The strategy of a margin improvement programme is the part where ‘how’ to achieve the long term aim is mapped out; moving from the situation, (not enough margin) to the objective (long term sustainable margin).
Simply put the strategy could read;
- Better prices from suppliers
- Charge more customers higher rates for services
At first glance it doesn’t need to be more complex than that, the detail will come later, but put simply; buy cheaper, sell at a premium.
However, when crafting the plan there are four things that should be considered.
- Suppliers. More specifically, improve the commercial relationship with a more streamlined approach with the supplier.
- Business. Ensure that all supplier and customer interaction is at its peak performance in terms of process, commercials, reporting and measurement.
- Customers. Ensure that all commercials are on the terms that meet the business objectives.
- Market. Ensure that how the impact product evolution and competition is going to have on the business and its margins is understood.
The internal changes needed are critical and should not be glossed over. Dealing only with suppliers and customers is risky because price based conversations are by their very nature short lived. Prices vary, should your supplier charge differently and little has been done to improve the internal processes then the entire project may need to be redone. It is worth analysing to what extent the internal way of working has created the situation in the first place.
And these three points are intrinsically interlinked. There is no point only doing two out of three in this instance. You might have the best supplier relationship in the industry, but if it isn’t being billed properly, or can’t be measured, it is not sustainable. Similarly, great supplier prices and science fiction level billing counts for nothing if the customer is not being charged for the services that they consume.
All four areas need to have the same level of attention on them. Whilst the internal elements of the programme may be undertaken quickly and directly, consideration should be given to the fact that suppliers aren’t going to offer a lower price without something in return, and customers aren’t going to pay a higher price without a demonstration of value, at least not without a detrimental effect to credibility.
When considering the market, the biggest asset that the telecoms reseller has is the information on its customer base. This provides considerable leverage between the relatively narrow position of the supplier and the non-telecoms customer in the value chain.
The supplier has surveys, reports and customer feedback that talk about the statistical use of various products that they provide, but in many cases aren’t able to speak directly with the customer. The customer knows what their business does on a daily basis, specific to them and their needs, but they know very little about the industry, or its evolution. For example, there aren’t many companies that are aware of BT’s announcement on the demise of the copper network in 2025 or the impact it will have on their ability to make a phone call. And why should they?
This information should derive some powerful insight when creating the strategy. I have met many resellers who use this position to its maximum effect. I also talk with those who do not use customer information at all.
The last thing to consider is that whilst there are complexities to consider when setting the strategy, once set, it shouldn’t alter. The tactics and implementation can be flexed to address changing circumstances, but the overall plan should be based on and reflect both the margin improvement and business objectives.
The strategy then allows a detailed approach to be crafted and when setting out the tactical plan where there are several areas to consider.
- Product Set
- Sales and Marketing
- Provisioning and Billing
- Customer services
Every area within the business is engaged in margin improvement. It is at its core a change management programme and will only succeed through addressing the way that the business operates and interacts with the suppliers, the customers and internal colleagues.