SELF TEST #4: Creating the Customer Size/Supplier Role Matrix
What is the Size/Role matrix?
Answer: The Customer Size/Supplier Role matrix, abbreviated Size/Role matrix, shows the total industry sales volume broken into size segments defined by the combination of the customer size (Very Large, Large, Medium or Small) and the supplier role within the customer relationship (Primary, Secondary, Tertiary or Other).
What is the definition of a size-based segment in the market?
Answer: This is a combination of the customer size plus the supplier role. For example, a size segment in the market would be all the purchases Very Large customers make in their Primary role position.
What use can we make of the Size/Role matrix?
Answer: The matrix enables us to estimate the volume we might gain with an average customer if we do not know the size of the customer we are seeking. It also enables the company to compare its market share by size of customer, by supplier role, and by penetration in the various matrix segments compared to the average competitor in the market.
What is the meaning of a Size/Role matrix where there are five or more suppliers in the customer relationships?
Answer: This usually means that the business is a series of regional markets, where the product being purchased by the customer can not be shipped long distances. As a result, the customer must purchase from a number of suppliers in order to fulfill its total needs across a broad geographic area. The implication here is that the business should be evaluated on the basis of one or two regions, rather than on a nation-wide basis.
If we look at the Size/Role matrix over time, what information would it produce for us?
Answer: If you look at the matrix and how it changes over a period of years, say three to five years, you will see whether the industry is consolidating or de-consolidating. It consolidates as sales volume moves from right to left and from bottom to top on the matrix. It deconsolidates when sales volume moves from left to right or from top to bottom on the matrix.
What is the Heart of the Market?
Answer: The Heart of the Market is the four size segments defined by the Primary and Secondary roles with the Very Large and Large customers. These four size segments make up the bulk of virtually every market. Any competitor who would lead its industry must outperform the average competitor in the Heart of the Market.
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