Great StoryCustomer Satisfaction methods often focus on individual consumers and businesses. Normally the business is bigger, more powerful and may  employ the language and thinking of slave-owners when dealing with customers.  The consumer feels small and may be intimidated.

There are cases, however, where there is a more even match between customer and vendor, or where the customer has more power than the vendors.

Many of us can relate to large conglomerates like Walmart and their power over suppliers. Large organizations expect volume discounts, special handling and perhaps products with special specifications only available to them.

(That’s a little trick large organizations use so they can advertise that they have the best price and will guarantee you won’t find the same product cheaper anywhere. Guess what? You can’t. The product is only available from that organization.)

Sometimes the organizations are more evenly matched in size and scope. And then the golden rule applies.

The Golden Rule:

He,  who controls the gold, makes the rules.

Here’s an example from my experience at IBM.

A large customer had requested a ‘Request for Proposal’ from multiple vendors to meet their needs. IBM was bidding along with other competitors. What was interesting about this particular bidding process was the way the customer evaluated the proposals.

Each vendor had to prove they had a viable solution to the customer’s problem, submit the details of their proposal and their bottom line bid.

The customer would then assign the vendor a score based on various elements, most of which reflected the cost of doing business with that vendor. Those with the worst score received a  large ‘add on factor’ to the bottom line bid price. The ‘cost of doing business’ factor was added to  each of the vendor’s the bottom line bid price. The results were used to make a final decision.

The company’s rationale seemed sound.

If vendor A provides inferior technical support over Vendor B, that means the organization needs to have more support people trying to determine the problems themselves than doing business with Vendor B.

If vendor A’s products break down more often or have more quality problems, then there is a cost of maintenance or repair  (also called total cost of ownership) that would be assigned compared to other vendors.

Let’s use a concrete example. If I buy evaluate Car A  and it is inexpensive to buy but more expensive to maintain and the gas milage is worse than Car B, then I might decide that Car B had a more favorable ‘cost of ownership’ even though the initial price of Car A might be less.

All elements of doing business were included in this customer’s evaluation criteria.

1. Service

2. Product Quality

3. Billing and Accounts Receivable Quality

4. Upgradability

5. Reliability

6. Maintainability

7. Track record of continuous improvement

8. On time delivery

An add on factor was created for each vendor as an index of these various areas.

So while the initial focus of the bidders was the bottom line price, it soon changed to ensuring that the customer’s rating of the cost of doing business factor was favorable to the vendors.

To make this kind of process work, an organization needs to be doing business with all the vendors, in order to evaluate them and assign a score.

After the Request for Proposal was over and the business was awarded to one of the vendors, the losers were then counselled on how to improve their scores for the next time. This led to a complete review of how we, at IBM, were set up to handle customers and was instrumental in moving forward the case for improving all aspects of customer satisfaction, not just service or support.

The Harvard School term for this process is Vendor Relationship Management  and Doc Searls is one of the experts in this area.

Does your organization use any form of Vendor Management or rate your vendors based on the total cost of doing business with them? Leave your story in the comments section below.

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Adele Berenstein

Adele Berenstein is an Experienced Customer Satisfaction Executive, recently retired from a Large Global IT Organization after a long productive management career including Sales, Marketing, Services, teaching and education center management and most recently, 19 years in customer satisfaction management. She turned around divisions with customer satisfaction problems, implemented measurable improvements and management systems, and implemented programs to prevent problems from ever affecting customers.

2 Responses to “When Customers Rate their Vendors”

  1. Flemming T Christensen Says:

    Always enjoy your insightful posts 🙂 This reminds me of some European road building contracts, where bids combine both the initial building effort plus 10 years of maintenance, NOT specified by the maintenance effort to be delivered, but rather by the minimum size of irregularities that must be repaired. That way, the selection process looks not for the cheapest road to build, but for the most cost-effective way of providing an acceptable road surface for the specified time period. This removes the incentive to use low grade materials. Voila 🙂

  2. Adele Says:

    Hi Flemming

    Thank you for your comments and story abut European Road Building Contracts. North American road buyers would appreciate that story and hopefully apply it here too.

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