November 10, 2021|
The Supply Chain Crunch Puts the Focus on Customer Loyalty
Shipping containers piling up in ports. Empty shelves at your favourite store. Printers in Europe running out of paper, and the price of lumber going sky-high thanks to a shortage. Car manufacturers and electronics manufacturers alike are decrying a chip shortage.
Welcome to the new realities of the supply chain. Over the past few months, another victim of the pandemic has emerged. Now, as we head into the holiday season, the supply chain is all we can talk about. It’s meant we’re seeing more empty shelves. The prices of many products have shot up, leading to the highest inflation figures we’ve seen in a while.
The supply chain crunch is going to hurt, for a few reasons. Those of us who survive it are going to be the brands that put the emphasis on customer loyalty.
Where Did the Supply Chain Crunch Come From?
The pandemic created the snarls in the supply chain, but there are a few different factors. The first, and most obvious, is that shutdowns brought a lot of industries to a standstill. Even when they were able to open back up, it may have been at a reduced capacity.
Take the paper shortage for example. Paper is a wood product, which relies on the forestry industry. When COVID hit, many industries, including forestry, stopped in their tracks. Even when lockdowns lifted, the industry had to work with limited hours and small crews.
That’s the next issue: labour. Many industries haven’t been able to operate at full capacity for almost two years. Even if they could operate during a lockdown, it may have been at reduced capacity. They may have had to have fewer people on the floor or in crews, especially to meet new COVID-19 protocols. They may also have had to lay people off or fire them to help balance the books.
At this stage in the pandemic, many employers are having trouble finding enough people to keep running full tilt. That means they’re still short-staffed, even as orders have been piling up for almost two years now.
That’s affecting every industry too. We can see it in the raw materials industries, like lumber, steel, or mining for silicon to go in microchips. And we're definitely seeing it in shipping. Even retail operations that need to stock shelves so customers can actually buy products are getting crunched.
The shipping and logistics industry is the biggest linchpin in the whole setup. A lot of shipments were grounded or reduced during COVID. When ports were finally opened, there was a huge backlog which still hasn’t cleared. So now, we're not just dealing with factories scrambling to produce parts or products. We’re also dealing with serious shortages of drivers, port workers, and more. And that makes it tough to get anything anywhere.
So we have not enough people and not enough product to get through a backlog. That's been followed by not enough capacity to get what is being made into the hands of consumers.
Brands Are Going to Hurt
The long and short of this is a lot of companies keep getting shorted and therefore, hurt. Take the auto manufacturers as an example. They’re not able to get cars on lots for people to buy. That means that customers have two options. They can either put in an order and patiently wait for their new vehicle to arrive. Or they can take their business elsewhere—maybe to a used car lot.
Those who have the patience to wait are making things worse though. Auto dealers are already saying their shipments are pretty much pre-sold. That means, even when they get shipments, there’s nothing on the lot. The dealers need to keep taking orders for the next shipment. And customers have to keep waiting for those shipments to arrive.
Some people can’t wait, though, so they are seeking other lots, options or brands. The supply chain issues are hitting almost every manufacturer though. It’s not like you can jaunt down the road from Ford to Volkswagen and have tons of selection at the other lot. Shortages are across the board.
The long and short of it is scarcity is going to mean a lot of people give up on brand loyalty, because they can’t wait. Forecasting becomes a guessing game. Lots of risk from over-forecasting to offset shortages on the lots with the risk that when product finally arrives, customer’s needs are met somewhere else, and they’re going to end up overstocked.
This is not limited to the car industry. Apple aficionados might have to turn elsewhere because of the chip shortage. Those people might come back to Apple … eventually. It might not be right away. Or they might become brand agnostic.
What Can You Do?
The biggest thing for brands right now beyond trying to effectively forecast, is to focus on your future customer.
Is there a way to make sure those people who turn to other brands come back? It may not seem like there’s much you can do right now. After all, if you don’t have the stock, what can you do to make sure people are coming to you the next time they need a car or a phone?
This is why brands need to focus on the why, not the what. Why is what builds customer loyalty—it’s the reason your customers keep coming back, time and again.
This is the only thing that’s going to help you survive the supply chain crunch—both now, when there are shortages, and later when you actually have stock on your shelves or on the car lot.
How Do You Build Customer Loyalty?
This is the million-dollar question (or even billion-dollar question) for Marketers: how do you build loyalty? Is it by having a good product or great customer service?
In this market, it’s all about the why. Why should your customers shop with you? Why should they pick you over anyone else on the market? Why should they stick with you through thick and thin?
The answer depends on what your brands values are. To be able to convince your customers to stick with you, you need to understand the why—why does anyone buy from you? It’s about more than the product or service you offer. Your brand has to stand for something, so you need to make sure you’re asking yourself what that something is. If you’re not sure, then your customers probably aren’t either.
Looking at our brand values and asking why is more critical than ever. If we don’t have a good reason for our customers to stick with us through this, we’re going to find that we don’t have those customers on the other side.
Like always then—we have to remember to start with the why!
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