Downstream Business Management: The Key to Business Success
In downstream business management there are two options: Managing your business from within or from without.
By Charles Valentine
There are two ways of looking at all aspects of your business – “market pull” and “market push.” Imagine you are a spray foam insulation supplier. In a market pull stance, your company looks to develop what the market is requesting. In a market push scenario, your company looks at the market and determines what would be best for it, then develops that product and introduces it to the market. At first blush, you might assume that the market pull model is always the way to go; however, due to the resources available to a large supplier, they may be able to see something new on the horizon prior to it hitting the marketplace.
Another method of viewing the marketplace is to look at it downstream. What does your customer need and what is in their future? Once again, this can be a push or a pull situation.
PUSH VS. PULL
In a push situation, the suppliers will work to direct the market. This is sometimes done in the best interest of the customer, but it is always managed to be in the best direction for the supplier. This can create conflict because what is best for the supplier is not always best for the customer. The supplier may have liability or cost concerns that differ from the customer. At the same time, the concerns of the supplier may very well be in the best interest of the customer. Issues such as industry sustainability and safety are often in direct sync with the customer’s needs. Suppliers may see this issue from afar and choose to invest to ensure that industry positioning is in line with the contractor’s future needs. As a small business owner, sometimes the short-term needs of the individual’s business are not in line with the long term needs for sustainability of the industry. Sustainability of an industry may require short-term sacrifices for long-term gains. When you are trying to make ends meet month-to-month, it is a large benefit to have suppliers who are investing in the long-term sustainability/viability of the industry. After you, as a business owner, have invested significant time and resources in a business, it is important that the business has value when you either pass it on or sell. Sustainability investment is exactly what preserves the value of your business.
The best scenario for a market is the combination of market-pulling issues coupled with some investment by large suppliers for sustainability of the industry. The supplier and contractor both need to balance this view. The contractor needs to communicate to their supplier what they are seeing in the market both locally and nationally. As our industry grows, many contractors are gaining in size, geographic coverage, and influence. Suppliers need the input of their contractors because, although they both work in the same market, they do not touch it in the same manner. While builders, architects, and specifiers all hear from suppliers about product capabilities, and while product application is the most valuable decision they will make, contractors understand the difficulties associated with applying a product in the field. Only contractors understand the nuances of building configurations, substrates, and ambient conditions. While suppliers will work to produce products to support contractors in various conditions, valuable feedback on performance will support long-term development.
“Contractors need to communicate to suppliers what they are seeing in the market…”
Industry groups are required to bring the market issues to the forefront and allow for the suppliers and contractors to slow down from the day-to-day business to review major industry issues and to have a forum to discuss.
Suppliers need to listen to their customers and demonstrate that they have listened. This demonstration is a business decision. The supplier needs to decide where to invest their resources. As with any business, the resources are somewhat limited, so investment has to be both long- and short-term. Quite often, customer support is a short-term investment with long-term dividends. A supplier with a downstream business mindset is running their business with the idea that their customer’s success has an immediate impact on them. Although this is true in all cases – all suppliers depend upon their customers’ success – this is not the mindset to which all suppliers adhere. Sometimes, the short-term sales will override long-term customer-service investments.
When you ask if your supplier is in your corner, the question really is whether the supplier is investing in your business or only theirs. Are they supporting you in advertising your business as they advertise their own? Does their investment have your success in mind or have they invested in a manner that insures their success regardless of your performance? There is often a message from the marketplace that this investment is not valued.
A QUESTION OF PARTNERSHIP
As customers, do we reward investment in our business or do we simply look for the lowest cost alternative? This is truly a business decision and there are advocates for both sides. As a consumer, it is often difficult to envision a supplier or vendor truly being on your side. The traditional customer/vendor relationship is more adversarial than aligned with common goals. In the downstream model, both parties must overcome this traditional relationship. The true partnership opportunity must be embraced and practiced. In a true partnership both parties must give. Does the supplier sell to all his customer’s competitors or does he choose to support and invest in one champion? At the same time, does the customer continue to purchase from his supplier or does he switch due to short-term income gain? These are very difficult questions for both parties, and there may not be a correct answer as they simply may be differing business decisions. If the consumer does not see value in the supplier’s investment, then why not accept lower pricing if indeed there will be no change in the resources available to the customer? At the same time, if the supplier is going to be constantly at risk, then why not sell to all opportunities that present themselves?
How do these parties ensure that they can truly form a partnership and that linked downstream and upstream relationships can be achieved? Communication is key, and the supplier and customer need to openly discuss business issues. This level of relationship is difficult to achieve due to several reasons. The sales personnel either need to have the wherewithal to engage customers from a business perspective or the supplier needs to have management available to engage customers in these discussions. The buy-sell relationship has to grow to the point of being a business discussion.
SES Foam LLC (SES) has invested in understanding the contractor’s business. This investment has led to the development of a new standard of customer support with the highest ratio of technical support personnel to sales personnel in the industry. SES’s new online contractor support portal will provide their customers access to significant contractor-focused support services. They have invested in key industry specialists focused on supporting their contractor base. This means that SES is poised to tailor support to the individual contractor, meeting them in their market and providing services directed by the contractor to be utilized specifically in their market. This focus on downstream business is the foundation of the vision that SES has for the market.
The request for constant input from the customer base, coupled with communication regarding future investment by the company, set the stage for the downstream relationship to work. Reviewing customer performance and needs ensures continuing development of programs designed to support customer growth. In this manner, the company remains flexible to design business relationships and services to meet individual customer needs. Listening to the marketplace and requesting feedback is a critical component to this program. •
Contact SES FOAM
Direct any questions about business management strategies to SES Foam:
Phone: 855-335-2440 / 713-239-0252
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