The Seller’s Hidden Advantage

Sellers know things about their customers’ businesses that the customers don’t know and can’t find out on their own, yet value immensely. Because they come into contact with many and varied buyers, sellers have a bird’s-eye view of the forest — the industry’s competitive landscape — in contrast to customers, who often see only the trees. And they can use their wide range of experience to teach customers about their own businesses.

This isn’t a matter of divulging confidential aspects of clients’ businesses to their competitors. The challenge is to translate an industrywide perspective into knowledge that customers can use. Companies that can do this successfully reduce their customers’ costs or operating risks and are rewarded in turn with customer loyalty, pricing flexibility or both.1

Knowledge generated by having a view of the forest can be as simple as an anecdote or as complex as a cause-and-effect model tested on large data samples. Such knowledge should help a company answer one of three questions that it cannot address on its own: What is going on elsewhere in the forest? What is my location? What will happen if … ? Customers want an answer to the first question so that they can learn from the experience of others; they seek to avoid the cost, time and effort needed to reinvent the wheel. The second question arises because customers’ restricted view prevents them from precisely locating their current position in the forest. Customers find it difficult and expensive to gauge how they stack up against competitors or peers on key dimensions, such as productivity levels or market prospects. The third question relates to issues that lie outside the experience of any single company. Sellers are in a position to extrapolate answers to “What if … ?” from the collective experience of their customers.

For suppliers to capitalize on their bird’s-eye view, they must establish systems to collect, aggregate, adapt and share customer experiences. That process by itself is neither unique nor revolutionary, but what makes it remarkable is how few players in the industry are able to develop and use their unique perspective to build customer value. Perhaps because most companies are so busy pushing product out the door, they are unable to step back and systematically develop such systems.

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References

1. M. Vandenbosch and N. Dawar, “Beyond Better Products: Capturing Value in Customer Interactions,” MIT Sloan Management Review 43 (summer 2002): 35–42.

2. For a more comprehensive discussion of these tools, see A. Hartman, J. Sifonis and J. Kador, “Net Ready: Strategies for Success in the Economy” (New York: McGraw-Hill, 1999).

3. I. Gordon, “Measuring Customer Relationships: What Gets Measured Really Does Get Managed,” July/August 2003, http://www.iveybusinessjournal.com/article.asp?intArticle_ID=432.

4. N. Nohria and S. Ghoshal, “The Differentiated Network: Organizing Multinational Corporations for Value Creation” (San Francisco: Jossey-Bass, 1997).

5. J.B. Barney, “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17, no. 1 (1991): 99–120. See also M.A. Peteraf, “The Cornerstones of Competitive Advantage: A Resource-Based View,” Strategic Management Journal 14, no. 3 (1993): 179–191.