In today’s issue…
People who travel a lot try to load up miles on a single airline, even when that airline doesn’t have the lowest fare to a particular destination.
“Frequent Flyer” is a simple concept, really. Be a loyal and regular customer, get rewarded.
It works for both parties. The airline creates customers with higher annual purchases than their average customer. The loyal customers receive better treatment than the average customer.
It works the same way in your business. You have loyal customers, and you treat them with greater care and personal attention than not-so-loyal customers. In return, they treat you differently. Where the average customer might grind you about price and product details, the loyal customer values your quality of service. You are happy to provide them priority attention and a fair price.
It’s more fun to do business with your loyal customers – not to mention more profitable – and price is not the reason they keep coming back to buy from you.
So, today’s Coffee question above could be put another way…
Are you a loyal customer?
Leveraging Your Purchases
Do you tend to recommend different gear for the individual needs of each particular customer? Yeah, you’re in the custom business. We know. But if you’re working with a lot of different brands, you’re working with a lot of different suppliers – and not doing much business with any one of them.
Many companies buy through distributors. Multiple distributors. This guy’s wire is a little cheaper than that guy’s, but that guy has better pricing on mounts. And still another carries the cheapest in-walls.
Going back to the Frequent Flyer analogy, does this kind of purchasing behavior get you a First Class seat?
We recommend you sign up for the Frequent Buyer club. Consolidate your purchasing with a handful of suppliers. You will become more important to each of them.
Minimize the number of different brands and models you put into your proposals. Sell the same products, over and over. Not only will you become a more loyal and rewarded buyer, you will also become a more efficient and reliable provider of goods and services. This means your customers will be happier, and you will be more profitable.
If you’ve got a distributor who sells some key brands along with most of the kinds of items you need for your jobs (wire, cables, parts, mounts, etc), buy it all from that distributor. You will save lots of time going to a single vendor for your weekly supplies, and you will build supplier loyalty.
Make a Plan, Share the Plan
Suppliers love it when you are able to give them an idea of how much you will be purchasing in the coming year. They love it even more when you actually do what you said you were gonna do.
To make this happen, you need a plan. You need to know how much business you will do overall. Then, what percentage of that total business will come from Vendor M products, and how much will go to Vendor S? Now, take the anticipated margin for each vendor, and translate sales into COGS. This is your budgeted purchase amount for that vendor, for the coming year.
This is a pretty easy spreadsheet exercise. PROJECTED COMPANY SALES x PROJECTED VENDOR SHARE % x (1-Vendor GM%) = VENDOR COGS/PURCHASES.