key account management | Relationship Capital

Posts Tagged ‘key account management’

account planning, Audit, business development, client loyalty, growth, internal collaboration, key account management, marketing, planning, pricing, professional service firms, strategy management

Stress test your client strategy

In Articles, Commentary on 9 February 2015 at 8:12 am

Most client plans I see are tactical, short-term and myopic. They are really sales pipeline documents with coffee catch-ups tacked on. There’s often very little about intended client strategy. By client strategy I mean a game plan to win – a big picture view as to how to respond to and potentially shape the client’s needs and buying patterns over time. A clear articulation of how to run faster and smarter than major competitors.

In my view, client strategies can be categorised into five areas. These categories provide a useful checklist in stress testing your key account plans.

#1 Price, risk and cost

Price and risk-sharing is a strategic arena that provides a wealth of competitive opportunity. Firms can leapfrog rivals by offering alternative pricing and risk-sharing models that go beyond convention and better address fundamental client needs. A recent case study on Bendigo and Adelaide Bank is a good illustration of this.

A number of professional service firms are creating an edge, not by race-to-the-bottom discounting, but by negotiating long-term incentivised retainers to deliver positive outcomes to both the client and the provider. I think there’s rich pickings for firms that can truly understand the nature and scope of client risk and identify options to de-risk the client’s business.

Another strategy in this category is to reengineer the firm’s processes to significantly reduce cost-to-serve and to enable the firm to have greater price-setting discretion. Similarly, exploring new ways to measure and enhance perceived value can drive client commitment.

#2 People and relationships

Many clients plans concentrate on relationship mapping and connecting. This is great, but cherrypicking is a client strategy often not considered with any rigour. Cherrypicking starts by asking, “if we had to hire three people that would fundamentally advantage us with this client, who would they be?”. These new hires might be in a competing firm, in the client organisation or in an adjacent provider. A quick business case analysis of the options can be extremely revealing.

I recently heard of an accounting firm that captured the lion’s share of a major client’s spend by headhunting a senior manager from a rival firm. Client feedback revealed this manager had become the ‘go to’ adviser and was far more important to the client than the figurehead client relationship partner.

#3 Data and technology

Information and communications technology is increasingly being used improve client connectedness and service. A great illustration of this is a leading Australian law firm that provides each client end-user a tailored smartphone app that features:

contact details and specialisations of service providers
seamless integration with Skype for videoconferencing
real-time project status updates
billing data and analysis
relevant legislation, case law and industry updates
on-demand and live professional development modules
upcoming events and service improvements
a feedback and suggestion space
FAQs
discussion forums.

Big data is going to be one of the next frontiers of client strategy. At the moment, most firms and clients operate with islands of data that are not linked in any meaningful way e.g. procurement, matter management, time recording, document management, billing, HR, client satisfaction, etc.. There’s much opportunity to integrate and analyse all this data and offer both the client and the firm deeper insights into how to run more effective and efficient projects.

#4 Delivery, capacity and coverage

At the heart of the Big 4’s multidisciplinary strategy is a compelling value proposition: our capacity, coverage and consistent service delivery allows you, Mr/Ms Key Client, to lower your transactions costs, leverage your scale, make you look good, de-risk innovation, facilitate new market entry and improve compliance across ALL of your operations. Did I mention ‘make you look good!’?

Benchstrength or depth of expertise in a particular area important to the client can be at the heart of a firm’s client strategy. It’s not that the expertise itself is superior but rather it’s the critical mass of high quality talent and a strong team approach that builds trust and creates preference in the client’s mind.

#5 Knowledge and expertise

The fifth area of client strategy relates to the firm’s knowledge – both [1] technical discipline expertise, and [2] understanding of the client’s business and industry. The key here is the firm’s ability to contextualise advice and make it relevant to the client’s specific needs. A firm may have a wizz-bang CRM, but it’s useless if they can’t use this knowledge to pre-empt competitors, bring fresh ideas to the client or simply make the advice more cost-effective and valuable.

In my experience many firms over-estimate the distinctiveness and durability of their knowledge. Consequently, if you’re number 2 or 3 on the client’s pecking order i.e. the challenger brand, investment in deepening client knowledge and its application can be at heart of your client strategy.

Another related client strategy in this category is “flanking”. This is about avoiding direct head-to-head competition with a strong incumbent and instead picking up work around the edges in new expertise areas and/or locations. Once a foothold is created a direct assault on the incumbent can then be launched.

In conclusion

In stress-testing client plans it’s important not to get too hung up on the client plan document itself. A plan is not a document. A plan is the outcomes you’re seeking and your intended actions to achieve those outcomes. What’s critical is that there clear evidence of robust strategic thinking and discussion around how to compete, where to invest and, the hardest bit, deciding what not to do.

Check out Barolsky Advisors’ Profit Growth Now! to make a step-improvement in your firm’s critical client relationships.

Photo source: http://picrutes786.blogspot.com.au

▶ Comment

account planning, Audit, business development, client loyalty, client relationships, innovation, key account management, planning, pricing, professional service firms, Sales management, strategy management

Adding Adding Value

In Articles, Commentary on 3 November 2014 at 8:18 am

Does your firm having adding value to clients as a core objective? I’ll bet it does.

Does your firm really measure how it adds value to clients? I’ll bet it doesn’t.

Most firms ask their clients to rate overall value for money in their client listening research. To my mind this is a generic approach to assessing value and a major missed opportunity.

A new way

I think there would be significant benefit adding a section to your client feedback tools under the heading ‘Adding Value’. This section would be tailored for each client and it would ask the client to agree or disagree with a series statements as to how the firm has added value, or what difference it has made over the preceding period. This would not be merely a restatement of activity or inputs but rather outcomes achieved and real benefits delivered.

So, for example, this section might include statements like:

Helped with the successful launch of new product XYZ and in creating 15% market awareness in 6 months.
Improved consistency of safety incidence reporting contributing towards a 5% reduction in lost-time injuries.
Reduced risk exposure to ABC claims from High to Moderate.
Settled the MNO matter with a sum $1 million less than that provisioned.
Realised incremental rental income of $500K through early project completion.
Delivered tailored training program that contributed towards a 5% improvement in staff productivity.
Helped with effective rollout of new corporate compliance program via dedicated secondee.
Rejigged proposal templates and process leading to a 7.5% improvement in the bid-win rate.

The client respondent would also be asked to identify other things, big or small, that they felt have added value. They might list some valuable off-the-cuff advice provided for free or an introduction to a valuable business contact. This open-ended section would catch all the tangental things that the client perceives have been of benefit. Sometimes the smallest things can have the biggest impact.

Ideally this value added assessment should be part of a periodic relationship review conversation. It could be used in a quantitative survey but then you miss the opportunity to have a deep dive discussion into what value is and isn’t from the client perspective.

Communicating value

Communicating the benefit you deliver is essential in justifying the price you charge. The problem is that in many professional services value is in the eye of the beholder. If Perceived Value = Perceived Benefits – Perceived Costs, then it’s incumbent on the provider to work extra hard to communicate and amplify the perception of benefit. Getting their agreement or otherwise to a series of value-added statements makes the benefit more conscious and tangible. It also reveals what elements of your offering are more valuable than others.

Finding the words

Harry S Truman once stated, ”it is amazing what you can accomplish if you don’t care who gets the credit”. One of the challenges with this suggested approach is that the client may perceive the whole exercise as a kudos claiming exercise. They might think you’re trying to steal their thunder. I think this can be partly addressed by [1] explaining the rationale for the questions, [2] describing in detail the firm’s specific role in creating the outcome, or [3] using softer phrases like ‘contributed to’ or ‘helped with’. Having the statements as propositions that the client can agree and disagree with, also reduces the risk of coming across as too self-serving.

Identifying the outcomes achieved might be difficult if the service is purely a commodity or the firm’s service role is basic compliance. However, if your firm is a non-commodity player then the only reason for not doing this is laziness or a lack of creativity.

Call to action

One simple next step is to pick a key client of the firm you have a good relationship with. Write down a series of draft value added statements and ask your client which ones they support, which they don’t and which ones are missing. I bet you’ll both find the conversation fascinating and value-adding in so many ways.

▶ Comment

account planning, business development, client relationships, growth, internal collaboration, key account management, marketing, professional service firms, Sales management, Workshop facilitation

The key to cross-selling: know what you don’t know

In Articles, Commentary on 2 September 2014 at 4:04 pm

We need to cross-sell, increase share of wallet, offer clients our full product range, make more of existing client relationships,…

Sound familiar?

One of the biggest constraints to effective cross-selling is partners/directors not knowing what other parts of the firm offer. As firms grow in headcount, capability and footprint, this becomes a bigger and bigger problem. Here are four case studies that address this challenge that you might find interesting and worthy of emulating.

CASE STUDY: 3MT

Each year, PhD students at the University of Queensland are encouraged to enter the 3MT competition. This event is about getting students to present their entire PhD to a lay audience in the most compelling and accessible way in 3 minutes. If a student can explain an 80,000 word PhD thesis that has taken years to research in three minutes, then a professional services firm partner can explain their practice just the same.

One law firm I’m familiar with has introduced a similar competition with a case of Penfolds Grange as the first prize. Each partners meeting starts with three 3MTs and a secret vote on each by all partners. The vote requires not only a score out of 10 but one key takeaway from the presentation and one client or referral opportunity. In order to increase partner engagement, eligibility to win the prize is based all votes entered and comments made. The firm’s 3MT is currently being rolled out, but the early signs are that it’s a winner.

CASE STUDY: TRADE FAIR

A leading Australian accounting firm recently adapted the trade fair concept to enhance firm-wide understanding of what the firm could offer. At the annual partners and managers conference, each practice was asked to set up a stall and spruik their wares. Each person attending was given 1,000 Firm Dollars to place orders based on the quality and creativity of the pitch, with a maximum of $300 with any one vendor. The goal of each stall holder was to win the most business.

CASE STUDY: TED TALKS

I was told recently of a firm that had created an internal TED Talks series and related YouTube channel. Extending the TED slogan of “ideas worth spreading” the firm created a platform for anyone to prepare and present a thought-leadership video. Presentations were usually under 7 minutes and some included music, poetry and drama. The talks were moderated by a small panel which also offered guidance to those submissions that were initially rejected. Linked to the video was a detailed profile of the presenter(s) together with their areas of specialty, clients and recent projects. In some instances the internal TEDs were released to external audiences. The MP Award, Most Viewed, Most Likes and Most Shares were the most sought after prizes.

CASE STUDY: SPEED DATING

A few years ago I facilitated a partners retreat of a firm that had recently merged with another firm of similar size. Many of the people attending didn’t know each other. We organised a speed dating session where everyone got to share and listen to everyone else. The instruction was for each person to speak for one minute addressing one of these topics:

What’s the one thing you are most proud of? OR
What has been a really memorable moment in your life? OR
What would you say is one of your greatest strengths? OR
In thinking about your career, what do you dream about?

KEEPING IT FRESH

Each of the ideas described above has a use-by date. The Trade Fair concept will work once, possibly twice, but no more. People get tired and bored quite quickly. It’s essential you keep both the message and the medium fresh.

I’d love to hear how your firm builds internal knowledge.

Image: Maria Esther Lopez C (Pinterest)

▶ Comment

culture, executive leadership team, growth, key account management, professional service firms, Training, Workshop facilitation

20 workshop facilitation tips and secrets

In Articles on 24 July 2014 at 8:48 am

I have been facilitating planning workshops, firm retreats and focus groups for over 25 years. I love it! It’s a real buzz to nail a complex issue and create a safe and productive space for everyone to do their best thinking and speaking.

A friend recently asked me to write down some of my workshop facilitation tips and secrets. Listed below are some of the key points that I included in my reply. No rocket science here but hopefully some practical ideas for you to use and adapt…

1. Understand your role. It’s important that you are clear on your role in the workshop viz-a-viz the the person that usually leads the meetings of this group (Board Chair, CEO, MP, Team Leader, CRP). Ideally they should be treated as an equal participant in the workshop with you as the independent chair/facilitator of the discussion. They might open and close the session, but this is your show.

2. Get the venue and set-up right. The monkey enclosure at the Melbourne Zoo was a recent workshop venue highlight. My general preferences: offsite is better than onsite; natural light is key; ceilings not too high or too low (converted barns or halls are hopeless); beware basements of expensive hotels; no noise or distractions from other rooms; screens/boards (if used) visible to all; AV, pens and other equipment ready, tested and working; U-shape set-up for smaller groups, round tables for larger groups; breakout rooms nearby are nice but not essential.

3. Be shockingly clear on the workshop objectives and outcomes. Design the process/agenda to achieve those outcomes; leave the rest out. Calibrate outcomes to the time available or vice-versa – don’t kid yourself that you’ll get full agreement on a 5-year strategy in a one hour discussion.

4. Visualise the process or “screenplay” of every session. As a facilitator you need to imagine the flow of the discussion, how long each deliberation will take and where it may go. If you can’t really do this perhaps more work needs to go into describing the specific discussion topic i.e. it may be framed too generally or narrowly.

5. Anticipate the most contentious issues. Good preparation should reveal the likely potholes, road humps, obstacles and diversions. Give more time to these in the agenda; gather more data beforehand to inform this discussion; pre-identify options/likely solutions; get to these issues quickly by getting everyone to sign-off on the less contentious stuff.

6. Understand who’s who in the room. Do your homework on the participants; know their hot buttons, preferences and needs; identify likely supporters, vocal disruptors, passive aggressors and abstainers. If appropriate, make contact with key opinion shapers before the workshop to see where they’re at and get their advice on how to run the meeting. Getting their fingerprints on the agenda can also be very useful at times.

7. Get engagement before the workshop. Ideally ask participants to do some work beforehand and apply their minds to the issues at hand. This may be pre-reading, completion of a survey, gathering data from other staff or clients or just to jot down their questions or concerns next to each agenda item.

8. Mix it up. In designing the agenda try vary the process and keep it fresh. Don’t have four or five breakout sessions in a row with the same groups. Consider a variety of buzz groups (two or three people sitting next to each other), syndicate work, debates, videos, post-it note brainstorms, guest speakers, competitions, presentations, etc.. David Gray’s book is an excellent resource on different types of activities you can use.

9. Look to parallel process. Assume you have five major issues to deal with in the workshop. One option is to deal with each sequentially by the whole group. My preference, not always though, is to parallel process and get five smaller groups working on each issue at the same time. One should try avoid boring plenary report-backs from each group. There are a variety of ways to get the outcomes from small group work fed back efficiently and effectively.

10. Be independent. As a facilitator it’s important to be content neutral by not taking sides or advocating a strong view during the meeting. If you want to state your view or advice, pre-qualify your comments. If it’s a really contentious issue, people need to trust the process and trust that you will not bias the outcome.

11. Plan your note taking. If you’re going to use the whiteboard or butchers paper to note comments during discussion think beforehand about how that might be presented. Where are you going to start, continue and end; where you will go if more space is needed; what layout will you use. I use mind maps a lot but sometime just a bullet point list is fine. I ran a workshop recently where I wrote up the key points on the glass encasing the room. It was better than butchers paper and blue tac.

12. Get early involvement. If time allows, start by asking people their expectations for the meeting and any concerns. Get everyone to say something as early on as possible. Directing questions at specific participants keeps people on their toes.

13. Let the bees fly. Quite often one or two participants will have a bee in their bonnet – a strong opinion about the issues to be discussed. In my view the worst thing you can do is bottle them up. Let people get things off their chest early on in the process and try get all the key problems on the table. If there are no more bees and elephants left in the room (this is mixed metaphor mayhem (with alliteration)) you can start to work on options and solutions.

14. Limit the loudmouths. In most workshops there are participants who love the sound of their own voice, interrupt others and make it easy for the abstainers. I try limit their impact on the discussion via buzz groups, polling, ’round the rooms’ and/or directly enquiring from those less vocal. Another tactic I use is to frequently mention their name and their key points: “As Alex pointed out, cross-practice collaboration is a major problem in the firm…”. They then feel heard and their ego stroked – two major causes of loudmouthedness.

15. Draw in experts. Where and when its possible get the experts or most well-informed person on a particular issue to be involved. So, for example, if it’s an IT issue get your CIO to introduce the topic, help with Q&A and contribute to the debate. This approach avoids the blind leading the blind and accelerates collective understanding.

16. Frame the problem. One of the most critical skills of a facilitator is the ability to fathom all the discussion and synthesise and frame it it in a way that allows for clearer decision-making. Without this intervention the workshop runs a huge risk of becoming a talk fest and the issues left unresolved. It’s actually a worse outcome than not having the workshop at all. My approach is as follows: I wait till the law of diminishing returns kicks in – the moment when people start repeating themselves and no major new insights/contributions are made. I then try to play back everything I’ve heard by clearly defining and restating the problem in as simple words as I can, and clearly mapping out all the alternative solutions/options. I then ask the group if to give some feedback on my problem statement and options. After some discussion, if appropriate, I ask for a vote around these options. If one option is clearly preferred, or not preferred, it helps narrow the choices and you’re one step closer to resolution.

17. Help the strugglers. If someone is struggling to make their point, [i] restate your understanding of their issue in your own words, or [ii] ask them to give an example or re-explain. Chances are most others in the room will be confused too.

18. Hand back the agenda. If it appears that a particular issue is going to take up much more time than scheduled, put it back to the group on how the agenda should be rejigged, i.e. what agenda items should be kept, what should be deferred or dropped. This empowers the group and protects your credibility as a facilitator.

19. Use the clock as your friend. “We only have 20 minutes left and we have to get a resolution on this”. Use the pressure of the clock and people’s desire not to waste time to break a deadlock. If resolution is not reached, then at least agree the process to be followed to reach it some time in the future.

20. Finish on a high. A great way to end is to revisit the objectives/expectations and recap the key outcomes and next steps. Even if things were not completely resolved, it’s important that people feel that the issues have been advanced and there are clear steps to get resolution in the near future.

I’d love to hear some of your top facilitation tips and secrets.

▶ View 1 Comment

account planning, business development, client loyalty, client relationships, innovation, key account management, professional service firms, strategy management

Your loyalty levers: head, heart and ego

In Articles, Commentary on 22 May 2014 at 9:05 am

Sticky profitable clients are nice. Most professional service firms just love them. I’m sure you do too.

But what keeps these clients loyal to your firm and willing to come back for more?

Research evidence suggests that client satisfaction is an important driver of client loyalty, but as the chart shows it’s not the full story. There are many instances that for a given level of client satisfaction, clients of one firm are significantly more loyal than another. It would appear that there are other hooks, zippers or levers that facilitate client loyalty. These levers generally work both as a positive motivation to stay, but also as a disincentive to switch.

In my view, there are three primary loyalty levers and they relate to your client’s…

Head – the perceived financial benefits gained/foregone as well as the anticipated time, costs, hassle and risks of switching.

Heart – the emotional and social benefits gained/foregone.

Ego – the impact of staying/switching on client’s personal status, reputation and position of influence.

There has been extensive commentary on client loyalty strategies particularly around developing closer personal relationships. Rather than repeat all of this, I thought I’d share a few head, heart and ego ideas that have received less air time.

#1 Multiple services

Beaton Research and Consulting data shows that client loyalty increases as the number of services bought by the client grows. Their data shows client loyalty goes up by 10.4% when moving from 1 to 4 service lines in legal services, 12.3% in accounting and 6.6% in consulting engineering. While cross-selling is good for the revenue line, it’s also really good for the client loyalty line. Intuitively this makes sense. The more services you provide, the more you know and understand about the client’s business, the more personal connections there are and the higher the perceived switching costs.

#2 Loss of future financial benefit

Colin Jasper and I argued in an earlier post that there is much merit in exploring relationship pricing arrangements that provide incentives for both parties to commit to working together for the long-term. Client loyalty is incentivised by having a retainer arrangement in which the client foregoes significant future financial and strategic benefit if they end the relationship. Discounted hourly rates that are easily matched by competitors do not qualify as a loyalty incentive.

#3 Cultural alignment

One of my clients has scored major brownie points with his clients by actively supporting their causes and CSR projects. Every effort is made to attend client-sponsored charity events, make donations and provide people and resources for joint community development projects. Underpinning this activity is the message is that we’re like you; our values and your values are similar; culturally we’re aligned. He says this approach not only fosters client loyalty but it widens clients’ ‘zone of tolerance’ on pricing and occasional service stuff-ups.

#4 Buying in self-image

While clients will seldom reveal this decision criterion in surveys or interviews, their actual behaviour betrays them. There are numerous instances of clients staying loyal to prestigious firms not because of superior service or advice, but just because they’re prestigious. Simply put, they like sunning themselves in the firm’s after-glow. Their status is reinforced by the company they keep. Going ‘downmarket’ is a major threat to their ego. Many clients don’t like to admit it, but they often buy in their own self-image.

Related to this point is the ‘making them look good’ phenomenon. Some firms are experts at making their clients look like superstars. Switching to an alternative provider may reveal a hidden capability flaw or risk being seen to perform at a lower level.

#5 Co-creation

Clients are less likely to walk away from anything that they’ve invested a lot in. Getting clients to co-create new products, processes, projects or programs helps encourage this investment. To illustrate, one mid-tier law firm in Australia recently initiated a project to redesign the workflow process with a major insurance client. The intent was to reduce handovers, minimise errors, take out resources, speed up time and reduce cost. The end result: the client got a lower unit fee and the firm enjoyed a greater share of wallet and a commitment from the client to ‘co-act’ (their words) together into the foreseeable future.

Your call to action

Focusing on improving client satisfaction is a good thing, but if you really want to create sticky profitable clients its time to think more creatively in playing to your client’s head, heart and ego. What’s more, if you’re seeking to win a new client that appears to be wedded to a competing firm, having a deeper understanding of their relationship can help craft a winning strategy.

▶ Comment

account planning, business development, innovation, internal collaboration, key account management, planning, professional service firms, Sales management, strategy management

What’s wrong with the sales pipeline?

In Articles, Commentary on 24 April 2014 at 12:19 pm

Panic sets in when the phones stop ringing!

In the frantic rush to drive revenue growth, sales pipelines have become the favoured business development tool of many professional service firms. Before your firm follows a similar path, I think there are five important limitations to note particularly when it comes to selling to existing clients. To address these problems, I’ve developed a complementary/alternative approach based on the McKinsey Three Horizon Growth Model.

Five key limitations

1. Revenue not value-focused

I recently reviewed the sales pipelines of a major professional service firm and over 85% of the opportunities listed amongst existing clients were focused purely on revenue generation. The language of “sales” orientates one thinking around revenue and, in my view, creates a blindspot around other opportunities to enhance perceived value, reduce cost and improve the overall profitability of the account.

2. Reactive not proactive

Sales pipelines can encourage lazy reactive thinking that relies mainly on the client to feed the top of the funnel. At worst, firms just sit around and wait for the next RFP to be issued. Effective strategic account management demands proactive discussions with clients, challenging their thinking, suggesting things not on their radar and, if appropriate, offering unsolicited proposals.

3. Internally not externally-focused

In an interview with a senior BD manager from a large global engineering firm he lamented the fact that pipeline meetings were very internally-focused. “90% of the discussion is about us. It’s about our specific project proposals and who we can influence to get our proposals accepted. This is okay to a point, but we spend very little time talking about the bigger-picture of where the client is at and their broader strategic needs.”

4. Sales ends at a sale

The concept of the sales pipeline was first developed for B2B product organisations with dedicated salespeople. In this context, once the sale is made the sale process ‘ends’ and accountability is then shifted to production or delivery teams. In many professional services, sales does not end at a sale. Delivery is critical for repeat purchase, on-selling and referral. Pipelines focused on new opportunities sometimes deflect attention from expanding the scope of current projects.

5. Awkward language

Many law, accounting and consulting professionals find the language used to define the key pipeline stages awkward and ambiguous. One law firm client recently relayed a story of protracted internal discussion around the definition of “Initial Contact”, and significant resistance to the term “Closing” as it implied some type of manipulation and counter to trust-based selling. While this is not a flaw in the pipeline concept per se, it is a common barrier to effective implementation.

A complementary/alternative approach

One approach I’ve successfully experimented with, is adapting the McKinsey Three Horizons Growth Model (see graphic below) and applying it to a firm’s strategic accounts. There are few points to note about this adapted model:

The axes are Time and Value created in the relationship i.e. not just revenue or profit generated by the firm
Strategic account managers need to focus on the three horizons simultaneously, not sequentially
Each strategic account plan should reflect a good balance of H1, H2 and H3 actions and opportunities
The traditional sales pipeline is not ignored but absorbed into the three horizons
Sales pipeline meetings become “Three Horizon Meetings” with a broader agenda
There is potentially much benefit is working with your client in creating and updating the key points under each horizon.

Your thoughts

I’d welcome your thoughts and experiences in using the sales pipeline. Does it work well? What are some of the limitations you’ve noted? Do you think the Three Horizon Model is a useful addition to your toolkit?

▶ Comment

business development, client relationships, innovation, key account management, planning, pricing, professional service firms, strategy management

What’s your sneaker strategy?

In Articles, Commentary on 31 March 2014 at 11:05 am

At a strategic planning workshop last week I retold the old sneaker joke…

When two hikers on a Southern African safari are suddenly confronted by a lion, one of them drops to his knees and starts to put on his sneakers. His friend says, “why you’re doing that – you can’t outrun a lion.” To which he replies, “I don’t need to outrun the lion, I just need to outrun you!”

This joke led to a fantastic discussion on the firm’s competition and their “sneaker strategy“, that is, how it intended to outrun its rivals.

For this firm, a leading communications consultancy, we identified five major competitor sets:

Boutiques and one-man-bands
Direct, comparable competitors with a similar service/staff profile and geographic footprint
Indirect competitors from adjacent sectors including the Big 4, engineering firms and change management consultants
Clients in-sourcing, DIY and captive suppliers (clients doing without or taking on more risk was also in this category)
Web-based products and providers, mostly off-shore, providing lower-priced solutions for process and commodity work.

For each competitor set we then went through an exercise trying to identify how the firm could beat the competition. In some cases, my client’s competitive strategy was confident and compelling, but in others it felt more like a wish and a prayer. The discussion was instructive in that it clearly identified that their current client relationships were the bedrock of much of their competitive strategy. It also revealed major knowledge gaps, especially how little they knew about Competitor Set 5.

Framing the discussion around, “how are you going to run faster than the other guys?” or “what do your sneakers look and feel like?” was particularly instructive in opening minds and challenging assumptions. It was much better than getting people to talk about positional advantages and distinctive capabilities. This textbook approach is okay but it often yields textbook answers.

When someone said, “they’re starting 20 meters back but running 20 km/h faster than us”, the discussion went on to how the firm could [i] slow their progress, or [ii] join their team, or [iii] shift the finishing line, or [iv] start a different race? It was clear that the level of the discussion was at least two or three notches above anything we had attempted before.

If your firm wants to win the race, or at least get a medal, I’d highly recommend this simple but effective planning tool. Feel free to change the joke to suit your context – a grizzly for North America, a tiger for India, an angry red roo for Australia or a Man United supporter for England.

▶ View 1 Comment

business development, client loyalty, client relationships, key account management, marketing, Measurement, professional service firms

The two sides of the client loyalty coin

In Articles, Commentary on 29 November 2013 at 12:32 pm

CASE ONE: I continue to book and fly with Qantas but I would not recommend them to others. My desire to accumulate frequent flyer points is stronger than my need for a more customer-focused airline.

CASE TWO: One of my clients has lots of raving fans but is struggling financially. He gets great feedback, but for various reasons, his customers are not spending more with him.

These two case studies support Don Peppers’ argument that there’s an important distinction to be made between attitudinal loyalty and behavioural loyalty. Client recommendation or advocacy, as measured by the Net Promoter Score (NPS) is really just an ‘attitude’, it is not really an indicator as to whether the client will give you more of their business. My loyalty to Qantas is behavioural but it’s not backed up by a positive attitude towards them. Put simply, there are two sides to the client loyalty coin. The goal in your firm is to have clients that give you BOTH a good rap and a good Dollar.

The New Client Loyalty Matrix

Plotting attitudinal loyalty and behavioural loyalty yields a New Client Loyalty Matrix:

So what are the strategic implications of this new Matrix? Here’s my initial list, but I’d welcome your thoughts and comments.

At a minimum, you should measure both dimensions of loyalty for all key clients. I think most firms will have reasonably good data on attitudinal loyalty, but many will just use historical financial performance at the indicator of behavioural loyalty. I’d argue that getting deeper insights into future behaviour and the true nature, degree and predictors of client commitment is a frontier few have forged.

Just measuring and focusing on NPS drives clients towards Quadrant VII. The goal should be to get your key clients towards Quadrant IX.

Most new clients start out in and around Quadrant V. It would be an interesting piece of analysis to track the progression of all new clients with say the first 18 months of being with the firm and see where they land up, AND WHY?

Most of your best referrers would be in Quadrant VII. It’s worth having another look at these and other fans with closed wallets and seeing whether there’s something the firm can offer them that would be of value. In other words, move them right on the Matrix. To illustrate this, one mid-tier accounting firm found that its traditional referrers were a happy hunting ground for the firm’s personal wealth management and SMSF services.

Your most vulnerable clients are those in Quadrants III and VI. They may be giving you most of their business at the moment but their heart’s not quite in it. Their spend with you might be as a result of a long-term contract or a company-wide directive such as global panel alignment. Relying on these type of arrangements for your client’s loyalty might have short-term benefits, but in my experience, it usually ends badly.

One needs to understand the specific drivers to get a client that’s in Quadrant V or VII and shift them over time to Quadrant IX. Providing great service, good value and being nice guys might get to Quadrant VIII but more structural or deeper strategic interventions would get you to IX. For example, negotiating some type of an incentivised retainer arrangement could get you there.

The best opportunities for growth will most likely will come from your competitors’ clients that are in Quadrants III and VI. Their behavioural loyalty to your competitor might be more to do with perceived switching costs than any other factor. If your offer includes paying for these switching costs then suddenly you’re in the game. As an example of this, one law firm got a prospect to switch by offering discounted “getting to know you rates” for the first three months of a relationship as recognition of these switching costs and to symbolise their willingness to invest in the relationship.

True commitment

In some industries, it is almost impossible to create truly committed clients. For example, servicing public sector organisations that are bound by strict probity requirements might make “Consider” the highest level of behavioural loyalty. I think the implications from the Matrix still hold up, you just need to adjust the scale to what’s possible.

Your call to action

Your immediate call to action is to take a fresh look at the questionnaires and discussion guides you are using to solicit feedback from your clients. Are they asking the right questions to adequately measure both attitudinal and behavioural loyalty? Are they providing insight into the things your firm needs to do to, the actions to be taken to get the client in or around Quadrant IX?

My other challenge to you is to plot all your firm’s top clients on the Matrix and stress test your whole client portfolio. Is it sustainable? Where are the points of vulnerability? What broader capabilities do you need to develop to get better at driving both types of client loyalty? What does your overall relationship capital base look like and what could you do to make it more valuable?

▶ Comment

business development, client relationships, key account management, pricing, professional service firms, Sales management

Smarter Relationship Pricing

In Articles, Commentary on 14 November 2013 at 2:01 pm

Written by Joel Barolsky and Colin Jasper*

Most pricing literature focuses on how to price a product or a discrete service. Far less has been written or researched on relationship pricing. This creates a significant challenge for those involved in pricing professional services as many arrangements between buyers and sellers are relational rather than purely transactional.

By relationship pricing we mean a pricing arrangement that covers multiple transactions over a period of time and where there’s some commitment from the client and from the firm to do business together.

The most dominant form of relationship pricing is discounted hourly rates. Many firms offer their priority clients discounted rates as both a symbol and a reward for a more valuable relationship. Similarly, many clients seek to lock-in discounted hourly rates for a period of time by setting up preferred provider panels via tender.

There are a number of problems with this approach. Firstly, there are few incentives for the firm to invest in a new service delivery model or in technology that could significantly reduce cost. Typically within the discounted hourly rate model, major cost reductions over time result in reduced firm revenue without improved profitability. While in the short-term this appears to benefit the client, in the long-term it significantly slows the pace of service innovation and the potential for step-change efficiency improvements.

Secondly, there are few incentives for the firm to provide breakthrough ideas and service that delivers a quantum improvement in the client’s business. With a discounted rate model, the only reward for truly outstanding results maybe the chance of a greater share of wallet or just a good vibe.

And lastly, the total system costs are often significant, especially in “second bite” panels where clients ask panel firms to re-compete for discrete projects. In these instances, the client has to go through a process of briefing firms, addressing issues, receiving proposals, assessing proposals and informing all parties of the outcome. Each of the panel firms has to invest significant time and effort in preparing and presenting their proposals. If one properly accounted for all this non-value adding activity by each participant for every transaction, it’s painfully clear that over time the whole arrangement is lose-lose.

Incentivised retainers

One form of relationship pricing that is worth exploring in more detail is what we call incentivised retainers. It doesn’t suit all circumstances or relationships but has a number of elements that set the scene for better outcomes for both the firm and the client.

At its most basic level an incentivised retainer has these characteristics:

An underlying intent to achieve the strategic objectives of both parties
A joint focus on ensuring quality outcomes
Agreed incentives for the firm to improve their performance on things that matter to the client (eg. end-customer satisfaction, speed, consistency, reduced rework, reliability, managed risk)
Agreed incentives for the client to help the firm reduce their costs
An efficient and effective process to deal with matters outside of the agreed scope
On-going processes to ensure a positive and constructive relationship.

Some interesting examples of these retainers or variations of this theme include:

A client whose primary focus was not to exceed their annual budget entered into a retainer arrangement with a single firm at 95% of the budget. To encourage the firm to find cost savings, the contract was offered to be renewed at 95% of the previous year’s budget. While both firms have the option of exiting the relationship at the end of each year, the arrangement has now been running successfully for several years.
A client gave one firm all the work of a particular type on a medium-term transparent retainer arrangement. This arrangement encouraged the firm to invest in new processes and technology that radically improved cost-to-serve. Having greater cash flow certainty allowed the firm to make these investments and to date it has yielded significant benefits to both parties.
A client wanted to encourage genuine competition for a long-standing incumbent firm. They had established a panel, however this had minimal impact in changing the buying behaviour of a broad range of instructors who had deep relationships with the primary provider. An innovative competitor entered into a retainer arrangement based on agreed resources in order to provide the client with a credible high quality, cost effective alternative to an embedded incumbent provider. Individual instructors could continue to use – and pay for – their preferred firm. Alternatively they could access the innovative competitor at no charge, as the retainer was paid centrally.
A client sought greater price consistency from one project to the next. An incumbent firm with significant historical data was able to analyse past projects, classify them into three categories, and provide a staged fee structure for each category. They then converted their pricing from hourly rates to task-based billing – at a price-point that was neutral to both parties – in order to meet the client’s primary objective.
Firms who put a proportion of their remuneration at risk, at the sole discretion of clients, based on their overall satisfaction across a range of projects over a set time period.
A client who wanted the flexibility to utilise a range of firms at different price points offered annual retainers to multiple firms. Selected firms were encouraged to work together on a range of projects to maximise the value to the client. Retainers were reviewed each year based on the client’s perception of the contribution made by each firm during the prior year.

Limited only by imagination

The opportunity to establish incentivised, relationship-based retainer arrangements is limited only by the imagination of the participants. While many firms offer creative arrangements, not all meet the specific needs of the clients. In our experience, the best arrangements have been created by firms and clients working together to find mutually beneficial solutions. What are the most innovative arrangements you have seen?

* Colin Jasper is Director of Jasper Consulting and one of the world’s foremost experts in professional services pricing

▶ View 2 Comments

business development, client relationships, executive leadership team, internal collaboration, key account management, professional service firms, Sales management, Training

The story of the leader, strategist and salesperson

In Articles, Commentary on 11 October 2013 at 12:37 pm

I was asked recently if there was ONE FACTOR THAT LED TO FAILURE of key client programs in professional service firms more than any other? My answer was that most firms don’t really understand the Relationship Manager* (RM) role and consequently make poor selection and development decisions. Their starting point is that the RM is a key point of contact for the client and a co-ordinator of client development activity. In my view, the starting point should be that the RM is a business builder with a profound strategic role, both internally and externally. They are the champions of building the firm’s relationship capital.

The way I see it, the RM is a blend of leader, strategist and salesperson. As a leader they inspire the internal client service team and all other stakeholders across the firm to collaborate and deliver on the promise. As a strategist they can think think big and dream large, beyond their technical specialisation, and craft a cunning game plan that will realise new value-creating and long-term relationship building opportunities. And as a salesperson they have fire in the belly to get things done and to influence fee-paying clients to say ‘yes’ more often than not.

As illustrated in the graphic below, when one of these characteristics is absent, the execution of the role is potentially compromised:

This idea has important implications for:

Selection – Most professional service firm tends to select RMs who historically have the best relationship with the client. While there’s obviously some merit in this, I’d argue that future growth of the firm-client relationship is more dependent on the RM being an effective leader, strategist and salesperson that any legacy factors. In reality this is often easier said than done given firm politics and client preferences. But I warn you, if you just persist with same old same old, don’t expect any fireworks.
Development – It is interesting to observe the emergence of a new breed of strategic account management training courses that are in effect leadership development programs with a client analysis and BD flavour. These courses have largely evolved because of the recognition of leadership capability being so crucial to the effective execution of the RM role. If your firm currently has a leadership development program in place, perhaps tailoring a module for the RMs in the group would be helpful. Similarly, if you’re running a sales/CRM skills initiative you should look to complement it with leadership and strategy elements.
Support – Your firm might not be blessed with an abundance RM Superstars to choose from. This potentially means fulfilling the role not through one person but a team of both Marketing/BD people and other practitioners. In this instance supporting the RM with the right people and getting the team to work effectively and efficiently is crucial. A good illustration of this comes from a mid-tier Australian law firm that decided to appoint a Client Relationship Partner or CRP (equivalent to RM) and a Strategic Account Manager or SAM for each of its key clients. The CRP had stewardship over the whole relationship but the SAM was a Senior Associate from another practice group also servicing that client. The SAM’s role was to do a lot of the ‘heavy lifting’ and support the CRP with leadership, strategy and sales activities. The firm adopted this model as its Marketing and BD Department comprised just one person.

Too many clients?

Perhaps the most profound implication of the Leader + Strategist + Salesperson hypothesis is rethinking how many GROWTH clients you should have. Maybe this decision should be based more on how many RM Superstars you have available (or could hire in) and less about the traditional client selection criteria of revenue, profit, service range, etc. Perhaps you should only have a Top 3 or 5 where you genuinely have those limited numbers of RMs with the capability to take a good relationship and make it great. Having 20+ GROWTH clients might give you a warm glow and receive wild applause from the equity holders, but frankly you’re probably setting yourself up to fail.

* The Relationship Manager is sometimes referred to a Client Relationship Partner (CRP), Client Relationship Manager (CRM) or Strategic Account Manager (SAM).

▶ Comment

A blog by Joel Barolsky of Barolsky Advisors

Relationship Capital

Posts Tagged ‘key account management’

Stress test your client strategy

Adding Adding Value

The key to cross-selling: know what you don’t know

20 workshop facilitation tips and secrets

Your loyalty levers: head, heart and ego