Ask Andi: Our vendor is not meeting deadlines. Because of that, we missed a deadline. This didn’t have to happen. I suspect that they just took our account for granted. What advice do you have for me?”
Save your client relationship when a vendor is not meeting deadlines. A deadline involves reputation and future business. Good relations between customers and vendors are like gold. When things go sour, that can devastate the relationship. Let’s take a look at this problem from both the buyer’s and the seller’s points of view. From the buyer’s point of view, what can you do to prevent problems, and how do you handle the situation effectively if things do go wrong. What should you do to protect your firm if you suspect things aren’t working as well as you want them to work? From the seller’s viewpoint, what is the cost of a major relationship break, how do you handle a tough situation, and what can you do to recover?
Vendor not meeting deadlines
Let’s start with the seller. Good customers are the centerpiece of well-run businesses. And yet it is just as easy to lose a good customer as a bad one. Most good customers go away. Not because they get a better offer. But because their current vendor doesn’t pay enough attention. Most sellers spend more time getting new customers than they do hanging onto the ones they have. You have to have a mix of both. Today we’ll focus on what it takes to keep the customers you have.
One big customer relationship trap is the potential to take good customers for granted. Especially long-time customers. You know each other well. You know what each other expects. Your firm has always been able to handle this customer. You know you can count on them for repeat orders. Don’t be so sure.
Pay attention to your customers, or someone else will. And eventually, you’ll be out a good customer. Perhaps a competitor will come along with a better offer. Maybe your customer will decide you’re not interested enough in their business. Either way, that customer goes out the door, and your profits go with them.
Vendor deadlines speak volumes
How do you know if it’s worthwhile expending time and effort to hang onto customers? Figure out exactly how much profit you make on each customer. Factor in how easy or hard each one is to handle. The margin you make on their orders. And any opportunity you have to expand the relationship. What you will lose in profits if good customers decide to leave you and seek products elsewhere? Then figure out your cost to sell a new customer of similar value. Do the math. Is it cheaper to hang onto existing customers? What it would cost to replace the ones that leave?
Let’s assume you’ve done the math and decided to hang on to the good customer. And you’re faced with a breakdown. You – the vendor – are not meeting a deadline. Your firm has to handle the situation quickly, and effectively. This is called crisis management. What you do in the first minutes and hours after a breakdown can set the tone, and may go a long way to determining whether you and your client continue to work together.
The elements of successful crisis management include rapidly acknowledging a breakdown, acknowledging the severity of the situation from the client’s point of view, and expressing concern for the client. You want to immediately apologize, accept responsibility, and avoid laying blame. Finally, suggest actions you both want to take to avoid future repeats.
What can you do to recover? You want to ask the client what they think it would take to make the situation right. Come up with some way of compensating your client for the distress. Assure the client, through your words and your actions, that you are fully involved and committed to making things right between your firms.
Vendor management
Internally, you want to talk with your employees about the importance of hanging onto good customers. Teach your people about the basics of crisis management, and practice handling difficult situations, so that people are more familiar with what to do once they end up on the firing line. One of the biggest mistakes many employees make is that they get into a loop of defending their behavior. Another problem is that they try to explain why things happened, at a time when the customer isn’t interested in hearing about them. Most customers want an opportunity to vent. Want to be sure the seller appreciates the severity of the situation. And want to move on to a solution. Leave rehashing why it happened for another day when everyone has calmed down. Focus on getting things back on track first. Compensate the customer second. Then work on the mechanics of why.
What if you’re the buyer? There are a number of things you can do to try to prevent problems. Make sure that if you have a deadline, your suppliers know about it. Ask them ahead of time to if they see any problems meeting the deadline. Even better, ask them to deliver early. Put requests in writing, and ask for written confirmation back. Don’t cry wolf every time you need something. Do know your supplier’s chain of command? Know how to escalate requests when they are important enough to merit that. Do it before the vendor starts not meeting deadlines.
Work on communication
Periodically visit suppliers to see firsthand how they are doing. Get to know the financial people, as well as the people who handle your account. Keep a pulse on their financial health. Be alert to big changes in staff or management. Formally review your account relationship, at least yearly. Have the seller tell you where you rank in their customer portfolio. Ask what you could do to improve the relationship. Discuss future plans of the seller’s firm. Check if supplying companies like yours are core to their long-term growth and development.
Once a breakdown happens, shift into crisis management mode. Ask for a quick snapshot of the problem. Stick to facts. Repeat back what you hear. Remember in a crisis it is easy to min-interpret. And you don’t want to go from a bad situation to worse because of a misunderstanding. Avoid the temptation to vent. Walk away, if things are heating up. Trying to lay blame, or complain about what has happened, won’t help. Or might further hinder progress. Focus on problem resolution. Be clear as to what will, and will not be acceptable. Determine what will happen, given the breakdown.
Demand that your problem reach the level of someone with the authority to act. Ask the seller to lay out specific next steps. Include dates, and times, and clarify who will be accountable. Watch how the seller handles the situation. This will be a factor in your decision later on. As to whether you continue to work with the firm, or move on to another vendor. Ask the seller to make an offer to compensate your firm for its trouble once the dust has settled.
Don’t be afraid to pull out
When you are past the crisis, consider your firm’s options. Sit down for a probation conversation with a vendor not meeting a deadline. Similar to what you’d do with an employee who is underperforming. Explain how important it is, that they deliver as expected. Ask the seller to show you what they have done to improve things systemically. So that your account will never again be in jeopardy. Expect them to take your account seriously. Be careful if your gut tells you things aren’t right. Look for actions, rather than words. Use the three strike rule: strike one your fault, strike two, my fault, strike three, we’re done.
If things are off track, don’t hesitate to switch. Don’t stick around for promises that you know won’t be met. Sometimes you have to take your business away, in order to get their attention. It is always important to have more than one vendor lined up. Regularly require that your employees shop for alternative suppliers. Periodically review a list of vendor options, stack ranked in terms of quality, price, and reliability. Know where your firm would go next if it needed to do so.
Looking for a good book?
Try Crisis Management, Planning for the Inevitable, by Steven Fink.
