Last week we discussed five specific procurement goals or resolutions for the New Year and followed up by taking a deeper look at goals two through four. Today we are going to discuss goal number one. Focus more on existing customers. Cater to existing clients as new business becomes scarcer.
As a recap from our original post the five procurement goals or resolutions for the New Year are as follows.
1. Focus more on existing customers
a. Cater to existing clients as new business becomes scarcer.
2. Look at ways to use new technology to save money
a. New open source software applications mean you don’t have to shell out a ton of money for license fees.
3. Make training a priority
a. Talented workers want to be challenged. Keep them happy by helping them develop new skills
4. Take a close look at your supplier chain
a. You can find ways to save money by reevaluating what suppliers are charging.
5. Create a small business network.
a. Collaborating with other businesses is one way to save money
Today we take a look at possibly the most important goal for any company as it heads into a new year. Focus more on existing customers. From a casual perspective many may not believe this has a whole lot to do with procurement. In fact, it has everything to do with procurement. Programs such as frequent shopper programs have been in place for many years that help retailers collect detailed data about their customers. If the information is complete enough, it allows retailers to analyze what deciles of their customers are buying what products and create unique merchandising or continuity programs that are intended to drive greater wallet share from the top deciles or those customers that do the majority of their shopping with that specific retailer.
If these programs are executed properly, products that have an affinity with another product family can also increase revenue and margin contribution at the same time. An example may be paring a product such as tortilla chips with a particular brand of beer and merchandising them in a unique way that uses end caps and signage to create brand loyalty for two separate products and increasing sales at the same time. These types of programs can also have a specific impact on customer satisfaction. Studies have indicated that a one percent increase in customer satisfaction can have a corresponding two percent impact on top line sales.
So, are your procurement plans in line with your marketing and merchandising plans? Are you using your procurement tools to drive the best margins possible for the products that your customers want and offering products with an affinity that makes so much sense to your top customers that they select the package without event thinking about it. If not, it may be time to realign your resolutions for the New Year.
We look forward to and appreciate your comments.