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Loyalty doesn't always pay

Feb 03, 2014

I think most of us are aware that loyalty doesn't always pay but I also think most of us are guilty of thinking "but that's not us".  Well let me tell you, it probably is!

We've just completed a category review here which, for reasons that will become clear, I won't reveal the school it was for or the spend category in question.  Our approach at Minerva is always that the best, and usually easiest, option is for the school to be getting good value for money with their existing supplier.  Sometimes this means the existing supplier has to 'sharpen their pencil' in order to retain the business. which they're normally happy to do as losing margin is better than losing the business completely.  There is an air of inevitability that some degree of complacency will set in with existing supplier relationships as they are, after all, in business to make a profit.  However, what really gets my goat is when you hear comments like the one I did during this review process when I mentioned to the incumbent supplier that, having benchmarked them against others, they were rather expensive.  The response I got was this "Yeah, we do add on extra margin for them as we know they never look around."  Grrrr.....

Turns out that this additional margin has been costing the school over £8k per annum which, I am sure you will agree, is no small sum.  So, my message today is this, don't assume loyalty pays as it doesn't always.

And if you don't have time to benchmark yourself why not get someone in to it for you........!

P.S.  You'll note I don't claim that loyalty never pays.  In some cases it absolutely does and there are a number of fabulous suppliers out there who really value loyalty and ensure they look after their customers from a price and service perspective.  To make sure you're with one of those and not like the one in our recent review all I can say is benchmark, benchmark, benchmark.




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