Our Over-Reliance on One Vendor Was Our Downfall

Last Updated Apr 4, 2011 3:02 PM EDT

By Charles Wetzel, CEO, Buxton, Fort Worth, Texas
Buxton is a customer analytics firm that helps retail chains identify new markets and marketing strategies. Some of our biggest clients include Lowe's, Weight Watchers, and Smashburger.

Everything we do relies on detailed and accurate data -- things like the income level, demographics, and interests of consumers in a particular geographic area. For 15 years, we had relied on one key vendor to parse this data and display it to our clients. Then in 2008 we suddenly had to find a new data source -- and we had to find one fast with as little interruption to our current business as possible.

There's nothing like a minor crisis to make you rethink how you've been doing things for the last two decades. Here's what we learned in the process about managing successful vendor relationships.

No data, no business
Part of our core service to our retail clients evolved to offering them an online portal where they can see prototype models of an average customer in a particular geographic area, among other things. Our vendor did not want to give our clients access to the data we needed to build these models, but without this data, our business model could have been compromised. We immediately began searching for a company that could give us what we needed.

After months of negotiations we found one, but that was only the first step in solving the problem.

A difficult transition
Migrating all of our proprietary client profiles from the old vendor to the new one was a lengthy process -- it took nine months. During the transition period, many of our operational employees were asked to stay late each night to work on the migration. To motivate them, we announced that at the end of the transition period, we'd celebrate at a company party as reward for their hard work. We also allowed them to wear jeans and T-shirts to work instead of the usual "business casual" attire, and began offering monthly sports events like kickball and croquet to boost team spirit.

Our staff also put considerable time transitioning each retail client over to the new system during this period. If we had recently built a customer profile for them, we had to re-build it for free because it had to be built with the new data.

Altogether, the data migration process cost the company approximately $325,000 in production hours.

Improving vendor communications
The whole thing was difficult and stressful, to say the least, but the experience led us to take a good look at our relationships with all of our current and potential vendors to avoid similar problems in the future. We identified which vendors we needed to rely on to create the business we wanted. We said, "Here's exactly who we want to be, and here's how we envision your software or product helping us achieve our goals." We asked specific questions like, "Are you comfortable with this?" and "Will you help us get there?"

To achieve these goals, our company established a vendor milestone plan.

First, we listed of all our vendors and used a tiered rating system from Platinum to Silver to rank them. The Platinum vendors are the ones we consider to be mission-critical to our business, while the lower tiers are less important.

After that, we created a position specifically to manage these relationships. This individual is an executive within our company who meets with all of our vendors throughout the year. He sets goals, and holds both parties accountable. Now, one of our requirements when discussing business with a potential vendor is to define the terms of the relationship. Whenever we can, we include those terms in our contracts.

For our Platinum vendors, these requirements include a monthly call and meeting to ensure that we're always on the same page. For lower-tier vendors, we'll evaluate our relationship annually to see if we're getting what we need from it, and consider switching to a new vendor if necessary.

While the problems with our data provider proved frustrating, the lessons we learned ultimately helped us build better relationships with all of our vendors. In our previous relationship, contact was on an as-needed basis. Now, we're more proactive to make sure we're always getting the best from our vendors.

-- As told to Stacy Lipson

Buxton has 100 full-time employees, and its 2010 revenue was $20 million. Charles Wetzel was offered a COO position at Buxton in 2004, when he stopped by to pick his sister up for lunch. He became president in 2008 and was promoted to CEO in 2011.
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