There is a reason why McDonald’s enjoyed total revenues of $23.5 billion in 2008. Could it be that there are more than 31,000 McDonald’s restaurants around the world in 118 countries? That is partly the reason, however I believe the fact that they sell 9 million pounds of their delicious French fries per day is an even more important element.
What they really do well is ask, “Would you like fries with that?” McDonald’s world wide excels at add on sales. I realize that others have also gotten on the “add on sales” band wagon, yet McDonald’s consistently performs year after year.
What Would it Take?
What would it take for you to create this kind of culture in your organization? You might be finding yourself a bit resistant, thinking that the MacDonald’s employees are mindless robots; and you might be right. However, they consistently perform. What would it take for your organization to perform at the level McDonald’s expects? Could the roadblocks be ego, intellect, and perception?
The Ego Roadblock
In my experience professional service corporations and chic retailers are the worst offenders in the area of letting ego get in the way of add on sales. I’ll ask you this. ”Do you want to hold on to your costly erroneous beliefs or do you want to increase revenues? When you let your ego get in your way, revenues will decrease.
The Intellect Roadblock
“I’ll do it my way because I know better.” This is the battle cry for intellects. In solving complex problems this is fine, however it is not acceptable is selling more of your products and/or services. Intellects are infatuated with features as opposed to being conscious of benefits. Intellects love to hear themselves talk about the technical side of anything and everything. Guess what? Your customers really do not care. They just want to know how your product or service will make their lives better—and, that it is a good value.
The Perception Roadblock
The perception roadblock to add on sales is one that will definitely need a brain adjustment. Business owners and the employees that sell for them too often feel it is an imposition on their customer to offer something additional. Somehow these folks got their head screwed on cockeyed and they really do need some help. When one truly cares about their customer, client, or patient; it is incumbent on them to offer every bit of value your/their organization has to offer.
One might say that McDonald’s is making people fat and unhealthy by offering supersizing or just “fries with that.” I do not think so. McDonalds is not cramming the food down the throats of their dining patrons but simply offering more value. Customers make choices. What you need to do is to simply offer your customers more choices and more value.
Success in Simplicity
McDonald’s, I believe, is successful because of simplicity. They do not rattle off 20 additional dining options but rather one or two. If you were to adapt this idea of simplicity to your organization, it might be done by just offering one single item to every customer as an add on, or possible having just one specific and different customized add on offering for every individual product or service. Needless to say, the multi-item approach is much more difficult to implement.
Why Else Don’t They Offer?
I have found that the primary reason you and your employees do not offer add on sales is because of a lack of training. I bet you thought I was going to say laziness. In my two decades of experience in work with organizations as a consultant, I have identified lack of training as the culprit much more often than apathy or sloth.
A Simple Solution
Your simple solution to increasing add on sales in your organization is daily training. Try this for a month and see if I’m not completely correct. At the start of every day, spend two to three minutes explaining to all the persons in your organization, why a particular product or service helps your customers’ lives to be better and suggest that they suggest it to customers that day. At the end of a month you have trained your entire company, on how to offer 20 new and or different, add on products or services. And your employees have consciously participated in that training.
Yes, it will take you, the leader, a bit of pre-planning time but, my gosh—isn’t that your job anyway? Do this rigorously for one month and I guarantee you that you’ll be pleased with the results. It is the little things that make the difference.
There are basically three levels of buyer/seller relationships. The first and most common relationship level is Adversarial. This is the traditional win-relinquish relationship where you, the buyer, squeeze your supplier for the very last bit of a discount. You are determined to get the last drop! You are not focused on the cost of doing business with one another, just what you believe to be the lowest cost. This is a transactional only relationship.
Next is the Barometric relationship. In a Barometric buyer/seller relationship you are always checking the atmospheric pressure. This relationship is still being monitored and measured closely. Generally you have not yet developed a high level of trust with one another. It could be a single source relationship, but with a short length contract. While this relationship can grow and flourish, it can also sour quickly. Few people thrive with others constantly peaking over their shoulder. In this type of relationship, each side must still engage in CYA (cover your assets).
The highest-level buyer/seller relationship is Complementary. This level is where true integral Partnering takes place. At this level the visions and values of each overlap with one another. There is a true alignment of values in place. Each understands the needs of their alliance partner and works hard to help their partner get what they need while likewise serving their own organization.
Vendor Managed Inventorying (VMI),
Just-in-time (JIT) shipments are made successful through trust and
Electronic Data Interchange (EDI) at this relationship level.
Complementary Contractor/Distributor Relationship
An example of Complementary buyer/seller Partnering is the relationship Universal Systems developed with Graybar through Graybar’s local branch. Universal is an electrical contracting company and Graybar is a distributor of electrical supplies.
In 1996, Gene Dennis, President at Universal Systems realized his company had a problem. His supply inventory was out of control. Through the assistance of Parviz (Perry) Daneshgari, Dennis set out to make a change. Daneshgari is president at MCA, (an implementation company in Michigan), an adjunct professor of automotive engineering science at the University of Michigan-Dearborn and Oakland University’s School of Management and the author of The Chase, (1998, Black Forest Press, San Diego, CA) a business novel about process implementation. Dennis decided he wanted to be a construction company without owning and handling any material. This was a lofty goal as traditionally the stocking of electrical supplies was a cornerstone of the business.
He needed a supply partner. His choices were a local supplier and Graybar, a national supplier with a branch in his community. He leaned toward the local supplier until he showed up at their place of business unannounced. “We were held hostage,” said Dennis (Electrical Contractor Magazine, July 1998). The problem was that the president was not in and the employees didn’t know what to do so they put Dennis and his team in a conference room. In contract, when he showed up at Graybar unannounced and the branch manager was out, all the employees knew about Universal looking for a supply partner. The staff at Graybar showed him and his team around at once. Upon closer inspection, Dennis learned that Graybar’s on-time deliveries had been 29 percent higher than their competitor. Graybar was selected for the sole-source arrangement.
Graybar agreed to take ownership of Universal’s existing in-site inventory. An on-site inventory was maintained and orders were placed via Graybar’s EDI system and invoices were generated from Graybar’s St Louis headquarters monthly. Universal realized approximately $60,000 the first year through eliminating delivery trucks, inventorying and other personnel savings. Graybar offered additional benefits as the relationship progressed. Before the partnership, Universal had to pay extra for shipping their frequent emergency orders. In the partnership Graybar maintains a standard list of commodity items at the local branch and if they don’t have it, Graybar pays the shipping.
What’s in it for Graybar? “Instead of wondering how to get the order, now we sit in on job meetings, try to find ways we can help, and look for cost and process savings,” says Jim Estis, a local Graybar account representative (Electrical Contractor Magazine, July 1998). Chatting with Dennis late October 1999, he said, “Partnership is covering the backside of each other—each looks out for one another.”
The following are Daneshgari’s steps to form a vendor partnership and criteria for selection, which Universal Systems used. Dennis and Daneshgari outlined these when they presented their success story at the 97th Annual National Electrical Contractors Convention in Las Vegas, Nevada, October 1998.
Steps to form a partnership:
Develop a scope of work.
Send out requests for proposal and interview potential vendors.
Create a short list.
Make unannounced tour of vendors’ facilities.
Negotiate an agreement with your selected vendor.
Criteria for Vendor Selection:
Purchase existing stock at retail value.
Establish a branch at Universal Systems.
Have an inventory management system.
Work toward continuous improvement process.
Use EDI for billing.
Have a delivery process.
Use periodic evaluation process.
Contract termination clause.
Product warranty and liability.
Maintain property damage insurance.
Aggressive pricing strategy.
Maintain stocking inventory.
Maintain workers’ comprehensive insurance.
Offer single point of contact.
(Used with permission of Parviz (Perry) Daneshgari)
Fuji Photo Film U.S.A, Industrial Imaging Group has the right idea. They are true partners with their distributors. Fuji Photo Film is a manufacturer that supplies the graphic arts industry, supplies for printers. Among the major suppliers to the industry, Fuji is by far the most advanced in building quality relationships with their dealers. Much of the success is attributed to Stan Freimuth, president at Fuji.
The Fuji factor is a model that more manufacturers should embrace and more purchasers should demand of their suppliers. If you were a distributor, wouldn’t you rather have a supplier relationship that could grow and improve over time? This is only possible with the right kind of supplier. The key elements to Fuji’s success are as follows:
Limited number of dealers offering their products to their market. While approached by virtually every non-Fuji dealer (distributor) in 1997 due to industry manufacturer consolidation and pressured to add their preferred dealers by national accounts, Freimuth had to make some hard decisions about his dealer network. He responded, “The net result of all this has been minimal changes to our dealer network. As most of you know, we have pretty tough standards that must be met before we will sign on a dealer. We only want strong, well-run companies who are willing to do business the way that we want to do it, and be complementary to our existing dealers.” (Access Fujifilm Graphic Systems Division newsletter, Fall 1997)
Manufacturing products of the highest quality with zero defects as the norm.
Builds tight relationships with their limited dealer network. In his letter to distributors, Freimuth states, “Last month the Graphic Systems Division hosted the Partnership 98 Conference in Greenville/Greenwood, SC. As many of you already know, this is a meeting where key dealer personnel (whether they be field sales reps, branch managers, electronic imaging reps, etc.) meet and interact with members of the GSD [Graphic Systems Division] management staff. It’s a chance for all of us to listen to each others concerns, get to know each other better and tour our state-of-the-art manufacturing facility in Greenwood.
We have been doing Partnership meetings in one form or another since 1992 and I am still impressed each time by the interaction between our two groups. At that first meeting in 1992 I remember the overriding sense among the attendees that we were all helping to shape something that was completely different in our industry. The concept of a manufacturer/dealer meeting with a free and open exchange of ideas (let alone mutual respect for each other) was unheard of at the time.” (Access Fujifilm Graphic Systems Division newsletter, Spring 1998)
Seeks constructive feedback from their dealers and acts on the ideas shared.
Consistency of leadership; Freimuth has been the president since 1983 when Fuji opened shop in the United States. Other companies in their industry have had numerous changes in leadership during that same time period.
Accessibility; several dealers attested to the fact that they could pick up the telephone and easily reach Freimuth.
Trust; when I asked about building quality relationships with his dealers (Spring 1999), Freimuth said, “It doesn’t come easy, it’s hard work.”
Regardless of the scope of your relationships, work with your suppliers to build Outrageously Successful Relationships. The Complementary relationship level may take longer to develop than you may hope, but the close relationship delivers value. This foundation will allow you to PartnerShift throughout your organization and benefit from your effort.
I recently delivered a “What Suppliers Say About Buyers” partnering presentation to the National Association of Chemical Distributors at their annual meeting. A couple months before the meeting, I visited the convention chair, Pat Marantette, at his Southern California business, E.T. Horn Company, to learn more about the industry. One of the things he told me was that he was more concerned with the relationships with his suppliers than the relationships with his customers. He went on to explain to me that without his suppliers, he was out of business.
In thinking back on the visit, asking how important are suppliers to your business success is an important question. The following is excerpted from my latest book, PartnerShift–How To Profit from the Partnering Trend. I believe you’ll be asking yourself questions in reference to the relationships you enjoy, or do not enjoy, with your suppliers.
At the Building Service Contractors Association International’s 1997 Chief Executive Officer Seminar in Los Cabos, Mexico, one of the suppliers to the industry was assigned to present a presentation based on what the suppliers in general said they did not like about the contractors, their customers, actions. While Rob Kohlhagen, senior market development manager at SC Johnson Professional delivered an exceptional presentation, I’m not sure he ever forgave me for assigning him the task. Admitting the comments came from only one industry, I believe they are universal, as they have applied to most of the industries that I have counseled or studied.
Power manifests through knowledge. It is important to know what your suppliers have to say about you. Completing Relationship Value Updates are important, as they will help you to avoid some of the following problems and open a conduit for communication. Remember, you can learn from another industry’s problems. Below are listed the three general areas of complaint from the contractors’ suppliers. Also there are some of the specific comments offered about the contractors. Their comments point out universal issues that suppliers have with their buyers. Most will apply to your industry. If you explore issues you might have with your own customers, there is a good chance your suppliers could have similar issues with you.
Fear of commitment
“They are not willing to single source but still want our total bundle of value-added resources at no additional cost.”
“They focus on reducing price rather than reducing cost.”
“They like to shop around regularly to satisfy curiosity . . . they are afraid that we will abuse the relationship.”
“They want direct prices but local service.”
Operations level support
“We get commitment from top management but the program gets derailed at the operations level.”
“Top management is reluctant to mandate changes to operations . . . they try to build consensus but it doesn’t happen.”
“Operations people have their ‘personal favorites’, old recipes they swear by that they will do anything
to hold onto (including sabotaging the partnership initiative).”
“The partnership is conceived at the executive level but the lower level departments are never convinced that it is in their best interests too.”
“Everyone is so busy we only communicate when there is a need for fire fighting . . . hence the relationship takes on a negative tone over time.”
“We never discuss mutual opportunities . . . it’s always, “How do we fix what isn’t working?’”
“We talked about the importance of communicating at all levels: executive, operations, purchasing, training, risk management and quality assurance but there is no structure established to make it happen . . . so it doesn’t.”
“The chemical supplier cannot partner independently with the building service contractor. There is an interdependence between the chemical and equipment and supply manufacturers but there is no communication link established between us.”
Interdependence is an idea that carries much power. From the Harvard Business Review, July/August 1994, “Active collaboration takes place when companies develop mechanisms, structures, processes, and skills for bridging organizational and interpersonal differences and achieving real value from the partnership. Multiple ties at multiple levels ensure communication, coordination, and control . . . more communication than anyone anticipated is necessary.”
Thomas Gale, editor at Modern Distribution Management, has his opinion about the integrity of some customers. From the November 10, 1994 issue, “And while many customers are talking about integrated supply partnerships, there are (and will always be) customers that are ultimately seeking price reductions, playing one distributor off another, without a willingness to explore how a true partnership can save money for the customer while providing a fair profit for the distributor.”
Developing a conduit for communication is not difficult but frequently overlooked in many industries. The Internet makes this even easier. Some industry associations are providing this service through members’ only sections on their web site. More trade and professional associations are helping to create this type of multi-function participant forum, but not enough. This area is a tremendous opportunity for associations to add a very high-level of value for their members. Continue the dialogue with all stakeholders in your business.
https://rigsbee.com/wp-content/uploads/2016/12/rigsbee_research_logo-300x112.jpg00Edrigsbeehttps://rigsbee.com/wp-content/uploads/2016/12/rigsbee_research_logo-300x112.jpgEdrigsbee2016-09-15 18:43:322020-03-24 01:03:47What Suppliers Say About Buyers (850 words)