It is no secret that businesses are always looking for ways to save money.
According to the IBM Institute for Business Value1, business executives have prioritized cost management (read: cost savings) as one of the top 4 priorities for the post-Covid world of the 2020s.
When it comes to finding ways to reduce costs, many companies turn to their suppliers.
Why do most customers change suppliers? Because sometimes the fastest way to cut costs is to replace expensive suppliers with cheaper ones.
But there are other reasons too why customers change suppliers. Let’s review them one by one.
5 Reasons Why Most Customers Change Suppliers
- Insufficient Innovation
- Inadequate quality of products or services
- Too expensive
- Inability to meet deadlines or fulfill orders
- Disagreements over product specifications or delivery schedules.
Let’s look at each of these in some detail.
1. Insufficient Innovation
As customers’ needs change, suppliers need to innovate to continue meeting these evolving needs. If a supplier fails to innovate, the customer will find another supplier who can better meet their needs.
Innovation is essential for companies looking to stay ahead of the competition and maintain customer loyalty.
Suppliers which are not constantly innovating and staying one step ahead of their customers’ evolving needs will soon find them replaced by their competitors.
2. Inadequate quality of products or services
If a customer is not happy with the quality of the products or services they are receiving, they will likely switch suppliers. This can be due to poor quality control measures on the supplier’s end, or simply because the customer is not satisfied with what they are receiving.
It’s important for companies to always ensure that the quality of their products and services meet or exceed customer expectations, in order to avoid losing them to a competitor.
3. Too expensive
If a product is too expensive, customers will shop around for a supplier who can offer them a better price. Often, this means switching to a new supplier altogether.
In some cases, customers may try to negotiate a lower price with their current supplier, but if the supplier refuses or is unable to meet the customer’s demands, they will likely replace the supplier.
Cost-cutting is one of the most common reasons why customers change suppliers. It’s much easier to replace suppliers with cheaper alternatives than to fire employees.
This is why it’s critical that all businesses are aware of their competitors’ pricing so that they are not blindsided by a customer’s decision to replace them with a cheaper competitor.
4. Inability to meet deadlines or fulfill orders
If a supplier cannot meet deadlines or fulfill orders in a timely manner, it will inevitably lead to lost customers.
No customer likes to wait too long after the promised delivery date, for an order to be fulfilled.
Furthermore, if an order is not filled correctly, the customer will likely have to suffer further delays until the entire order is delivered.
Regular inability to meet deadlines or fulfill orders will make even the most loyal customer look for alternatives.
5. Disagreements over product specifications or delivery schedules
If a customer and supplier cannot see eye to eye on product specifications or delivery schedules, it’s unlikely that that relationship will continue for too long.
The main reason any customer buys a product is to solve a problem. And problems are solved by product features and functionality. In a business setting, these features and functionality are governed by specifications – often technical specifications. If the supplier cannot satisfy the product specifications demanded by the customer, the relationship doesn’t have much runway left.
The same is true for delivery schedules. Customers are looking for a product that solves their problem in a reasonable amount of time. If suppliers aren’t able to deliver the promised product within that time frame, customers will be forced to change suppliers and look for alternative suppliers who can.
Summary
In conclusion, there are many reasons why most customers change suppliers.
It could be because the supplier is not innovating enough, the quality of products or services is poor, the product is too expensive, the supplier cannot meet deadlines or fulfill orders, or there are disagreements over product specifications or delivery schedules.
However, in most cases, it’s because the customer can find another supplier who can meet their needs at a lower cost. In short, Cost-cutting is the most common reason customers change suppliers.
Therefore, it’s essential for companies to always stay one step ahead of the customer’s changing needs in order to maintain customer loyalty.
