A recent article in The Globe and Mail on why you need to keep stroking clients discussed a major reason businesses lose clients and don’t maximize lifetime value from the relationship. Dubbed the cliffhanger paradox, which describes the situation where businesses want continued loyalty and financial gains — but don’t get it, the article points out that the reason clients jump ship is because, once the client is won, the business fails to communicate meaningfully, frequently, and personally with them. Like a cliff-hanger, both sides are left in suspense.
If businesses don’t continuously communicate with clients, they don’t know where they stand until those customers either buy again or jump ship to the competition.
But the same holds true in supplier performance management. Often a company will begin a supplier improvement initiative, target the most critical or most under-performing suppliers, work with them for months until the performance meets the target level, and then quickly move on to the next supplier in the queue, thinking “the supplier has everything under control now”. Maybe they do, maybe they don’t. But most importantly, neither side knows that. If the supplier thinks all is well with the world again, they might slowly drift back to their old, under-performing ways. And if the supplier thinks you have given up on them, they might put minimal effort into fulfilling their contracted obligations and instead put all of their effort into pleasing another, easier to retain, customer. Both ways end up with you not getting the best performance you can. It’s not just your customers that need to be stroked on a regular basis … your suppliers need their whiskers stroked too.