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12/1/1997 | 3 MINUTE READ

Learning To Deal With New Customers

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(This story is true, but the names of the companies have been changed. )  ABC Machine is a successful manufacturer of specialty products.

(This story is true, but the names of the companies have been changed.) 

ABC Machine is a successful manufacturer of specialty products. Their customers typically have been small and mid-size manufacturing companies that have relied on ABC's technical expertise to solve their specific problems.

About a year ago, ABC Machine was approached by Mammoth Industries, a world leader in the communications industry. Mammoth wanted ABC Machine to design and build a specialty machine for one of its new assembly lines.

The relationship began well. Mammoth made it clear from the start that completion dates were essential as the machine had to go online in less than six months.

After a number of meetings, ABC Machine understood Mammoth's requirements and developed a proposal. Two months passed before Mammoth approved the proposal in its original format. As a condition of approval, Mammoth insisted on a system of formal communication on a weekly basis. ABC Machine was instructed to e-mail weekly status reports to the Mammoth project director.

The ABC staff was told that if it performed well on this project, there would be many more opportunities in the future. ABC viewed Mammoth Industries as a key to continued growth.

The project began and was proceeding smoothly. At the end of the first week, ABC Machine's president forwarded the status report to Mammoth's project director. The following day, ABC Machine's president followed up to be sure Mammoth's project director received the e-mail. The project director was in a meeting, but would return the call. Unfortunately, ABC Machine's president would learn that Mammoth's project director was generally difficult to reach and rarely returned calls. Despite the absence of feedback from Mammoth Industries, ABC Machine proceeded with the project.

The project soon reached the point where sample parts were needed from Mammoth. Calls made to the Mammoth project director still were not being returned and ABC Machine's weekly updates began to reflect concern about missing milestone dates. In addition, an initial invoice sent to Mammoth to cover up-front expenses was past due.

At this time, ABC Machine learned that Mammoth's project director was transferred to another division of Mammoth. ABC was instructed to send the weekly project updates to another person who would be taking over.

After finally receiving sample parts, ABC was able to complete the first phase of the project. A demonstration was scheduled, and the Mammoth team agreed that ABC Machine had fulfilled its requirements and should proceed to the next phase of the project.

Two weeks later, a call was received from a new (third) project director at Mammoth. He had a completely different concept of what the specialty machine should do.

Today, details of the project are still being negotiated. The relationship between ABC Machine and Mammoth Industries is strained and the future is unclear. Several invoices are still outstanding, which presents a major cash flow problem for ABC Machine.

Here are the lessons from this story:

  1. Don't assume any new customer will be your ticket to business growth. New customers are good, but they do come with risk. Your new customer is someone else's "former" customer and something happened to sever that relationship.
  2. Don't assume that no news is good news. In fact, assume the opposite. Even if you are providing frequent status reports, be sure you speak to the decision-maker on a regular basis.
  3. Companies, especially large ones, frequently move employees around. The relationship you build with your initial contact will not last forever. Your customer is a company and not a person.
  4. Priorities change. If the sense of urgency has been lost, find out why.
  5. Get as much as you can in writing and even then be prepared for misinterpretations. The more confident you are as to the scope of any project, the better your chances of successfully negotiating changes.
  6. All new customers, regardless of how large or well known they are, should have their credit checked. Extended payments may be routine for large companies, but the lag can cripple a small company with limited working capital.