FEATURE | NEGOTIATING
WEIGHING UP CUSTOMERS SIMON BUZZA provides the next two rules in his series explaining the 12 key rules of negotiating RULE NUMBER 5 All customers and suppliers have a different value to you There are, of course, many ways in which sellers can categorise or segment their customers. By far the most common considerations are their size and revenue contribution, but these measures alone are simply not adequate if you want to determine how to manage a relationship or how to negotiate with a customer. Put simply, big is not necessarily beautiful, and small is not necessarily unattractive. As has often been quoted, size is not everything... The fact is that not all customers are equally important or attractive, nor do they always hold the balance of power in a relationship. Suppliers can afford to lose some of their customers and may well be better off for doing so. Furthermore, some customers represent a huge risk, especially when they account for a sizeable percentage of revenue. Just look at the unfortunate case of Courtaulds, a long-established maker of branded and private-label clothing for the retail sector, which recently went into administration, losing hundreds of “The fact is that not all jobs. The main reason for the customers are equally demise of the company was the important or attractive, nor impact on it of the high-profile collapse of department store do they always hold the chain BHS, which was its major balance of power in a customer. So, having a “default relationship” setting” for dealing with all customers is not the right answer. How then do we assess the value and desirability that customers bring? The answer is information and analysis. It sounds something of a dull cliché, but the old adage that “information is power” holds true. Now, I am acutely aware that we are all members of a wider market community. Therefore, the well-recognised suite of tools for analysing the market is vital. Analysis of the vast array of available financial and 22 WINNING EDGE
strategic information on the Internet, and measures like SWOT, PEST(LE) and Porter’s Five Forces to determine the position of a customer or supplier in the market, are all invaluable. In this article, however, I am focusing on the balance of power between two negotiating parties and will concentrate on two under-used analytical tools: “customer positioning” and “category market positioning”. These two tools are explained in more detail in the boxes on the following two pages. Together, they offer a really good assessment of the balance of power and relative value of the customer and supplier, and who really controls “the fear of loss” in the relationship. ISMPROFESSIONAL.COM
