Customer-Backwards Vendor Partnership
Start with a customer need and co-create the economics with suppliers
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 96%
This framework reverses conventional procurement. Instead of searching the existing market for something that happens to meet a target price, the company begins with the customer, defines the required value, and asks vendors to help create an economically viable offer. Suppliers become development partners rather than interchangeable sources. The customer constraint guides product design, materials, packaging, quantities, and margins. Direct customer contact supplies the evidence needed to choose the constraint and judge the result. Dollar General demonstrated the mechanism by working with manufacturers to create merchandise that could be sold profitably at its fixed price point, including converting surplus fabric into an affordable product customers readily bought.
Origin
Cal Turner Sr. adopted retailing to remain directly connected to customers, then worked with manufacturers to create merchandise that could be sold profitably at Dollar General's one-dollar price point.
Core principles
- 01Begin with the value customers need
- 02Treat vendors as development partners
- 03Design products to fit the target economics
- 04Maintain direct contact with customers
How to run it
- 1
Define the customer need
Identify the customer, the job they need done, and the value they currently cannot obtain.
Pro tip Use observations and direct conversations rather than internal assumptions.
Watch out Do not begin with a supplier's available inventory.
- 2
Set the governing constraint
Specify the price, margin, quality, or accessibility requirement the offer must satisfy.
Pro tip Choose one constraint clear enough to guide trade-offs.
Watch out An unrealistic constraint can destroy quality or supplier economics.
- 3
Select development partners
Approach vendors capable of changing the product, production method, packaging, or commercial terms.
Pro tip Explain the customer opportunity, not merely the demanded discount.
Watch out Treating vendors adversarially discourages useful innovation.
- 4
Co-create the offer
Work backwards from the constraint to design merchandise that customers value and both parties can support profitably.
Pro tip Explore surplus materials or simplified specifications when they preserve customer value.
Watch out Do not sacrifice essential utility merely to hit the target price.
- 5
Test with customers
Place the offer in front of the intended customers and measure demand, satisfaction, and economics.
Pro tip Use a small, representative launch before scaling.
Watch out Internal enthusiasm is not evidence of customer demand.
- 6
Refine and expand
Use customer behavior and vendor feedback to improve the offer and repeat the process in adjacent categories.
Pro tip Share successful results with the vendor to strengthen the partnership.
Watch out Do not scale an offer whose profitability depends on temporary anomalies.
In the wild
Dollar General worked with a Nashville vendor holding surplus pink corduroy. The fabric was converted into men's trousers that could be sold for one dollar. Despite the unusual color, local farmers bought them because the price created compelling value.
→ A stranded material became a popular product that validated customer-backwards merchandising.
Common mistakes
Buying first and finding demand later
Starting with available inventory can produce an offer that satisfies the buyer or vendor but not the customer.
Reducing partnership to price pressure
The mechanism depends on joint development, not simply demanding a lower wholesale price.
Is it for you?
Best for
Retailers and product businesses that can collaborate with suppliers on design, packaging, production, or pricing.
Not ideal for
Commodity purchases where neither the buyer nor supplier can materially change the offer or economics.
From the transcript
“We've got to be directly in touch with the customer.”
“Start with the customer in mind, and work with your vendors to create a value the customer needs.”
“My dad believed that vendors were great partners and that was an opportunity for development of the company, the partnerships that you form with vendors.”
From the episode
Cal Turner Jr. on the Promise of Family Business
Cal Turner Jr.