Managing
suppliers and
customers
A guide for business operators in South Australia
www.statedevelopment.sa.gov.au/smallbusiness
Table of Contents
01 Overview ....................................................................................................... 3
02 Choosing a supplier ..................................................................................... 4
03 Should you have single or multiple suppliers?.......................................... 5
04 Tips for maintaining good relations with your suppliers........................... 6
05 What is customer service? .......................................................................... 7
06 Why is customer service important in your business? ............................. 8
07 How to keep your customers coming back ................................................ 9
08 Managing customer complaints ................................................................ 11
09 Summary ..................................................................................................... 13
10 Notes ........................................................................................................... 14
Managing suppliers and customers
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01 Overview
Good relations with your suppliers and customers are essential for a successful
business.
If you cannot source vital raw materials, parts or merchandise from suppliers in a
timely manner for use in your business, you can ultimately lose your ability to
trade. Suppliers can also be an important source of information. This guide
offers advice and practical tips on how to build and maintain good relations with
your suppliers.
Your business has no future without customers. Given their importance, this
guide also discusses how to service your customers, keep them coming back
and manage complaints when they arise.
Also see the Department of State Development guide:
Managing your cash flow (PART B offers practical tips on getting customers to
pay on time).
Readers are advised:
• The purpose of this guide is to provide general introductory information.
• The guide does not purport to contain all the information that would be
relevant to any particular business opportunity.
• The guide is provided to interested persons on the basis that they will be
responsible for making their own assessment of that opportunity with the
assistance of the information provided.
• All figures contained in the guide should be regarded as estimates only based
on general samples and may be subject to error.
• The information in the guide should not be relied upon in substitution for
professional advice and individual investigation.
• Persons interested in pursuing any particular business opportunity are
strongly advised to fully inform themselves by taking professional advice as to
the extent of their rights and obligations—particularly in relation to any
proposed investment.
• The guide is provided subject to the terms of the formal disclaimer, which
appears on the last page.
Managing suppliers and customers
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02 Choosing a supplier
What factors are important to you when choosing a supplier? The cost of poor
suppliers can be significant. You run the risk of losing business and there are
human costs too in the form of frustration and stress. Get it wrong and you can
incur additional costs for delays, returns and replacements.
The following checklist offers a series of questions that should be asked before
entering into a business relationship with a supplier:
CHECKPOINT
How long has the prospective supplier been in business?
What is the supplier’s record for on-time deliveries?
Is the supplier’s business quality assured?
How does the supplier’s pricing structure compare with competitors?
What lead times does the supplier need for the supply of goods and services to
your business?
What capacity does the supplier have to meet a rush order, should it arise?
What payment terms does the supplier offer?
Are you willing to negotiate supply contracts over a period of, say, 12 months?
Can you identify alternatives if a delay in supply occurs?
What would you do if your chosen supplier went out of business overnight?
What is the supplier’s policy in relation to damaged goods or the supply of goods
other than to specification?
Does the supplier have a local representative with whom you can deal?
Managing suppliers and customers
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03 Should you have single or multiple
suppliers?
If you have just one supplier to your business for a particular range of goods or
services, you should consider how your business would be affected if a serious
problem arose. In some situations, even a short delay may have major
implications for your business.
By having a single source of supply, less time is spent on chasing prices and it
may be easier to negotiate discounts and trade credit. Due to the partnership
arrangement forged between your business and the supplier, you may find that
priority orders can be rushed through, there will be less variation in the quality of
goods and services supplied and ordering, inventory management and
accounting procedures will generally be simpler.
Multiple suppliers on the other hand offer a form of insurance against problems
which may arise with a single supplier. There is also the advantage of price
competitiveness.
Whatever approach you adopt, it is good practice to review the relationship with
all your suppliers on a regular basis.
Managing suppliers and customers
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04 Tips for maintaining good relations with
your suppliers
Talk to your suppliers regularly.
Pay your suppliers’ accounts promptly. Communicate with a supplier before the
due date for payment should you foresee a delay in paying an account.
Build good relations with your current suppliers’ representatives. Be fair but firm
with industry sales representatives; they can easily take up a lot of your time.
Avoid rush orders wherever possible—they can cause significant stress in your
business and put a strain on the relationship with your supplier(s).
Monitor the financial position of your suppliers—talk with industry colleagues and
competitors about the general financial stability of those businesses that supply
goods and services to you.
Raise any issues of concern in the relationships with your suppliers as they arise.
Return damaged or faulty goods to the supplier promptly, with supporting
documentation.
Be prepared to review and renegotiate the terms of trade with your suppliers from
time to time.
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05 What is customer service?
Quality customer service is about exceeding the expectations of your customers,
valuing those with whom you do business and developing ongoing relationships
with them.
Satisfied customers represent an investment in your business. They will not only
continue to buy your goods or services but will recommend your business to
others.
Customer service is also about mutual respect. People like to feel valued and
important. Customer service is about feeling good. Customer service is about
good business!
Managing suppliers and customers
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06 Why is customer service important in your
business?
On average:
It costs six times as much to gain a new customer as it does to keep an existing
one.
One dissatisfied customer will tell eleven others, who on average will tell five
others. That’s around 67 pieces of negative advertising from one unhappy
customer.
The lowest paid people in a business are generally the ones who actually meet
the customers—they are your business in the eyes of the customer. This makes
it vital that they are well-trained.
Around 96 per cent of customers do not complain when they have a problem—
they just don’t come back.
Since only around 4 per cent of unhappy customers complain, management can
be easily lulled into thinking all is well.
Half the customers who tell a business they are “fairly satisfied” won’t be repeat
buyers.
A business will lose 10 to 30 per cent of its existing customers each year—mostly
because of poor service. Most of these customers could have been retained.
Of those customers whose complaints are resolved, 83 per cent will remain loyal
and each will recommend you to five others.
About 68 per cent of customers who stop dealing with a business do so due to
some indifference on the part of the business.
Businesses which have a reputation for excellent customer relations and quality
service charge up to nine per cent more for their products or services.
Businesses providing quality service grow twice as fast and pick up market share
three times quicker than their under- performing competitors.
Increases of a mere few percentage points in customer retention result in
significant increases in profits.
Managing suppliers and customers
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07 How to keep your customers coming back
Take a moment to think of your favourite store, restaurant or any business that
keeps you coming back. Think about how the proprietor or employees greet you.
How do they sound on the telephone? How are the premises presented? How do
you feel while you are there doing business? How do you feel when you have
completed your business?
Businesses earn your long-term support because they exceed your expectations.
They treat you with respect. They make you feel that you are the most important
part of their business. They go the extra mile to win your loyalty and, in return,
you keep patronising them.
If that’s the way you would like your customers to feel about your business,
here’s a handy action checklist of things you can do:
CHECKPOINT
Train your staff to deal with customers.
Service comes from people.
Train your staff about product features and, more importantly, about the
benefits offered by the goods and services you provide.
Make the work of staff as satisfying as possible so that they are
committed and happy working in your business. This contentment will be
reflected in their dealings with customers.
Make your premises pleasant, welcoming, clean and tidy.
Maintain equipment in a good state of repair so that work can be
completed on time.
Establish a clear policy for dealing with complaints from customers.
Accept ownership of problems when customers complain or return
goods.
Managing suppliers and customers
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07 How to keep your customers coming back
CHECKPOINT…CONTINUED
Provide prompt service to customers and ensure that your business is
appropriately staffed to achieve this.
Be reliable—do what you say you are going to do, do it when you say
you will do it, do it right first time and get it done on time.
Invest in a first-class image—your customers will draw conclusions
about your business in terms of what they see, feel, touch, hear or smell
concerning your operations.
Be responsive—be accessible, available and willing to help your
customers whenever they have a problem.
Measure your service standards regularly and make improvements
where necessary.
Managing suppliers and customers
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08 Managing customer complaints
The cost to your business of an unhappy customer can be high. But the good
news is that 83 per cent of complaining customers will continue to do business
with you if their complaints are resolved in a satisfactory manner. They can even
become more loyal customers because you listened and resolved their problem.
Such customers will, on average, tell another five people about the way you took
care of their complaint.
The following action checklist will help you to manage situations with a
complaining customer:
CHECKPOINT
1. Listen
Accept ownership of the problem but do not take the complaint
personally.
Use good eye contact with the customer.
If on the telephone, concentrate on what is being said and take notes.
2. Practise honest empathy
Seek to resolve the customer’s concern in a non-judgmental,
empathetic manner.
Acknowledge the customers feelings.
Stay calm; do not become emotional.
3. Clarify the problem or issue
Gather the facts.
Confirm your understanding of the position with a phrase like “Let me
see if I understand your problem”.
Ask “Is there anything else we need to resolve?”
Managing suppliers and customers
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08 Managing customer complaints
CHECKPOINT…CONTINUED
4. Find out what the customer wants
Where possible, offer options for resolving the situation, provided you
are able to deliver.
Inquire which option your customer would prefer.
5. Obtain final agreement on the solution
Be clear on the action(s) you propose to take.
Ask the customer “Will that correct the problem to your satisfaction?” If
not, go back and start again.
6. Implement the agreed solution
Acknowledge the inconvenience caused to the customer.
Be cheerful and helpful.
Thank the customer for bringing the problem to your attention.
Remember, the last thing you say is most likely to be remembered.
7. Follow up with the customer
Contact the customer a few days after implementing the solution to
ensure that the customer is satisfied and happy with the outcome.
Managing suppliers and customers
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09 Summary
1
Choosing a supplier involves an assessment of the
factors that are important to your business and should
not just revolve around pricing.
2
The decision to have a single or multiple suppliers for
a particular range of goods or services to your
business should be carefully weighed.
3
Customer service can sometimes be the only way a
business can differentiate itself from competitors.
4
In customer service, little things make the difference.
5
68 per cent of customers do not come back because of
perceived indifference.
6
Your business earns long-term patronage
customers when it exceeds their expectations.
7
Without customers, you have no business.
Managing suppliers and customers
from
Page 13 of 15
10 Notes
Managing suppliers and customers
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Department of State Development
GPO Box 320
Adelaide SA 5001
T: +61 8 8226 3821
E: DSDSmallBusinessStrategy@sa.gov.au
W: www.statedevelopment.sa.gov.au/smallbusiness
DISCLAIMER
The Government of South Australia gives no warranty and makes no
representation, whether express or implied, as to the accuracy of information
contained within this guide or the suitability of the information for any purpose.
Any use of the information contained in this guide (whether authorised or not) is
at the users’ sole risk and the Government of South Australia disclaims
responsibility for any loss or damage incurred as a result of such use. The
information is provided solely on the basis that users of the information will make
their own assessment of the accuracy of the information and users are advised to
verify all information contained within this document. Any information about the
law in Australia or South Australia is provided as general information only and is
not legal advice. This guide is a starting point only and is not a substitute for legal
or professional advice. While the Department has attempted to ensure the
information is accurate at the time of publishing, no responsibility will be
accepted for any errors or omissions and the Government of South Australia will
not be liable for any loss or damage incurred by any person as a consequence of
any use, reference or reliance on this information. Any such use, reference or
reliance shall be at the sole risk of that person who should seek their own legal
and/or professional advice if required.
COPYRIGHT
Produced by the South Australian Government
© March 2015
Managing suppliers and customers
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