Saturday, August 25, 2012

Suppliers Are More Important than Customers. Marketing Secret 22/101

With the right amount of effort I, as a marketing consultant, can always get more people in your store or calling your phone.  There are 300,000,000 customers in the US.  My guess is that if you had 3,000 of those buying from you a few times a year, you'd be happy.  It just isn't that hard to find new customers. 

But if you get those folks to call, and you don't have what they want . . . game over.  If you get them to come, and you have what they want, but your landlord doubles your rent or kicks you out . . . it might be game over.  There are many other ways suppliers can drive you nuts.  I have almost been put out of business several times by insurance issues.  Product liability, workman's comp, even regular fire insurance can be UNAVAILABLE due to market conditions or changes in what they will insure or the way your operate.  I'm sure I don't need to point out that a banker can close you down.

But there are many ways that suppliers can be the cause of near death experiences or put us out of our misery all together.  A major brand decides to change distribution methods, go with a competitor and cut you out, or go out of business.  It happens all the time.  A variation on this theme is that costs of certain items may take your supplier out of the game or cause them to raise the price to you so that there is no possible way you can make a profit. 

If you've been in a business for a while, you have had a suppliers run out of product at the height of season, change the product in ways that crush sales, or abandon product lines that really worked for you.  I have seen manufacturers increasingly place pressure on retailers to achieve certain flooring percentages, total sales or other quotas that, at a minimum, distract from the potential of maximizing overall store success while concentrating on making those quotas. 

Next to cash, my experience would say that supplier interruptions are the most likely cause of business failure.  Assessing and reassessing your suppliers to make sure you are not only using the most efficient and effective providers, but also ones that are not likely to interrupt the relationship is a marketing challenge.  Obviously, having backup for every critical supplier would be another wise move.

At the beginning of every new company, expansion, or development of a new product or service, not only should we make sure the cash is there, but every critical supplier needs to be brought on board prior to launch.  Never assume they will be excited to see you.  We once made a foray into the rag business (Halloween costumes).  We had no idea that no suppliers in that industry would open a credit line.  The required cash outlays to support the inventory almost destroyed our core business. 

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