On January 28th we sent out a survey to get a feel for how the economy of 2009 might impact the customer-contractor relationship.
This qualitative temperature check provided some interesting responses. Thank you to those who participated.
Respondents were all contractors, except one consultant. Therefore the summarized results below are from the contractors’ perspective.
How do you see the customer-contractor relationship changing in the fear-based economy of 2009?
The consensus response was that customers will be forced away from value and partnerships, and towards lower costs. It’s being seen in more contracts bid out to lower costs, with the implication being contractors’ profits will suffer.
(No surprises here. CA)
Several respondents thought customers would become more committed to getting the most value from their contract spend.
And as importantly, showing they extracted higher value from lower costs to their bosses. This seems an understandable form of customers’ justifying their job for greater security.
(It’s a good idea for contractors to help make their customers look good upstairs anyway. Reporting contract service performance should be done as much for contractors’ benefit as for customers. CA)
One respondent took a long-term view of the current crisis, recognizing customers had a need to reduce costs now, and as a result hurts contractors’ profits.
This response looked at the tough economy as the time when partnerships are truly made. As an opportunity for contractors to get “baked in” with customers, positioning themselves for the eventual economic recovery. The belief being contractors who stayed with customers during tough times will be rewarded in the future.
(This is the strategy I’d employ if my customer base was struggling badly. Although, I’d wonder how many of my customer contacts would remain in their positions after the bloodletting passes to appreciate my toughing it out with them. CA)
What can be done to confirm the receipt of service value at lower pricing?
Almost every response contained some mention of either:
- Customer Expectations, and/or
Respondents felt greater communication was needed to shape customers’ expectations to the new impacts of lower spend.
Another common theme was contractors’ desire for customers to understand how costs and wages related to the service value received. Contractors felt customers would still expect the same levels of service, just at lower pricing.
Contractors mentioned two methods to increase customers’ understanding; benchmarking and service metrics.
Benchmarking would show customers their contractors’ wages and/or performance in line with the rest of the benchmarking group.
Service metrics would show customers they’re receiving similar value, relative to their new spend, from what they received in the past.
(Making service visible, tangible has always been needed, now more than ever. Shaping customer expectations helps customers’ perceptions align with contractors. CA)
Will contract governance become more, or less important in 2009’s fear-based economy?
The consensus was that contract governance would increase. Contractors felt customers would focus more on receiving full value from lower spend, holding contractors accountable.
One variation to the consensus felt there would be an initial increased focus on governance, but then customer layoffs would reduce customer oversight, and governance would fall off.
(Governance may end up being the last customer contact available to check contractors’ performance. Depends on how badly the customers’ industry is hit.
Yet, performance will always need to be reported, it’s just the nature of contract services. No reason for contractors to pull back because of a lack of oversight – should be all the more reason to report performance. CA)
How will service quality be impacted? Will it still matter? Why?
Responses were varied. However, a common theme in most responses pointed to the age old conflict between cost and quality.
Contractors have always struggled with trying to figure out which side of the scale customers might land on. Their responses showed the 2009 economy has brought the cost-quality conflict front and center, and with a vengeance.
This showed up in contractors’ questioning of how well customers understood their cost drivers, and how that cost affects quality.
If contractors’ responses were put into questions, they would be:
- Customers get what they pay for – but are they OK with that?
- Do customers expect the same quality at lower prices?
- Will customers believe other contractors’ promises of higher quality at lower price?
(How well do contractors understand customers’ specific quality expectations?
What cost pressures are customers under?
Specifically, what will customers put up with for a lower price?
And how much lower should the price be?
Answers to these questions may require more of a change in contractors’ expectations than customers . CA)
Remember, responses here are coming from the contractors’ perspective, and may not reflect how customers feel.
It would make sense for contractors to more fully understand customers’ expectations, and what level of service they’re being forced to accept in this new economy.
Understanding and profiting from the Customer-Contractor Relationship in 2009 will be a challenge. The crippled economy puts even more pressure on many of difficult areas of the relationship.
Themes revealed in this survey include:
- Shaping Customer Expectations
- Customer Communication is Key (using benchmarking & service metrics)
- Readjusting Contractors’ Understandings about Customers’ Expectations
What are you doing to understand your role in the customer-contractor relationship of 2009
President, Service Performance
Technorati: customer expectations, 2009 economy