Wednesday, November 30, 2011

How do you manage your small, profitable customers?

I caught up with some friends recently who run a successful bottled juice startup. One of their largest competitors is Coca-Cola, who despite not selling a lot of juice, are amazingly successful at the distribution side of their business and are often in direct competition with my friend's business.

My friends told me the story of a small, local coffee shop attached to a suburban tennis court that they were supplying their bottled juice to. The older clientele of the coffee shop were buying lots of my friends' pomegranate juice and so the owner of the coffee shop approached my friends about ranging more of their products and adding a fridge to stock only my friends' products. They agreed verbally to go ahead with this.

Then the Coca-Cola representative moved in. He offered the coffee shop a free Coca-Cola fridge and an impossible to beat deal on Coca-Cola products for the coffee shop. The coffee shop owner called my friends and sadly explained it was a deal he just couldn't refuse so he wouldn't be able to add the fridge and range more of my friends' products.

On the one hand it's a shame for my friends that they're not able to compete with a company who are willing to make a short term loss on a deal to retain their distribution, but on the other hand it's incredibly impressive that a global company the size of Coca-Cola care about their distribution in a small coffee shop attached to a suburban tennis court, and are able to operate so successfully at such a local level.

How well have you set up your systems and processes to ensure you're putting this much effort into all your small, profitable customers?

Published to Startupsmart.

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