As a customer, I would categorize my vendors into those two segments right off.
A commodity vendor (ex. Paper, toner, etc…) were valued based on price and delivery. Therefore, I could minimize their impact to my bottom line only.
A strategic partner (ex. Developer, marketer, etc…) were valued based on their direct contribution to my top and bottom lines.
As such, the strategic partner is called into a meeting to discuss the 3 shares.
Shared values – partner understands your goals, their role in achieving your goals and their overall mission is to support their customers goals.
This goes beyond just going, ‘yep sure, we want the stuff we work on with you to help you grow or save you money’. The vendor’s own mission or value system must be to directly support their customers growth plans. It not be prepared to walk away.
- Not a supporting value statement – Our vision is to be recognized as a global services innovator, helping customers realize the best results.
- Supporting value statement – we focus on superb delivery of solutions that achieve business result
Shared benefits – As that partner, if I am impacting their growth the effort I am engaged with the customer must delivery 10 times or more the expenditure my customer is paying out. If it is impacting the profit line, then at minimum 2 times that expenditure. If both, well you all can do the math.
As a customer, I can breakeven on these projects, engagements, initiatives by using my internal employees. The direct benefits must be measurable impact on my growth and/or profit.
On the other side of that coin, I as the customer must understand that you are NOT a commodity vendor. You are a partner and as such price is not the top priority in our relationship. Impact is, right!. Therefore, I as a customer should acknowledge that I need to be a profitable customer to my strategic vendor partner.
This provides two direct benefits.
- No other way of saying it. As a vendor, I know which customers drive my profit and whether I state it or not, those are preferred when I have to decide between satisfying one of two customers.
- Also, you want your partner to be healthy with a strong bottom line. If they are pinching penny’s (okay dollars now) they will be distracted from you and if they suddenly close up shop that can be very painful if you are in the middle of projects.
Shared risk – customer and partner share the risk of an endeavor.
This is where the vendor partner has to put money in the game. Often in an engagement, project or other activity once you move past 25 to 33% of the project, the customer now has all the risk.
However, if you balance the risk, by contractually agreeing that payments will be based on deliveries and tie the project plans to ensure that at each project gate there is a deliverable that is valued by the customer to be worth 75% of the current payments to that gate.
And of course, the big part of this is the hold back at the end of the contract, to ensure that the deliverable delivers a measurable impact which is normally 30 to 90 days after completion. The hold back should be substantial enough to have the partner in the game through the end gate and not just up to it.