Be Level Headed

Last week, Geoffrey James wrote about research from CSO Insights defining the five levels of B2B relationships.

  1. Approved Vendor—Seen as a legitimate provider of goods and services without a competitive edge over alternate offerings. Often competes on price.
  2. Preferred Supplier—Reputation with existing customers leads preferred suppliers to continue to get the business, all things being equal.
  3. Solutions Consultant—Because of the “product-related, value-add knowledge or services” brought to the table, customers consult the company on how best to use the goods or services offered.
  4. Strategic Contributor—Customers view the contributor “as a source of strategic planning assistance” above and beyond the products offered.
  5. Trusted Partner—Viewed as a long-term partner, critical to the success of the client because of the products, insights, etc., contributed.

Um, this applies to the relationships companies have with their non-business customers as well. Let me illustrate buy using a real-life example.

Suppose we are out of milk. There are any number of stores in the area that carry milk. If that is all I am looking for, then I can pick any grocer I want. Some of them, however, are in locations easier for me to reach than others. Those make it to my approved vendor list.

Since I have visited several of these stores and checked their prices, stock and selection, I keep my milk runs to a few preferred suppliers. I may narrow that list even more if I have to pick up other items as well.

One day, maybe I have a hankering for halibut. While I’m picking up the milk and fish, I might seek out a solutions consultant on how to prepare dinner, including side dishes and that perfect wine accompaniment.

Perhaps I decide a healthier lifestyle is in order. A subsequent trip for milk might include a conversation with someone at the store who is able to advise me, show me around the store and create a sample shopping list for me. She then becomes a strategic contributor.

We also tend to host a lot of dinner parties and holiday occasions. As we get closer to each event, we look to our trusted partner for his recommendations, based on our guests. Then, of course, he’ll also cater it.

This can apply in any number of businesses—entertainment, software, coffee shops, clothing stores. Any business can be at any of these levels with some of its customers. And that is okay. But don’t miss an opportunity to bring a larger number of customers into one of these levels. Just find the right one for you and get after it.

Ask yourself: What levels do you serve with your customers? Are you capable of doing more? If so, what aren’t you?

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2 Responses

  1. Interesting application of those principles. Remember, though, that climbing up the levels involves changes to your business model. The higher you go, the more “human-intensive” your business model becomes, which tends to increase gross profit at the expense of net profit. Services-intensive businesses usually have lower net margins than commodity ones.

  2. Thank you, Geoffrey. I agree completely. And not all levels are appropriate for all businesses. In other words, Sam’s or Target wouldn’t do as well at levels four or five. It’s not part of who they are nor how people think about them. Which is why they remain profitable.

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