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What customers love or hate about suppliers …

August 29, 2013

There are of course many factors that influence supplier selection and retention, but the bidding, negotiation and contracting experience are significant elements. So what are the things that buyers most value – or most dislike – when dealing with a supplier during this phase of their relationship?

IACCM has started a series of studies to explore this question and also to discover which suppliers are offering the best (or worst) customer experience during the negotiation or contracting phase. The work kicked off with research into the Outsourcing and IT Services sector and preliminary results are now available.

Leaving aside obvious issues such as honesty and integrity (which we naturally assume to be essential to doing business in categories such as this), the number one challenge that buyers tell us they encounter with this supplier group is ‘inflexibility of contract terms’. It is the top issue for 55%. Second on the list with 47% is frustration over the inability of the supplier negotiation team to close issues / make decisions; and 43% cite failure to provide an understandable contract. Clearly each of these it to a large extent an avoidable issue (though in their defense, many suppliers would argue that customers often demand unrealistic or inappropriate terms). However, the fact that buyers experience quite different approaches on these issues from major suppliers proves that those who are failing to perform could do better. And on a matter like ‘understandable contracts’, what excuse is there? How can it be in either party’s interests to produce contract terms or structures that are difficult to understand?

So what about positive differentiators? The number one attribute here is responsiveness, identified by 60%.  In second place is ‘being treated like a business partner’ – by which buyers mean only that there is a fair and effective resolution of issues, not that the supplier gives way every time. They expect timely and rational discussion – which is borne out by the item in third place, that the supplier fields ’empowered decision makers’. There is plenty of evidence that dealing with questions on the spot leads to faster and less demanding resolution; the longer it takes to resolve, the more those demands increase and the more confidence in capability reduces.

The economic downturn has had a significant effect on negotiations for 35% of those responding and they tell us that suppliers have been quite variable in the extent to which they adjusted to market conditions. Interestingly, Infosys emerged as the most adaptive – perhaps because it was in some ways removed from the early crisis facing its rivals in the West.

IACCM also asked which terms were most critical when it came to supplier negotiations. By far the most important is data protection, with 73% rating this as critical – outpacing second placed indemnities by 40%. Tying for third place on the ‘critical’ list are liabilities and service levels. Despite all the publicity about their importance, innovation and continuous improvement lagged far behind, with 57% rating them as either somewhat or not at all important – to some extent explaining why these items are often a subsequent source of disappointment.

The rankings of individual suppliers are not being published by IACCM, except to legitimate contributors to the survey.

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