Tuesday 23 April 2019

Be wary of giving too big a slice of your baking to just one client

Problem Solver

Piece of cake: It’s best not to offer a completely exclusive deal to a customer even with a large regular order
Piece of cake: It’s best not to offer a completely exclusive deal to a customer even with a large regular order

Feargal Quinn

Send your small business questions to himself@feargalquinn.ie

Q: I am supplying a cafe with cakes and getting large orders weekly. They have asked to remain exclusive to them and not supply anyone else within 50km. Is there a downside to this arrangement?

A: This is a question that comes up a lot. Not alone when supplying the food-service sector, but also in the retail sector across many different channels. Clearly the cafe you are supplying regards your work as very good and you have indicated that the orders you are receiving are significant.

What I don't know from your email is whether this is large enough to make your business profitable.

Certainly the golden rule when supplying product to anyone is to never offer exclusivity forever. Sometimes there is a valid discussion to be had about giving someone a 'lead time' with your product whereby if they are giving you sizeable orders, you would agree to supply them ahead of others for six or nine months depending on what suited both parties.

There would be a huge danger in you giving total exclusivity with no caveats around it.

If you feel you could generate enough business between this cafe and other customers outside of the radius they suggested, then it is probably a good arrangement.

If however, you could be losing out on other business and blocking your own business from growing, then it isn't such a good idea.

You could also think about having a conversation with the cafe about giving them some individual products, exclusive to their business and developing new products for the wider market as a way to find a midpoint.

A good cafe customer who really wants to support your business is certainly invaluable and you don't want to ruin that part of the relationship, while at the same time finding a compromise position either in terms of lead time, different product range etc is where the solution lies.

Q: I am really frustrated by competitors selling product which isn't nearly as good as mine in terms of quality for a cheaper price, and the consumer doesn't seem to understand the difference. How do I overcome this?

A: The answer to your problem is actually contained within your question. It would appear from your description that you are not doing enough work to call out the points of difference, and therefore the consumer is unaware and sees only price when they are making their purchase decision.

Your branding needs to be robust and call out clearly your Unique Selling Points. Your digital media needs to reinforce these messages and you need to have a really strong strategy to grow your digital media reach. You also need to be availing of any free PR in the media and use this as an opportunity to talk up why your product is different.

I remember in Superquinn we had the very same problem with Christmas hams. Some retailers used to buy their hams in the early part of the year when they were cheap, freeze them and then defrost them closer to Christmas. Nothing wrong with this at all, however the ham is never as good as a fresh ham.

In Superquinn we only bought fresh hams closer to Christmas which had superior texture and taste. However, customers constantly said that our hams were more expensive than our competitors. They failed to understand the difference.

I remember one Christmas we put a simple flash sticker on every ham and on all our advertising which simply said "Never previously frozen". The reaction was instantaneous. Our staff at our meat counters reported lots of queries as to why we were saying this and a key question from many customers was "Do other retailers freeze their hams?"

To succeed with selling a premium product in the marketplace you have to be a master of communication and use every opportunity to call out clearly why your product is superior.

It might be an idea for you to conduct some consumer research and see what messages consumers associate with your product which would guide you in terms of the actions you then need to take.

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