September 1, 2006
Column | outbound

Just what rock have these folks been under?

By Mitch Mac Donald

Can they really be this clueless? Or have they simply chosen to ignore an inconvenient truth?

Not long ago, I came across the results of a study that got me wondering whether the CEOs and CFOs at some Fortune 1,000 companies were due for a reality check. As part of that study, which looked at customer relationship management, researchers had sent out two separate questionnaires. The first went to buyers who had stopped doing business with a particular set of vendors. Among other questions, the buyers were asked why they had "fired" these vendors. The second questionnaire was sent to the CEOs and CFOs of the vendors that had lost this valuable business. The vendors were asked why they thought these customers had decamped.

The results? Nearly three out of four (74 percent) of the buyers said they had stopped doing business with the vendors in question because of shoddy customer service. The CEOs and CFOs had an altogether different take on the situation. More than four out of five (82 percent) said they lost the business because of price.

Apparently, these C-level executives have yet to figure out something regular readers of this page have long known: a customer-centric approach to business is vital to success in today's market. It's what differentiates your products or services from those of your competitors.

It hasn't always been this way. In the 1970s, in fact, most companies did compete on the basis of price. It made sense at the time. This was an era of soaring interest rates and runaway inflation. With the economy slumping and unemployment rising, a jittery American public was becoming increasingly sensitive to cost. Business recognized it and before long, price wars had broken out among manufacturers across the country.

As the 1980s dawned, inflation and interest rates began to stabilize. The public's anxieties started to ease. When it became apparent that price was no longer the flashpoint it once was, businesses began to scramble for the next great differentiator. For many of them, the answer turned out to be "quality." (Think of the Ford Motor Co. slogan, "Quality Is Job One.")

By the time the 1990s rolled around, most companies felt they had reached a kind of price and quality parity with their competitors. The quest for a way to differentiate themselves began anew.Many found the answer they sought in an "old school" idea: The Customer Is King! Companies that had once offered only grudging assistance to a few select customers suddenly embraced service as a way to stand out from the crowd. In the early days, the focus was squarely on the basic tenets of customer service—getting the right product to the customer, at the right time, and at the right price while meeting or exceeding quality expectations. But that evolved over time to include an added dimension: speed, or as we like to call it, velocity.

For logistics professionals, this represents a great opportunity: Set up a delivery network that's so swift and efficient that you can beat your competitors every time and you will have established a clear and demonstrable differentiator for your company.

Some CEOs and CFOs apparently suffer from the delusion that it's still all about price. You know it's not. You know it's about customer service—and in particular, speed.

Your mission, should you choose to accept it, is to find those CEOs and CFOs under whatever rock they've apparently been hiding. When you find them, lift up that boulder so they can finally see the light.

About the Author

Mitch Mac Donald
Group Editorial Director
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.

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