Replenishment as a Service (RaaS): A new approach to customer retention
For all businesses, but wholesalers in particular where margins are low, customer retention is critical. Statistics reinforce this common-sense supposition. Research shows that acquiring new clients is six to seven times more expensive than retaining the ones you have. Returning customers also spend 67% more than new customers. Finally, just a 5% increase in retention can result in revenue boosts of 25% or more. So how can wholesalers keep more customers? Interestingly, the answer is not solely lower prices.
Customers are often willing to pay higher prices, if better service comes along with them. Among B2B decision makers, lack of speed in interactions was cited as the top pain point – mentioned twice as often as price. As distribution channels become more consumerized, there is both a greater variation of demand and a higher expectation for responsiveness. Wholesalers need to be more agile, more flexible, and they must draw on their service levels as a key strategy to reducing customer churn and forging long-term relationships.
Becoming a more customer-centric operation
Anticipating the rise of ecommerce and omnichannel, and the subsequent impact they have had on the entire supply chain, Manhattan Associates saw a growing need to provide wholesalers with a new kind of technology. Customer-Centric Inventory Optimization (CCIO) is a demand forecasting and replenishment capability that provides deeper insights and visibility into your largest customers, enabling you to understand their specific business behaviors and demand patterns. By knowing what your customers are doing, you can then be more precise – and more profitable – in your buying decisions. CCIO helps you identify key customers, isolate critical information and then analyze the data to make optimal replenishment decisions. It also reduces customer churn by making you more responsive to their needs. Happy customers tend to remain customers.
A bridge to Replenishment as a Service (RaaS)
CCIO can also put you on a path to an even closer and “stickier” relationship with your customers. That’s because the data delivered by CCIO is a major component of wholesalers ultimately being able to offer their customers what we call Replenishment as a Service or RaaS. RaaS is where a wholesaler takes over demand forecasting and replenishment – for all inventory or agreed-upon products – on behalf of a given customer. Executed correctly, it’s a win-win scenario. Customers get guaranteed service levels, competitive pricing and the freedom to focus on core business objectives. Wholesalers get to lock in key customers while being armed with the data to service them in the most profitable way possible.
In addition to CCIO, there are three critical components to successfully execute a RaaS strategy. First, a wholesaler needs full data on the customer’s inventory position, what it has on hand, any inventory adjustments and what’s sold. Second, strategic conversations must be had with the customer around KPIs, guaranteed fill rates and other service level agreements – as well as metrics to measure them. Third, the wholesaler must decide organizationally how to staff and manage that account to ensure optimal performance. Let’s face it: RaaS creates new inventory optimization tasks, and it’s critical to decide if responsibilities will be managed by your experienced inventory analysts or by new additions to your organization.
As long as performance metrics are met, RaaS enables wholesalers to create customers for life. And CCIO is a bridge to RaaS.
Technology to increase customer retention
The right technology – like Manhattan CCIO – empowers you to start using inventory as a competitive advantage. CCIO is an unprecedented way to deliver higher service levels and profitably optimize assets around your key customers’ buying patterns. Beyond that, it’s also a major step in being able to offer RaaS, which helps you forge the ultimate wholesaler-customer pairing. It’s a relationship in which data is shared, business goals are shared and enduring partnerships are forged. In an industry where customer retention is crucial, RaaS is certainly worth considering.