Share is tougher to shift

Symptom: Competitors report that market share is becoming more difficult to shift as customers have consolidated their volume in the hands of current suppliers.

Implications for the market:

As hostility progresses, customer-supplier relationships will become much less volatile.

Supplier consolidation increases the pressure on competitors to gain and maintain volume. Competitors will struggle to meet the industry's high operating standards and still remain profitable.
Inevitably, some fail. As a result, customers encounter inconsistent service and product performance.
To avoid further disappointment, customers will begin to rely more exclusively on their tried-and-true suppliers, and will risk new competitors less often. As hostility advances, volume continues to shift among a customer's "old faithful" set of suppliers, but not between established and new suppliers.

The importance of an established customer relationship will increase proportionally. Long-term customer-supplier relationships — always a substantial competitive advantage — will become even more valuable.

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.