The Eagle Blog

The Customer is King

In 2006 Fortune magazine made the astounding claim that the rules were changing … where previously the shareholder was most important, in the new world the customer was king!

A year before that article Thomas Friedman produced his book The World is Flat, which talked about our changing world and the affects of forces such as globalisation.

I have blogged myself about our changing world and the fact that we need to understand the forces at work, and adjust to fit … or risk becoming obsolete.

One of the biggest drivers of change has been increased competition through globalisation, and thus the need to compete where the competition may well have a different cost model. The manufacturing base in Canada, particularly Ontario has been a classic case. What once was a vibrant part of the Canadian economy was severely impacted by the low price competition from countries like China.

As time goes by many industries are feeling the affects of such competition and they need to react in order to remain competitive.

What the customer is saying is, ” This is my price point, and if you can’t deliver a product/service then I can get it elsewhere”.

Don’t forget … the customer is King!

Many businesses don’t believe that this will happen … how can anyone deliver a comparable product/service for significantly less? I have been doing this for 20 years, the client can’t live without me.

They forget that there are valid reasons that your client is doing this … THEY are getting the same kind of pressure from their clients. Who would have thought that the big three automakers would be in trouble back when they could do no wrong (even though their product was not great). When competition can employ cheap labour, use more automated processes and be more reactive to consumer demand the it is going to have an affect. Compound that with rising labour costs, aging plants and a huge infrastructure and you have a recipe for disaster.

Many years ago you could find small family businesses in cities and towns. They had existed for years, provided a service to a loyal base of customers … they might have been paint shops, camera shops, small grocery stores etc. Then along came big box stores … it took time but eventually the consumer will go because of convenience, greater variety, cheaper price, relentless advertising or any number of reasons.

The customer is king.

So, what do you do when your business is being squeezed by your customers and aggressive competition.

a. Hang on as long as you can … eventually you will lose!
b. Make a decision to sell, and get the best price that you can.
c. Develop different strategies for survival.

The bottom line is that if you cannot deliver your service/product for the amount your customer is willing to pay then you have a problem … because someone will!!!

You MUST align your costs to be in line with your revenues, in order to survive.

Some thoughts:

  • Learn from others that have been successful.
  • Rethink your business from the ground up.
  • valuate other ways to do business.
  • Evaluate whether you can do different things.
  • Choose to be a niche supplier … smaller, higher quality and higher value but recognise that you need to be able to sell it … so be realistic about your chances!

If you don’t think others can do it think about the Tata Nano. Tata is a very successful Indian company that challenged a group to develop a car that could be sold for around $2,000 and would be a viable choice for a consumer. That was an incredible challenge, but they did it.

The customer is King … you can never be complacent in business.

Leave a Reply

Your email address will not be published.