Our Biggest Customer Is A Bully. Help!

In this month’s edition of Management Today there is an interesting article about bullying. No, not online bullying or workplace bullying, but B2Bullying.

B2Bullying is what happens when a (typically large) buyer makes continued unreasonable demands on a (typically small) supplier. In many cases, the buyer represents a significant proportion of the supplier’s business.

Here’s the scenario:

“Our biggest customer is a bully. It never pays us on time – every piece of work we do for it has to be followed by a flurry of emails and phone calls demanding payment – and the boss of the company is rude and arrogant. If I had my way, I’d tell them to shove it, but the work we do for them represents 35% of our sales. Help!”

Jeremy Bullmore, former chairman of J Walter Thompson, is the agony aunt who dispenses sound management advice about how to handle such a client.

Jeremy’s response (you can read it here) is solid and pragmatic, but it begs the wider question about what a typical or even excellent buyer-supplier relationship should look like.

Here’s our take on the subject.

In the business-to-business (B2B) world, long-term relationships are built on a foundation of mutual trust and cooperation. Academics talk about exchange theory (think of an exchange between two equal partners rather than a traditional buyer-seller model) and equity theory (the exchange has to be seen to be fair and equitable by both parties involved in the transaction. Indeed, a long-term relationship is based on a series of such fair and equitable exchanges.

That’s not to say that from time to time one or other party gets the short end of the stick on a particular transaction, but in the long run, it evens out and both parties feel pretty comfortable with a bit of give and take. You scratch my back and I’ll scratch yours. Or maybe more accurate: “You need to help me out this time but don’t worry, I’ll make it up to you.”

Upon such transactions are long-term relationships made. But if one party (often the larger party and typically the buyer) starts to B2Bully his way or continues to usurp his position of power, the relationship is doomed and will eventually fizzle out. What Jeremy is saying in his response – if you read between the lines – is that this is a one-sided arrangement and not a true partnership and that the supplier either lay down some ultimatums to the buyer if in a position to do so. If not, grin and bear it for the moment while working towards a dissolution of the so-called partnership when the timing is right.

On the other hand, an excellent buyer-supplier relationship is on that will stand the test of time and will be based on those principles of exchange and equity. You’ll recognise the signs. The parties in the relationship trust each other implicitly and are committed to helping each other. They collaborate on joint initiatives. They innovate together. They don’t wait for RFPs to be issued – they bring ideas to each other. They have an emotional bond that makes it extremely difficult for a competitor to get a look-in.

So, what’s the quality of your relationship with your top clients? If you’re unsure, why not contact us today and we’ll check out your Customer Relationship Quality (CRQ) for you.

Peter Lavers is Deep-Insight’s UK MD.

Why are Trust and Commitment so Important in B2B?

Commitment and Trust

“Commitment and trust, rather than power and dependence, are now central to discussions of business relationships. Researchers and practitioners have come to view most interactions between business parties as events that occur over the course of a relationship between two or more partners.”

The funny thing about business-to-business (B2B) is that it’s less about business and more about relationships. In fact, B2B is really P2P: person-to-person.

People buy from people. In large organisations, the decision to go with one particular service provider over another is often down to the answer to one simple question: “Do I really want to work with this person?”

And the answer to that question is usually based on the perception of whether the individual can be trusted or not.
 

How Important is Price?

Even in business situations where a large contract is put out to tender and a clear set of evaluation criteria is prepared to help guide the choice of service provider, the decision is often made on softer and often unwritten criteria. Sometimes decisions are made on the basis of price. Sometimes they are made on the basis of functionality. But when it comes to making the final choice to award the contract, subtle psychological elements come into play.

“OK, I know these guys seem to have the [INSERT: ‘best product’, ‘lowest price’, ‘most innovative solution’]. But what if it all goes wrong? Will they sort out the issues or will they leave me in the lurch? Will I lose my job?”

Fundamentally, we like to buy from people we think are honest, who treat us fairly and who act with integrity. In other words, we buy from people we trust. Price is a secondary consideration.
 

Morgan and Hunt

The Commitment-Trust Theory

Two American academics figured this out along time ago. In 1994, Robert Morgan and Shelby Hunt wrote a seminal paper on what really drives a long-term relationship between two business partners. The Commitment-Trust Theory of Relationship Marketingquickly became a hit, not just in academic circles, but among senior business executives who were trying to identify why people were likely to do business with you.

Essentially, what Morgan and Hunt realised all those years ago is that long-term business relationships are built on a mutual and cooperative working relationship between two partner firms. If you want to foster and nurture such a relationship, focus on Trust and Commitment. That’s why we built Trust and Commitment into our Customer Relationship Quality (CRQ) methodology.

Trusted Relationships = Consistently Good Service

At Deep-Insight, I spend a lot of my time trying to help our clients figure out how to build strong trusted relationships with their B2B (Business-to-Business) customers. Trust is all about honesty, fairness and acting with integrity. It’s one of the most basic elements of human interaction. And perhaps the most basic element of good account management. As they say:

“People buy from People” and
“You don’t buy from a person you don’t trust”

B2B is all about establishing strong people-to-people relationships. Trusted, committed relationships. And yet, here’s an interesting statistic. When we look at the correlations* between the various drivers of customer retention in our Customer Relationship Quality (CRQ™) methodology, guess what the strongest correlation is?

It’s between Service Performance and Trust.

When I first noticed this correlation, I was somewhat puzzled. It didn’t surprise me that Trust was strongly correlated with Service Performance. But why is it the strongest link of any of the elements in our model? Why does the level of service have such a strong impact on the degree of trust between the client and a service provider?

The answer is actually straightforward, when you think about it in real life. Many – no, most – of our clients operate complex businesses where their interaction with customers is based on a complex (and sometimes bewildering) array of services. Even manufacturing companies are heavily service-orientated these days. As an account manager or account director, you might like to spend your time having meaningful conversations with senior executives about where their business is going and how you can help, but the reality of day-to-day interaction is often explaining why that critical piece of machinery has not been delivered on time, or why the network that manages their business has fallen over again.

When the basic delivery of service is a constant issue and source of frustration for customers, account managers find the trust built up with key client contacts erodes quickly. Responses like “I’ll sort that out for you” are fine, as long as the service issue really is sorted out. But ongoing service problems can be notoriously problematic, particularly when processes or technology need to be changed in order to fix what’s broken. It’s frustrating for the client and it’s frustrating for the account manager but, most important of all, it’s damaging to the long-term relationship and ultimately the revenue stream from that customer.

Trusted relationships are based on consistently good service delivery. That’s what the data says. And that’s why getting the service right (and right first time) is so critical.

Correlations based on tens of thousands of customer responses over more than a decade. Service – Trust R-Squared = 0.74