Why Supplier Marketing Will Be Key to Supplier Experience Management
Table of Contents
What is supplier marketing?
To define what we mean by ‘supplier marketing,’ we should start by thinking about well-established practices in the modern world of marketing.
Philip Kotler is widely known as the Father of Modern Marketing. His book, Marketing Management, is now in its 14 edition and he has authored or co-authored over 70 books on the topic. Kotler defines marketing as “The process by which companies engage customers, build strong customer relationships and create customer value in order to capture value from customers in return.”
Let’s consider that in the context of suppliers for a moment. You could easily replace ‘customers’ with ‘suppliers’ and define supplier marketing as, “The process by which companies engage suppliers, build strong supplier relationships and create supplier value in order to capture value from suppliers in return.”
In fact, while customer marketing has a long history, more recently there has also been the rise of employee marketing, as organizations strive to become employer-of-choice, which has become vital for talent acquisition and retention. The definition could be adapted for employee marketing in much the same way.
Supplier marketing as the inevitable outcome of digitalization
Can the same be applied to supplier marketing? The driver for customer marketing was digitalization and the deployment of technology supercharged the ability to gather insights from customers and use those insights to create superior experiences and build better relationships with customers. The same has been taking place in the field of HR.
Therefore, as the Procurement technology landscape continues to explode with new best-of-breed innovation and as ever more sophisticated digitalization takes place, it is logical to assume that one outcome will be the rise of supplier marketing.
And it’s needed. In this era of greater global instability, the long-held ambition for an enterprise to be the customer-of-choice for its suppliers is now more urgent than ever before. Reiterating comments from CPOs, Adam Brown says, “Procurement is the Salesforce of the bottom line. We are selling our ability to buy stuff. We want to be the customer-of-choice because it means we are that customer that everybody wants to work with. It means we’re going to get the best deals, the best flexibility and the best working relationship, throughout the duration, with all the trust.”
Again, ensuring engagement, building relationships and creating value are the key motivating factors, just as our definition of supplier marketing, derived from marketing would suggest.
Fueling the enterprise need for data and information
The changing role of Procurement as a result of digitalization is also a driving factor. As Procurement sits closest to supplier data, their role as the primary data collector, or the orchestrator of data collection initiatives, in areas such as environmental impact, sustainability, diversity and inclusion will only increase. Therefore, the number of initiatives that suppliers have to complete is also set to increase. This is already a burden for suppliers today. As the HICX Voice of the Supplier survey revealed, 60% of suppliers to some of the largest organizations globally feel that they spend too much time on customer-driven admin, a statistic that is only likely to increase if current practices and trends prevail.
In one enterprise model, taking into account the number of touchpoints with relevant suppliers today, in terms of necessary initiatives, and modelling the projected number of touchpoints required by 2025, the impact equates to a fifteen to twenty times increase in full-time equivalent hours. Current ways of working will not be sufficient to support this.
Meanwhile, talking about the future of Procurement, Dr Epstein recently commented, “As we think about supplier experience, and certainly from an enterprise point of view, the greatest risks to your organizations come through your third parties, your suppliers. And the greatest opportunities come through your suppliers. And so, we have to be able to get better at engaging with suppliers when we talk about supplier experience.”
How technology drives new ways of working
Let’s consider consumer marketing again for a moment to understand how technology has been used to drive better efficiency when moving from a model of ‘one message, one audience’ to multiple messages to many different targeted audiences.
Technology in this space has focused on relevancy – it’s all about delivering the right message, at the right time to the right person to achieve the specific desired outcome – in the customer marketing world this might mean a purchase, but it could also be a sign-up for content or participation in a competition. It involves segmenting audiences at a granular level and then tailoring experiences to that audience.
The same will be needed for suppliers. In a simple analogy, in order to manage the number of initiatives and the required responses to those initiatives, ensuring that a specific supplier only receives the right initiative with the right content at a convenient time is going to be more effective than requesting the information from a larger group in which each supplier has to determine the relevancy of the initiative and the priority themselves. Overall, the supplier engagement is going to better.
The onus is on the enterprise to put the effort into supplier marketing in order to derive the value. It is their brand, their risk, or their opportunities to innovate that are at stake.
Conclusion: It’s all about the segmentation
If we accept therefore that supplier marketing is the inevitable evolution of all the trends we mentioned (the evolution of digitalization; the strategic role of Procurement; the higher demands for information capture and exchange; the increasing pressures of needing to become customer-of-choice; and the necessity for improved efficiencies in processes), then two questions remain:
First, who are going to be the leading proponents of this change, and what will be the characteristics of such enterprises who are able to derive this value the quickest?
And second, what can be learned from general marketing principles and from an area that has already had to learn from decades of evolution driven by similar requirements?
One principle will become core. Segmentation, as used in marketing, will be key to unlocking the efficiencies and the automation required to service these new demands and to successfully collect and analyze the data that follows. Fortunately, these are the areas that technology is best at.
The other side will rely on successfully applying these principles to the business.
In our next articles, therefore, we will take a deeper dive into the topic of supplier segmentation; we will investigate some use cases as they relate to the world of suppliers; we will explore further the idea of relevancy to drive the behaviors that we require; we will evaluate the value drivers; and finally we will return to marketing for a glimpse into where this may take us.