Customers are consolidating their purchases

Symptom: Customers are consolidating their purchases.

Implications for the market:

In most hostile markets, customers buy from several suppliers, asking each supplier to fill a specific role different from that of any other supplier. Typically, these roles are: Primary Supplier, Secondary Supplier, and Tertiary Supplier.
As volume consolidates, it becomes especially important for a supplier to fill the most important role–the role of Primary Supplier if at all possible — because the resulting volume is essential to keep the supplier's costs down and profitability up.
But to win or hold this primary role with the customer, a supplier must understand what the customer requires of that position and focus its business proposition on filling that need. And these needs change as customer segments change.
In such a market, a company must first improve its position with its best customers and avoid any volume loss with them.

Recommended Reading

For a greater overall perspective on this subject, we recommend the following related items:

Analyses:

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

"Finding the Open Door"
Volatility is the movement of volume from one supplier to another. A company can not gain volume unless customers are willing to make a change in suppliers. Volatility has special rules in hostile markets.
"The Big Slice of the Pie"
The head of one industry leader explains his company's insistence on being a key supplier to each of his customers: "The guy with the big slice of the pie doesn't go hungry." The workings of the typical hostile market provide solid support for this philosophy.
"Use Subtle Strategy in Tough Markets"
A hostile market operates differently than a market with "normal" competitive conditions. But as difficult as a tough market can be, it can also present an astute management team with an unusual opportunity.
"Which Customers Matter Most?"
Average customer profitability differs dramatically in non-hostile and hostile markets. Does the relative importance of one customer versus another change as well? The answer is less evident than many business leaders believe.