Late last week, Proxima Group revealed the initial findings of research they commissioned into how consumers – American consumers specifically, feel about companies that find themselves on the wrong end of a supplier scandal.
According to the release, “The study of typical American consumers, commissioned by sourcing and procurement specialist Proxima, reveals that 74% of respondents stated they would be unlikely to buy products or services from a company involved in controversial supplier practices. Furthermore, nearly 66% would stop giving such a company their business even if that company was the most convenient and cheapest option.”
Although I have not yet read the actual survey findings (which are hopefully forthcoming), there are already a few points warranting further consideration for procurement professionals and organizations.
One is that B2C businesses must meet a higher threshold of supplier management than B2B. The typical consumers targeted by the research are unlikely to be as affected by companies or brand names they do not know than those they shop with directly. Even if they don’t shop at a store, one third of the respondents said they would spread the news to friends and family. Bad news may or may not travel fast, but it sure does travel.
The other is that the strong reaction by consumers is likely to drive the decisions of investors, shareholders, and the passage of regulations. While the short term news cycle moves a story in an out of the public consciousness with greater speed than accuracy, the longer term impact of that story is likely to play out in the longer term through investment decisions and high visibility regulatory changes.
My last thought is more of a curiosity than a conclusion: Clearly decisions, opinions, and work of mouth are affected by negative news. Does the hold same true for positive news or recognitions of better than average supplier management? In other words, would an overwhelming majority of consumers support a company with good supplier relations? Would they pay more or go out of their way to do so?
I venture that they would not.
The real-world, school of hard knocks take away for procurement professionals from all this is that bad news will punish you more than good news will reward you. As a result, it is more worth your time to prevent problems and then stop investing time and energy once all is quiet. Going further by investing in advanced supplier management won’t pay off – at least not directly from consumers. It may be worth making that sort of development effort, but the payoff will have to come from operational efficiencies, competitive advantage, or an indirect grab of market share through price reductions or additional benefits to consumers.
We may value partnership and collaboration, but if the return isn’t there, the effort may not be worthwhile. This is the sort of finding that executives will be familiar with – and procurement should be prepared to address any questions that arise as a result.