At one time or another, every business will face the dilemma of whether to subcontract or face customer defection. This tough choice usually occurs when a business cannot meet a customer’s product or service needs.
So, what’s a business to do? The simple thing to do is tell the customer that the business can’t provide the requested service or product. What might happen next would be the loss of a customer to the competition. The other alternative would entail the business locate another business to offer the requested product and/or service, while still retaining the customer for upcoming sales.
The downside of “farming out” or subcontracting means less money for the referring business. However, the goal is a happy customer. Hopefully, the customer will remain your customer after this particular transaction.
Contrasting the Two Business Options
Whether you subcontract or seeing a customer walk away from your business are completely different. However, each approach can substantially influence business.
Contracting out business calls for hiring an external provider and/or supplier. Hypothetically that product/service could be completed by the referring business. On the other hand, “giving up” a customer occurs when that buyer defects to a competing business.
There’s no “magic bullet” regarding this particular dilemma to subcontract or face customer defection. There are a host of issues to consider in deciding what path to follow. For example, how much will the subcontractor cost the business? Does the subcontractor provide excellent work or service? How will the business be affected by keeping or losing the customer?
Many small businesses may believe that if they can’t meet the needs of a current customer, then their only choice is to let the customer go to a competing business. However, subcontracting may be the best route to follow. Subcontracting becomes a “win-win” situation because the customer receives what it wants and the business keeps its customer.
Accompanying Hazards
While subcontracting may be the best answer for a business, every business must weigh the possible hazards which come with subcontracting:
- The quality of the subcontractor’s product or service may or may not meet the expectations of the customer.
- The subcontractor’s work could possibly negatively influence the standing of the referring business.
- The expense of losing future sales from the customer.
- The skill in discovering a subcontractor which can actually deliver the products or services needed by the customer.
Calculated Choice
Lost income may come from subcontracting or losing the customer altogether. However, in order to permanently prevent losing a customer’s business, the calculated choice for a business may be to subcontract. Remaining connected with the customer still leaves open the possibility for additional business and more sales down the road.
At What Time Do You Subcontract?
Even if it means less revenue, a business should examine subcontracting. Rather than lose a customer altogether, subcontracting provides some revenue. Some money is better than NO money! The bottom line comes down to the consequences of subcontracting versus losing a customer’s business forever.
Keeping Your Customers while Subcontracting
So, what should a business do to keep happy and devoted customers? Every business needs to implement a plan where customer essentials, choices, and standards are met. There may be instances where a small business may not be up to meeting in totality what the customer would like or demand.
Subcontracting may be the best option for a business to accomplish customer satisfaction. That can be achieved regardless if the business provides the service or sells the product itself or a subcontractor (with supervision and communication by the business) completes the task. Creating and maintaining positive experiences with customers is vital for every business, even if subcontracting is a component of the transaction.
The Ultimate Conclusion
In the long run, determining whether to subcontract or face customer defection is not an easy decision. Every business should review each situation on an individual basis and consider the pluses and minuses of each opportunity prior to determining the best course of action.
