Research: Strong customer relationships key to recovery and growth

22 February 2022 4 min. read
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New research by Vendigital explores the changing nature of customer relationships at a time of major disruption. Jeff Kennelly, a director at the management consulting firm, walks through the report’s key takeaways.

Customer relationships have been in a constant state of flux over the last 18 months as a result of disruption caused by Brexit and Covid-19 as well as ongoing challenges such as energy and material price increases. But according to Vendigital’s study (based on the views of 150 C-suite executives in the UK), across the board customer relationships have grown stronger despite the disruptive environment.

More than half (54%) of the leaders surveyed believe that companies have managed to strengthen their trading relationships, with most putting this down to close cooperation and speed of response in flexing operations to meet customers’ shifting needs.

The top five changes in customer behaviour

Among the most common signs of improvement in customer-supplier relationships is a more open, two-way approach to communication, which has in turn helped these relationships to evolve and grow stronger. In other cases, where a supplier’s relationship with a key customer has suffered, a different approach to communication may be needed – what worked well in the past may not be enough going forward.

One in five respondents stated that their customer relationships were weaker than before the pandemic. As well as commenting on a lack of facetime, most put this down to the knock-on effects of missed deadlines, more price competition and the strain placed on relationships by unpredictable levels of demand.

A balancing act

Another key finding from the research is that 87% of C-suite executives believe that managing customer relationships, while keeping a close eye on costs, is key to survival in the year ahead. Decision makers understand the need to work more closely with customers to drive cost savings while maintaining service levels.

For example, innovating to find new ways of working together and communicating openly could bring about opportunities to build back better supply chain relationships and create scope to consolidate or diversify operations in the future.

Balancing changing customer demands with operational cost

As businesses pursue growth in recovery, ongoing market and geopolitical volatility means many decision makers remain cautious and they are aware of the importance of strong supply chain relationships. With customer relationships in particular, there is little room for error, as overestimating demand could lead to businesses gearing up too quickly, forcing costs to spiral out of control. Underestimating demand, on the other hand, could have a limiting effect on the company’s growth potential.

Collaborative way of working

Establishing a more collaborative way of working with key customers and suppliers will deliver the best outcome for all concerned in the long term. This relies on a clear understanding of the financial and commercial terms in place and their impact on the businesses involved.

For example, if a customer is experiencing financial difficulties, they may wish to extend the agreed payment terms, but have they considered the impact this could have on the supplier? It may be in the customer’s best interests to avoid taking any knee-jerk reaction and consider other potential solutions.

To support them in meeting customers’ needs in the future, businesses may need to re-evaluate their business model and management approach. This is likely to involve considering key questions about whether recent changes to core business processes are permanent and whether existing infrastructure is agile enough to meet market requirements.

It may also be necessary to address governance issues, particularly if complaints or returns are on the rise, and for some companies, engrained cultural issues could be holding them back.

Managing customer relationships effectively has definitely become more challenging lately. However, being ready to adapt, investing in the right infrastructure, communicating openly and adopting a more collaborative mindset could all help to deliver rewards in the long term.

Jeff Kennelly is a director and industrial engineering sector specialist at management consultancy Vendigital.