Hi folks, I would like your comments on a business situation described below... I realize every business is different and there are a lot of strategy guru’s out there, but the opinion of a self made tree climber or landscaper with good common sense is maybe more of value to me. The situation described is a real one, based upon a friend’s experience (no tree servicing cy). So here goes.
Suppose you’re a leading tree care service in your region, and your customer base comprises 3 big customers (A, B & C), representing 70% of your business ($), a few middle size customers representing 20 % of your business and a number of small ones counting for 10 %. Your company is doing well, especially with the 3 biggest customers, and you have invested quite some money in equipment (loans) and labour to serve them.
Customer A is your biggest customer (30%), customer B (20%) and C counts for 20% also.
You have provided excellent service for customer A during many years, and pricing, margins are to be considered as satisfactory.
Now customer A acquires the business of customer B, and hence becomes all of the sudden 50 % of your business. Customer A appoints immediately a new hot shot general manager, eager to create a high ROI and tells you that prices are way too high and immediately request a significant discount on your services (to a point where you are left with little margin). If you don’t comply with their request, they threaten with creating their own tree service crew, who might also focus on other customers of yours.
My questions :
How would you react ?
What would be your short term and medium term strategy ?
Please fire away. We all might learn from this one, hehe ..;
Suppose you’re a leading tree care service in your region, and your customer base comprises 3 big customers (A, B & C), representing 70% of your business ($), a few middle size customers representing 20 % of your business and a number of small ones counting for 10 %. Your company is doing well, especially with the 3 biggest customers, and you have invested quite some money in equipment (loans) and labour to serve them.
Customer A is your biggest customer (30%), customer B (20%) and C counts for 20% also.
You have provided excellent service for customer A during many years, and pricing, margins are to be considered as satisfactory.
Now customer A acquires the business of customer B, and hence becomes all of the sudden 50 % of your business. Customer A appoints immediately a new hot shot general manager, eager to create a high ROI and tells you that prices are way too high and immediately request a significant discount on your services (to a point where you are left with little margin). If you don’t comply with their request, they threaten with creating their own tree service crew, who might also focus on other customers of yours.
My questions :
How would you react ?
What would be your short term and medium term strategy ?
Please fire away. We all might learn from this one, hehe ..;