You Can Choose Your Friends, But What About Your Customers?

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As the saying goes, “You can choose your friends, but you can’t choose your family.”

Many organizations recognize the long-term value that providing great customer experience (CX) can bring, but what do you do when facing a “difficult customer”? Most organizations simply can’t afford to walk away from even the most difficult customers, so that puts customers in the family rather than friends category. Customer segmentation might be used to recognize friends — those who are easiest to work with and/or bring most value to your business. However, there is an inherent danger in this approach if the assessment is done from the inside-out point of view of your businesses. Those putting CX first, switch that mindset and look outside-in.

In customer fulfillment, difficult customers can be the hardest part of the job. Looking from the inside out, suppliers can see certain customers as difficult to serve, with exacting requirements unlike their normal customers. It also stings when those “difficult” customers charge penalties for nonconformance. Amazon is frequently cited as a champion of customer experience. Its stellar growth and strategic importance puts it firmly in the “family” camp — love them or hate them, you simply have to do business with them. Yet some suppliers say Amazon is one of their most difficult customers to experience, citing erratic ordering that’s impossible to forecast, unique packaging requirements and stringent receiving protocols, along with chargebacks for any transgressions.

But let’s take a timeout. Stop and ask the most important question: “Why?” Selling online, not in store, is a key factor, but the even more fundamental driver of the “why” is Amazon’s customer obsession. This drives the company to constantly evolve to serve emerging customer needs, whether it be less packaging or next day delivery. Customers, in turn, reward Amazon with growth.

Given that Amazon’s customers are your businesses’ end customer, let’s take another look at Amazon’s “difficult” behavior with an outside-in mindset to see if understanding “why” can change “difficult” to “different.”

Erratic Ordering That’s Impossible to Forecast

Amazon is small. While it accounts for nearly half of all online retail spend in the United States, that’s still only 5% of all retail spend. Its orders don’t always warrant the supplier-friendly full truck loads that are shipped to Walmart, so more difficult less than load (LTL) deliveries are required. The majority of suppliers struggle more with on-time deliveries in LTL and pick up most purchase order chargebacks here.

Demand planners in consumer products companies know how to forecast store sales. They live and breathe the impact of different assumptions around shelf space, store size and promotional feature, and have years of historic sales figures to base it all on. That same planner sees Amazon as nearly unforecastable. Not only does Amazon have a limited history, but ranges change and expand rapidly. Amazon’s customer base is expanding so fast that sales patterns morph constantly. Further, Amazon has had tremendous success in applying dynamic pricing to its products in order to stay competitive, especially on commodities. The combination of this algorithmic-led dynamic pricing, growing range and expanding customer base penetration all lead to seemingly erratic order patterns for those who don’t understand the algorithms (and that is much of the industry).

Unique Packaging and Stringent Receiving Protocols

Amazon coined the term “frustration-free packaging” based on feedback from customers, who told the company when packaging was difficult to unwrap, excessive or unneeded. The packaging in brick-and-mortar stores serves a variety of functions, many of which are unnecessary or less critical online. For example, outer packaging is used in store to make the product stand out on shelf, larger packs accentuate the value impression and anti-shrinkage measures deter theft.

Amazon’s receipt processes are different too, with pallets broken down to individual units upon receipt, with those units handled four times more than in brick-and-mortar supply chains serving stores. Suppliers that understand these differences well are developing Ship in Own Container formats that reduce both damage and packaging waste.

Why does Amazon care so much about on-time delivery? Its customers are voting for speed in huge numbers. The company broke the 100 million member mark in the fourth quarter of 2018, driven by the expansion of Prime free same-day delivery and Prime free one-day shipping to over 10,000 U.S. cities and towns. To support this, it needs suppliers to deliver on time. All of this is a big investment for Amazon, some of which it recoups through its Fulfillment By Amazon revenues, but the chart below shows the scale of the investment to customer fulfillment.

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Delays in inbound delivery from suppliers simply make it harder for Amazon to deliver its promise to your end-customer. Amazon isn’t just being difficult — it is being different. The issue is that even once you understand this, it’s difficult to suddenly create the new capabilities needed to serve this different channel.

So How Do You Change You?

Building physical and system capabilities will take time, so start with building the mindset. Help your teams and your businesses see these “demands” as “needs” associated with a new supply chain and business model. Point out that this “difficult customer” and other online players are fueling growth by satisfying your end customer needs and that working to that end is the route to long-term gain, even if it means short-term pain.

If that doesn’t work, drop this bombshell: All retailers are going to become “difficult.” Just look at these two Gartner retail predictions.

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Start developing the capabilities to serve your “difficult customers” by prioritizing investments that make your business customer centric. Work to understand your customers and your customers’ customers like you would understand your friends. That way your customers can be become friends and family.

 

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Author Simon Bailey

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