Concord, NH, specializing in improved sales, marketing and new business development for generating profitable growth. Please contact Mr. Hosmer for further information. |
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