A number of professional service firms spend considerable time and angst going through the process of ranking their key clients. Often this process results in some type of grading model with three or four tiers, each with a different level of priority.

The real question is what next? What are the consequences of grading?

If there’s no real difference between the top, middle and bottom grades, other than the name, then there’s little value in having a grading model at all. Moreover, getting the grading model wrong can mean putting too much or too little resource into a specific grade resulting in over-kill, or even worse, lost opportunity. The ultimate aim is to optimise investment into the key client portfolio in a way that yields the best return, reduces risk and, at the same time, engenders client loyalty and advocacy.

One firm I came across had a grading model that attempted to distinguish between “strategic”, “growth” and “valued” clients. This sounded great on paper but the only thing strategic clients got that the others didn’t, were a few extra invites to the corporate box at the football and a better table at the annual Christmas party. In addition, there was very little difference in approach between the “growth” and “valued” categories. To me it seemed like a trivial response to months of work to decide the grading model and composition of each client category.

In my view, the discrimination between client grades should address these nine areas (in no particular order):

1. Overall Dollar investment. The relative Dollar amount or range the firm is willing to invest to support relationship development. This calculation would typically include specific business development costs (eg. pitching and tender costs, client entertainment, proprietary research, promotional campaigns, special events, client feedback gathering and in-depth client and industry analysis), the Dollar cost of the value-adds listed in point 2, as well as a time cost allocation.
2. Value-adds. The specific bundle of added benefits offered to specific grades of clients, including things like in-house training seminars, tailored reporting, knowledge bank/library access, precedent/template access, secondments, access to case/project management tools, access to shared service professionals, industry briefings and joint innovation initiatives. Typically your more important client grades would get a more attractive bundle of value-adding benefits.
3. Access to resources and queue jumping. The relative priority the firm is willing to give in terms of access to top talent, proprietary products or systems and work scheduling. One large Australian engineering firm makes special effort to give their key clients access to their “A Team” (my words not theirs) and, if necessary, to divert resources to ensure projects for top clients are finished on time. Another example of this is Qantas Airlines’ preferential boarding queue for its Platinum customers, allowing them to jump to the front of the line and earn the ire/envy of the Gold and other flyers.
4. Conflict of interest. The preference the firm is willing to give in situations in which one or both of the firm’s clients perceive a conflict of interest. Usually this decision is assessed on a case-by-case basis, but I have seen examples where firms stipulate that Tier 1 clients always take precedence over Tier 2 and 3 clients in conflict situations.
5. Access to preferential pricing, risk sharing and contractual terms. The level of discounting, risk sharing and preferential terms the firm is willing to offer its different client grades. One leading law firm has a clear pricing framework to guide the choice of price structure and price level. The relative importance of the client relationship is one of the key factors in guiding the decision to share risk and to go ‘hard’ or ‘soft’ on pricing a particular matter. This framework makes it quite clear that special discounts are NOT offered automatically to top grade clients but  negotiated on a case-by-case basis. Equally, a very powerful case needs to be made to offer discounts or better terms for clients in low priority grades.
6. Relationship Manager type. In some instances, a particular client grade warrants a particular type or profile of relationship manager (RM). Using David Maister’s typology, “Finders” would be great for high growth potential clients, “Binders” would be good for large multi-service, multi-location clients, “Minders” for clients that the firm wanted to keep but had limited growth potential, and lastly, to make sure to keep “Grinders” well away from client manager roles.
7. Relationship management model. There is often a distinction made between a “butterfly” relationship model where most firm-client interaction is funnelled through a single RM point of contact, or a “diamond” model where multi-layered interactions and relationships are encouraged and the RM plays a conductor or choreographer role. Other relationship management model decisions often include whether to have a formal client engagement team, whether a BDM/account manager is appointed to support the RM and the number and role of deputy relationship managers.
8. Client engagement plan. The relative level of ‘comprehensiveness’ of the client engagement plan – ranging from a thesis, to a plan-on-a-page, to a statement of financial targets, to nothing. Research shows that preparing a client engagement plan for high growth, complex client relationships is generally a good idea. It can be a very useful tool to inform, align and inspire all those interfacing with the client. Unfortunately preparing a good plan takes a times and effort. Being clear on the scope and level of detail required in a client plan can ensure the potential benefits are commensurate with the effort involved.
9. Senior executive time and focus. One of the scarcest and most valuable resources in your firm is senior executive’s time and focus. How much of this time will be spent interfacing and enveloping personal relationship with the firm’s key clients is another variable that should be addressed in the grading model.

I’m not arguing that you must discriminate or distinguish ‘levels’ on each of these nine factors. Far from it. There may be a big risk, for example, in introducing a model where some clients get preferential access to resources or better pricing.

What I am recommending is that you make a conscious choice whether to discriminate or not? Careful consideration of these issues will ensure that you optimise your investment into your key client portfolio.