Even if we were only dealing with suppliers and customers, it would be worth bearing in mind that;
- Suppliers will only offer lower prices in return for something.
- Customers will only pay higher prices if they see additional value.
Neither one of these situations will come about without a change to one or both of these relationships. If you’ve made a mistake in the model, or charged the wrong amount to your customers, simply going back unannounced to reset the price is going to raise serious questions.
The programme needs to be carefully mapped out and implemented. It should also include every element of the business
- Supplier Management
- Product Management
- Sales and Marketing
- Provisioning and Billing
- Customer services
It is critical that the last two areas are not ignored as these are the touch points for your customers and suppliers. They also provide the measurement of success that you have achieved.
The previous strategy post identified the resellers unique position within the value chain as both the industry and customer expert. It demonstrates the position that can be leveraged by teaching both supplier and customer something they didn’t know about the other.
So work where the knowledge is, you know your customer and your market better than your supplier does. If you don’t, you should, so get to know it better. You are the organisation that adds the value to the transaction, you know your segmentation and how your customers operate. This is your point of differentiation and ultimately what your suppliers do not have access to.
The suppliers’ sales technique is likely to revolve around research, knowledge and a solution ‘payoff’. So be prepared to turn the tables and be explicit in what your need is. Turning this around and being proactive in your approach will enable you to map out what you need, but more critically, your suppliers likely offer and response.
This is a shot that can only be fired a few times, it needs to be effective and followed up. Take into consideration these points.
Plan for growth
Your business case needs to demonstrate where your growth is going to be and where you need support.
Product split and performance, customer segmentation and engagement.
Plans for cross product and complimentary product bundles.
Working with the right supplier
Compare all available suppliers of your product set and consider moving to one that can offer a better set of commercials, support and value.
Consider using fewer suppliers, or a single provider for many products.
Consider your approach to the terms and conditions.
For a lot of companies this is where the meat of margin improvement occurs. It is where the gaps that can exist can be plugged within the commercial element of the product and how it performs. During the analysis of the situation you will have discovered which products are performing well, as well as those that are not pulling their weight. Now is the time to apply those changes, either through the conversations with your suppliers as detailed above, or by applying changes to the things that your customers pay, or indeed both.
When looking at the commercial performance of a product, and comparing that to the competition or the market in general there are a number of key factors that need to be taken into consideration.
Consider the analysis that you have run on the product sets as well as your customer and suppliers, segmented and identified against each product. Compare these against the business objectives and the market in general and map out the changes needed to make a stable impact on your bottom line, in conjunction with your communication plan.
Sales and Marketing, interacting with your customer
Customers are unwilling to pay a higher price for something that they have been consuming without good reason. These reasons need to be communicated well and with plenty of notice. Price changes within contract are regulated by Ofcom; General Condition 9.6 requires that communications providers give consumers at least one month’s notice of any changes to a contract that are likely to be of ‘material detriment’ and allow them to exit that contract without penalty.
Selling the price change into your base needs to be done in such a way that the customer sees the value of it and accepts that they are not going to get a product of this value from your competitors.
This is the crucial part of any margin improvement programme, and if it is not done well will undermine and unravel all of the work that has happened to date.
People, whether they are individuals or company purchasers are more than happy to pay premium prices for premium products. But nobody is going to do that if they don’t see a value return.
Earlier in this series we talked about the reasons people buy from a chosen supplier, they render down to Credibility, Utility and Relevance. Throughout the margin improvement workshops that we run we talk about the key reasons that people have when choosing to buy again from their preferred supplier. In summary they are;
- Personal contact
- Follow up
- Understanding customer needs
All of these need to be leveraged when engaging with the customer during margin improvement negotiations.
The sales and marketing process needs to be central to the margin improvement programme and in paraphrasing the excellent book The Challenger Sale written by Matthew Dixon and Brent Adamson. Successful negotiations will come as a result of teaching the customer something that they were not aware of, tailoring the solution the customer’s specific needs and taking control of the interaction in such a way that it overcomes the customer’s natural aversion to change.
Your segmentation will come into its full effect here, allowing you to prioritise both the changes that you will make and the communication strategy that underpins them. This is a far superior way to approach a potentially damaging programme than simply putting the prices up and not telling anyone.
Billing and Measurement
Throughout your margin improvement programme your billing and analysis department (which may be one person or a team of ten) will be closest to the actual change. They will be the team that sees the immediate impact on the decisions made and need to be involved in both the decision making processes and the physical implementation of the changes.
Without proper communication to the base once a change is made, there is a large possibility that your customers are going to ring in to find out what’s gone on. Even if you have communicated out well you may not have had the chance to engage face to face with everyone and there are going to be individuals that didn’t read the email, didn’t think it applied to them or won’t accept the change. Your customer services team is a sales team in disguise and should have the same range of options and training as your field based teams. It’s no coincidence that retention teams and customer services teams are the same people in all but the biggest carriers.
Stitching it all together
Whilst there is a lot of ground covered within this post, it’s because effective and stable margin improvement touches every part of the business from the board to the customer services agent. It is nothing short of business transformation and should be treated as such. Weekly meetings that update the business as a whole on margin improvement should be considered. Everyone is on this journey and should be included in the successes and the potential pitfalls. Where this is not feasible then a simple dashboard or email update could be considered. Keeping everyone up to date is crucial, especially as questions from customers will come into the business at every contact point.