STRATEGIC SELLING # FIRST WORK HARD FOR THE CUSTOMER'S INTEREST

 The market is flooded with an array of  slogans to brand Sales Training.  Some call it “hi powered” selling; some call it “results selling” All have one thing in common…they  seem to think SELLING  is a bag of tricks you play on the prospect. Nothing can be more self-deceptive - the prospect has a mind of his own and in today’ digital age the purchase agent is better informed than most sales people. 

Could we aim at something different could we consider selling as some kind of helping relationship were we partner the customer bring value to his business??? 

CREATE A TRUSTING PARTNERSHIP 

Prospects want to be part of the solution. Think about working with your buyer not just to “sell” to them, but to help them achieve a goal with your help. This is the essence of collaboration: working together to achieve mutual goals. Like “helped me avoid potential pitfalls,” this one leads to trust. Set and meet expectations, don’t sugar coat anything, and don’t hold anything back, and the Prospects will trust you and appreciate your advice and knowledge.

Another trend in selling is to diminish the importance of relationships. Do so at your own risk. I’m not suggesting that connecting with a buyer personally represents the totality of a strong business relationship—there’s a lot more to it—but making a connection with Prospects person-to-person helps. The age old saying “PEOPLE BUY FROM PEOPLE WHOM THEY LIKE” is applicable to OTC sales like housewives as much a big-ticket selling like  technology products and buying decision for project sales 

KEY ONE:

BE A PROBLEM SOLVER & KNOWLEDGE SHARER

There are two parts to this one. First, you have to give the buyer an idea of what the end result will be. Second, you have to persuade them that these results are achievable and not just a pipe dream.The Sales professional who win bring ideas to the buyer’s attention that they perceive as new. They give Prospects ideas that can change their thinking. Also, note that true sales champions  don’t just do this almost three times as often than second-place finishers. 

DEPTH OF KNOWLEDGE

In all sales positions, the company has the obligation to educate you about the specific product you are selling. The company operations manuals will provide you with technical skills and product knowledge. This knowledge however, rarely goes beyond that required to describe competently the product to a client.

I recommend that you set aside time on a regular basis during which you can deepen your knowledge (and hopefully your enthusiasm/love) of your field.

Your responsibility as a professional includes much more than learning elaborate descriptions. If someone Ire to say to you, "Tell me about the field you are working in," could you give them an interesting, in-depth explanation of how it started and where it is today? Perhaps you think that knowing the history or theory of your industry is not necessary for your day-to-day selling. The fact is that with an increase in knowledge comes an increase in confidence and authority. The result: longer lasting client relationships and more sales.

BREADTH OF KNOWLEDGE

It's also important to develop your ability to discuss a broad spectrum of subjects. Having depth of knowledge in your specific field without knowledge in a wide variety of topics puts an automatic limit on the number of people you can relate to and who in turn can relate to you. This is a serious handicap for a salesperson.

Anything worthwhile takes effort and this includes expanding your conversational horizons. A fast, concise and convenient way to know what's going on in the world is to subscribe to a news magazine which will expose you to science, politics, the arts, international affairs, etc. It is not necessary for you to have an opinion on all the issues, but being informed on them and keeping up to date by scanning a good daily newspaper will give you confidence and expand your conversational effectiveness. 

KEY TWO BUILD TRUST

DIG DEEP TO STUDY PROSPECTS PROBLEMS

Interestingly, we found that Sales professional don’t need to diagnose needs as much as they have in the past. However, Sales professional still need to demonstrate that they “get” what the buyer wants to do, where they’re going, and what they want to achieve.Make sure your buyer sees how what you’re selling will help them achieve their desired outcomes. Be honest with Prospects about what can go wrong after they buy. Do this, and it not only builds trust, but also sets an expectation of what life will be like after they purchase. Set the right expectations and not only will you win more sales, you’ll also build trust and maximize repeat sales.

CREATE A VALUE PROPOSITION FOR PROSPECT BUSINESS

Overall value from the company is superior to other options: There are two important parts to accomplishing this. First, you have to be able to maximize the buyer’s perception of value of whatever you’re selling. Second, you have to be able to position it favorably against your competitors, and potentially against the buyer deciding to do whatever it is you’re selling on their own.

CONCLUDING 

No matter how great your conversational skills may be, your efforts will be completely wasted if you are not sensitive to your clients needs. It is crucial to be aware of your client's "silent messages" which often reveal the real meaning behind the verbal ones.

I recommend that you study body language and try to be empathetic. Observe what people do with their bodies in different situations. Put yourself in their shoes so that you can be open to what's happening with them, but do it intellectually rather than emotionally.

For example, by studying body language and being empathic, you will be able to acknowledge when your client is too busy at the moment (foot tapping), and arrange to come back another time when they are more receptive. 

YOUR ATTITUDE IS SHOWING

People don't seem to see that their opinion of the world is also a confession of character. In other words, if I think this is a miserable world to live in, then I live in a miserable world...and probably make it miserable for others to live in too.

Our attitudes are reflected in everything I do, including relationships with our clients. Our attitudes elicit different responses from our clients, so if I see them as jerks that can be manipulated, their responses will be entirely different than if I see them as fellow business people with whom I have a lot in common.

I can never be truly professional salespeople unless I develop a sincere respect for -- and healthy attitude toward -- our clients. Try thinking of them as valves through which your energy flows rather than as dams (obstacles) who will stop your progress. Only your positive attitude toward them will ensure the mutual trust, which is so vital to doing business successfully.

STRATEGIC ACCOUNT MANAGEMENT BEST PRACTICES

A sales strategy is a combination of the methods and tactics that your sales reps use strategically to close deals. It includes planning out who you’re going to sell to, how your team members will engage with them, and what the buying process will look like.

 For B2B sales, it’s important to consider both an inbound and outbound sales plan. An inbound sales strategy is needed when new leads come organically into your pipeline via a form on your website, email, or free trial signup. The tactics your team uses when a new inbound lead arrives should align with the marketing strategy. That way, new potential customers can flow easily through the sales funnel and become qualified leads

.An outbound sales strategy involves actively searching for and engaging with potential customers. Sales leaders identify the right tactics to engage with prospective customers through cold email, cold calls, social selling, and more.

A great sales strategy includes a bit of both, but the best option will depend on the market  you sell to and your team’s capabilities.

DEVELOP YOUR COMPETITIVE ADVANTAGE

In order to develop your competitive advantage, you need to know what else is out there. The odds are good that you’re not the only one selling your specific product or service. So, it’s critical to be able to explain the benefits or results your customers will receive from purchasing your product or service that they will not get when purchasing the product or service of your competitor.

What are your competitors’ claims? What are the benefits they’re selling? How is what you’re offering different? You should be able to express why people should choose your product or service over others on the market if you want to be growing sales. 

 

RIGHT ACCOUNT SELECTION IS HALF-WAY TO SUCCESS

A winning strategy hinges on being selective. Make sure you're picking the right key accounts -- and you're applying the same criteria to each one . Periodically assess your selection criteria. Are your current key accounts generating as much ROI as you anticipated? If not, it could be a sign you're using the wrong measures. Regularly review your key accounts to verify they still require additional time, energy, and resources. If they perform as expected to justify the resource allocation, then continue on. However, if for some reason they are underperforming or the account no longer feels like a good use of additional resources, you may want to consider scaling back.

USE LEAD SCORING TO PRIORITIZE YOUR PROSPECTS

The best salespeople have a plan to develop the highest quality and quantity of prospects that can and will buy within a reasonable period of time. Prospecting is an essential part of successful sales strategies and something you need to prioritize if you want to increase sales. If your sales strategy is lacking this critical component, or your prospecting tactics are falling short, I’ve created an essential prospecting checklist that will help you focus your attention on the prospects that will have the maximum return. 

After fully qualifying your sales prospects, lead scoring will help you prioritize your prospects based on the strongest possibility for closing the sale quickly—before even beginning your outreach efforts. Lead scoring is a process of ranking inbound leads on a scale of 1 to 100 based on their characteristics and behaviour. Ranking factors might include: Job title or role, Specifications that indicate intent, Department, Company size etc. Work your prospect list from top to bottom to prioritize time on the highest-scoring leads with the greatest potential for conversion.

BUILD A  DEDICATED SALES TEAM

Even the best KAMs can’t get the job done alone. Ideally, the KAM role is not performed by someone who has sales rep duties on their plate simultaneously. Assign dedicated strategic account managers (or KAMs). These employees should be separate from Sales, if possible.

Build cross-functional teams around each account manager. To serve your clients well, you'll need a range of skills, disciplines, and expertise. Each account manager should have a cross-functional support team to support the proper execution of deliverables related to the client’s account. These teams should include a range of skills, disciplines, and expertise to serve your clients well.

If possible, name an executive sponsor to each account. They can play a major role in getting the necessary resources, connecting with the C-suite at the target account, and providing high-level guidance.

 

TRACK THE PROCESS METICULOUSLY

 

Set a cadence for internal account reviews. Depending on the size of the team, the value of the account, and the dynamic of the relationship, these might be weekly, monthly, or quarterly. Consistently measure the account's engagement and loyalty. Both should trend upward. Schedule recurring check-ins with the account to get their feedback, address any issues, and find areas for improvement.

Keeping track of key sales metrics like conversion rates, team activity, customer lifetime value, profit margin, and sales velocity will help you see how your sales strategy is working, and whether you need to adjust. Ongoing sales analysis is how you'll monitor your team's overall performance and the effectiveness of the strategies you're implementing.

 

SALES BEGINS AFTER THE SALE -

“Once a customer, always a customer” — this should be your motto if you want to learn how to increase sales in business. Once a customer has purchased your product, it should not be the end of your interaction with them. Focus on maintaining a strong relationship with your customer by making them feel valued so that they stick around, and get others to become customers as well. A forever customer will do more for your business than 10 one-time customers.  

Everyone loves a good deal, and when they feel like they have the inside scoop on an upcoming sale, or receive early access, your customers will develop greater trust in and loyalty to your business. They may even buy more because of it. This doesn’t only go for sales and special offers. Keep current and repeat customers in the loop with upcoming launches and business news too, and soon, they’ll develop a vested interest in the business.

Squeeze hard to get the maximum wallet share. You should be continually be looking for ways to up-sell customers so that they buy more each time. What products or services will complement what they are already purchasing? Once you prove your value and have loyal customers, they will likely say “yes” to you more and more. 

LEVERAGE TECHNOLOGY

Use a CRM to keep track of your communication with the account stakeholders and give everyone on the account team visibility into what's happening. Implement an email tracking and notifications tool to know exactly when your recipients open your emails and click any links. Use LinkedIn (either the free version or LinkedIn Navigator) to monitor changes in your account's market and industry, strategic shifts, hiring and firing decisions, and more. Set up calls and appointments with a meetings tool to make the process seamless for the attendees. Invest in a video platform so you can create personalized videos for prospecting and relationship-building. You can also try investing in a video platform such as Loom so you can create personalized videos for prospecting and relationship-building.

 

Market content on multiple channels. As part of your ongoing strategy to increase sales, you should be continually seeking creative ways to improve your advertising and promotional efforts to reach new customers. There are so many mediums out there including Twitter, Instagram, Facebook, LinkedIn, TikTok, YouTube, email, blogs, podcasts — even traditional print materials such as magazines and newspapers — that can get your message and product out to the right audience.

 

CONCLUDING Be Helpful at the Core of Your Sales Strategy

The best way to win trust is by being genuine and helpful throughout the sales process. The best salespeople have always been helpful. When you're selling a product or service, it's hard to go wrong if you're genuinely looking to help the other person. That's really when selling becomes more than just sales. It becomes all about building a genuine, meaningful relationship instead of about just selling what you have to someone. By thinking of yourself as a proactive problem-solver for each prospect you engage with, you can shift your own perception of the role you’re playing in the sales process from seller to consultant. If you set out with the primary objective of helping your prospects, you’ll naturally be leading them to the best solution for their business. A good sales strategy is long-term; there’s no substitute for making a positive lasting impression. Don’t miss out on a future potential sale because you weren’t helpful.

 

Most sales campaigns falter at the DELICATE negotiating phase.... this might make or break the sale or else squeeze your margins dry

NEGOTIATE  LIKE A SALES CHAMP

 How many times have you heard:

• "You've got to drop your price by 10% or we will have no choice but to go with your competition."
• "You will have to make an exception to your policy if you want our business."
• "I know that you have good quality and service, but so do your competitors. What we need to focus on here is your pricing."
• "I agree that those special services you keep bringing up would be nice, but we simply don't have the funds to purchase them. Could you include them at no additional cost?" 

Every time you hear statements like these, you're in the middle of a difficult sales campaign. How you handle that negotiation will determine whether or not you close the sale and how profitable that sale will be.

Every salesperson eventually must confront the following situation: You want the deal badly. You need the business. You've been suspecting that your price is too high to begin with. So what do you do? You lower your price rather than negotiate.

Many salespeople are afraid to stand by their price structure because of a single mistaken assumption: "If I refuse to negotiate my price, I'll lose all my customers." The reality is just the opposite. If you aren't prepared to defend your price, your customers will lose respect for you. Here are ten tips that will help you to negotiate the price you deserve.

In order to give you a real edge every time, I have listed below some key points taken from my sales training seminars @ the Bombay Chamber, Indian Merchants Chamber, etc

.

Don't Believe Everything You See and Hear

Part of a good salesperson's skill is to learn to read people and situations very quickly. However, when it gets down to negotiating, you have to take everything you see and hear with a grain of salt. Buyers are good negotiators, and thus they are good actors. You may be the only person who has what she needs, but everything she does and says, from body language to the words she uses, will be designed to lead you to believe that unless she gets an extra 10% off, she's going with the competition. Be skeptical. Be suspicious. Test, probe, and see what happens.

DEVELOP THE PYSCHE OF A NEGOTIATING-CHAMP

Finally, and most important, be patient. Sales is a high energy, fast moving business. Patience is one commodity that is in relatively short supply, but if you're impatient in a negotiation, you'll lose your shirt. If I'm negotiating with you and I know that you're impatient, I will hold out just a little longer, no matter how desperate I am to make a deal with you. As long as I know you're in a hurry, I'll wait.

¨      Do not underestimate your power. Most people tend to have more power than they think. Only by making a systematic analysis of power can you understand your strengths. Your base of power rests on a foundation of more than just competition or financial matters. Commitment, knowledge, risk taking, hard work, and bargaining skills are also real sources of power.

¨      Do not assume that the other party knows your weaknesses. Assume that they do not and test that assumption. You may be better off than you think.

¨      Don’t be intimidated by status. We are so accustomed to showing deference to titles and positions that we carry our attitudes to the negotiating table. It is well to remember that some experts are superficial; that some people with PhD’s quit learning years ago; some people in authority are incompetent; a specialist may be excellent in their field but without skill in other areas; learned people, despite high positions of power, sometimes lack the courage to pursue their convictions or have none. There is as much danger from having a “little-shot” complex as a “big-shot” complex.

¨      Don’t be intimidated by statistics, precedents, principles, or regulations. It’s 2010, some decisions are made on the basis or premises and principles long dead or irrelevant. Be skeptical. Challenge them.

¨      Do not forget that the other party is negotiating with you because they believe there is something to gain by being there. You may discover that this negotiation, no matter how small it is, is part of a larger framework in the other party’s objectives. This alone may provide you greater bargaining power than is apparent from the situation. Be positive in your approach. Assume that the other party wants agreement as much as you do. If they don’t, learn why.

¨      Don’t emphasize your own problems or the possible losses to yourself if deadlock occurs. In all likelihood, there are constraints on the other party’s action as severe as your own. Concentrate on their problems and issues. These are your opportunities to find routes to agreement.

¨      Most sales offers will require some concession making. Don’t set your initial demand near your final objective. There is sufficient evidence to conclude that it pays to start high. Don’t be shy about asking for everything you might want and more. Many times your demands may be too modest, or too easy to achieve. The other party may not know what they want or may have a set of values quite different from your own.

¨      It is a mistake to assume you know what the other party wants. It is far more prudent to assume you do not know, and then proceed to discover the realities of the situation by patient testing. If you proceed to negotiate a deal on the basis of your own untested estimates, you are making a serious mistake.

¨      Never accept the first offer—many people do. There are two good reasons not to: First, the other party probably is willing to make some additional concessions. Second, if you do accept the first offer, there is a chance the other party will have the feeling that their offer was foolish. They may find ways to spoil the agreement later. In either case, the negotiator who takes the first offer too fast makes a mistake.

¨      Never give a concession without obtaining one in return. Don’t give concessions away free or without serious discussion. A concession granted too easily does not contribute to the other party’s satisfaction nearly as much as one that they struggle to obtain.

¨      Get Something in Return for Your Added Value…What if you discover that the buyer wants to be able to track his expenditures for your products or services in a way that is far more detailed and complex than is standard for your industry? What if your account tracking system is set up in a way that you can provide that information at essentially no cost to you? Often the salesperson's overwhelming temptation is to jump in and say, "Oh, we can do that. That's no problem." Before you do, however, think about your options. You could throw it in as part of the package and try to build good will. Or you could take a deep breath and try something like, "That's a difficult problem that will require some effort on our part, but it's doable."So be patient. Take the time that you need, don't rush to give in, don't show your anxiety, stay cool and don't panic. Negotiation is a process and a game. Use the process and play the game. You'll be astonished at the difference that it makes!

best of luck

dr wilfred monteiro

www.synergymanager.net

SEVEN STEPS TO KEY ACCOUNT MANAGEMENT SUCCESS

KAM is a radically different organizational process used by business-to-business suppliers to manage their relationships with strategically-important customers; sadly, many KAM implementations fail and are abandoned. 

Key account management (KAM) is one of the most important changes in selling that has emerged during the past two decades. KAM is a radically different organizational process used by business-to-business suppliers to manage their relationships with strategically-important customers, and it produces measurable business benefits.

Not surprisingly, smart suppliers are keen to implement KAM. But, sadly, many KAM implementations fail and are abandoned. In other cases, suppliers find that they have to make big changes to the KAM programs to get them to function.

The good news is that many of these failures are unnecessary. KAM is a major change, but the chances of success can be dramatically increased by following the seven steps described here:

 

Step One: Recognize that KAM is an organizational change, not a sales technique. 

KAM implementations take years, not months. The companies which have implemented KAM most successfully have been those who thought of it as a change in the way they did business, not as something that is confined to the Sales department. Suppliers who fail at KAM tend to think of it as being an initiative within the sales department. This approach is doomed to failure. KAM is a commitment to work differently with certain priority customers and, to fulfill this promise, other supplier divisions have to understand and support KAM. One obvious example is supply chain management. If a key account is promised priority access to urgent products or services, it is Operations who can provide that, not Sales. Best-practice companies choose to train their operations and supply chain people in KAM as well as their sales people.

 

Step Two: Get high-level buy-in. 

An organizational change of this magnitude requires high-level sponsorship, preferably C-suite. The best companies, such as Rolls-Royce and Siemens, have high-level sponsors for each of their key accounts. Members of the main board of Siemens, including the CEO, each sponsor a number of key accounts and visit them regularly.

 

Step Three: Appoint a KAM champion. 

Once the organization has accepted that it is embarking on a major change, and senior managers understand what KAM is and have bought in to it, the next step is to find someone who is going to champion the KAM program and drive the implementation. Usually, this will be someone high up the organization, and it helps if they report directly to the top management, at least for the duration of the project. That way, KAM gets onto the top team agenda and the champion gets the support they need to make changes. Your KAM champion should be passionate about KAM and needs to have good influencing skills and great energy levels. Tetrapak has two KAM champions who travel the world to ‘sell’ the message about KAM within the company.

 

Step Four: Identify your key accounts — carefully. 

To get the KAM program started, you need to identify some key accounts, and you need to develop an offer that differentiates them from the rest of the customer base. Good advice here is to start small. It is easier to add customers to your KAM program than it is to ‘demote’ customers once you have told them they are key accounts. Generally, the number of key accounts should be small. Our rule of thumb is somewhere between 5 and 25 key accounts. Even major corporations like Xerox keep the number of true key accounts below 100, and they have far greater resources than most and have been practicing KAM for years. Be clear about what defines a key account and stick to that. Don’t give in to pressure to add certain customers to your key account program just because they have been customers a long while, or they are golfing buddies with the CEO.

 

Step Five: Appoint and train your key account managers. Many organizations make the mistake of simply moving their best sales people into key account manager roles. That’s a mistake, because KAM is about changing the way people work — it is not just a sales technique. Converting your best sales people into key account managers might mean you’ve put a bunch of people into a role they are not really comfortable with, and you have just lost your best sales people as a result. In fact, there are technical people and project managers who can make great KAMs. You need to think about what the role requires (a broad range of skills, including financial, consultative, planning, interpersonal and influencing skills) and then pick the right person for the role. Don’t forget to train them: Very few people come into a KAM role with all the skills they need.

 

Step Six: Set the right metrics. 

What gets measured gets managed. If you have tasked your key account managers to build long-term relationships with their customers, don’t carry on rewarding them as though they were doing a standard sales job. Traditional sales metrics — such as the amount of time spent with the customer — are irrelevant to KAM. Many key account managers spend much of their time inside the supplier company, managing things on behalf of the customer. If you pay your key account managers for top line revenue, expect them to focus on short-term sales and not on building longer-term value. The right metric for a key account manager is the lifetime value of their customer (the customer bottom line), not top-line revenues. This is an important point: Key account managers typically work on bigger deals for bigger clients. Some of these deals can be big enough that there would be real damage to the supplier company if they went sour. So, the key account manager needs to understand the cost to serve and not just the top line.

 

Step Seven: Benchmark and build. 

Your key account program should not be static over time. Instead, you should keep it refreshed. One way is by moving new key accounts into the program (and occasionally moving former key accounts out if they no longer match up). Another way is by actively seeking best practice, both within and outside your company. Hewlett Packard continually reviews its relationship with customers, reflecting changes in what is important to them. PwC has an internal committee that actively benchmarks its own and other KAM programs in a search for best practice. Remember, you don’t have to be ill to get better.

KAM can have a profound effect on the performance of the supplier organization. But to get there requires a different way of working. These seven steps will help your organization make the transition to KAM successfully. It won’t be easy, but it will be worth it.

KEY ACCOUNT PLANNING - key to strategic selling in testing times.

You can effectively grow your business "garden" when you know where to prune the bushes and trees that represent your customers.

Increasingly, large companies mandate that their suppliers set up "key account management teams" that specialize in selling and servicing their needs exclusively and globally. Such account teams are often headed by a high-level executive, sometimes a vice president. Big Companies are spending enough money with their suppliers that they are in a position to virtually demand such response. On initial glimpse, some supplier companies  may see this as an unreasonable requirement from sometimes difficult customers. A closer look, however, reveals that, executed properly, there are significant advantages in such arrangement for both buyers and their vendors.

Key account management (KAM) is essentially the focusing of a supplier company's sales, marketing and service resources, through a select global team, on key customers. Such customers are deemed vital to the supplier's future because of their potential large volume purchases through an extended time. Key account management is a strategic sales/support tool that facilitates the development of an effective, long-term customer relationship or strategic partnership.

The advantages to the customer are:

• Globally expanding customers want to achieve consistency in selection and speed up qualification of equipment and materials, thereby reducing costs of support, training, inventory, etc.
• Customers want to develop purchasing leverage and drive vendors toward worldwide pricing within worldwide purchasing agreements.
• Customers wish to maximize their ability to transfer processes anywhere in  India rapidly and at a minimum cost.

While most customers will not publicly admit it, central supplier teams facilitate communication within the customer company country-wide; indeed, "peddler mail" may be faster than intra-company e-mail and possibly more effective.

There is a downside in the KAM scenario for large customers: Their insistence on dealing exclusively with key account teams may cause them to overlook new and exciting technological advances that so often flow first from smaller companies without KAM teams in place for key customers.

KAM also offers distinct advantages to supplier companies, including:

• Attainment of in-depth understanding of customer specifications, support requirements and other needs.
• Maximizing the likelihood of selling to all or most of a key customer's specifications. This is crucial because much money and time is needed to qualify a purchase item like tools, electronic components etc. These long qualification cycles emphasize the need to know the customer's present and future requirements accurately, and also provide opportunities to adjust effectively to changing customer requirements.
• Full utilization of all supplier resources without costly duplication of effort.
• Creation of leverage among a customer's specifications. Positive product performance in one contract consignment, can assist in moving toward success in other specifications of the same customer.
• Keeping professional relationships when a customer executive moves to other assignments in other consignment.
• Gaining insight on customer technology usage, corporate culture and the driving forces country-wide.

Smaller vendors are at a significant disadvantage vis-a-vis their larger competitors, even it they have the greatest "whiz bang" in the world. Through their key account management teams, larger customers can search company-wide and worldwide for their own as well as competitive performance flaws and other opportunities to meet customers' needs at the expense of competition. All of this ultimately benefits the customer.

There are some downside issues for suppliers to large key customers, including:

• The leverage of the large key customer on price, terms and support items.
• The supplier's need to learn to work in a matrix management environment. This means dealing with executive immaturity ("I want it now!"), limited discipline for setting and executing corporate priorities, and managing "turf consciousness." These factors have proven fatal to more than one corporate effort to adopt key account management.

Categorize Your Customers

One simple way to determine which customers you need to reassess is to categorize them by industry or type and list them from highest to lowest profitability (not revenue) to your business. One financial services firm did this and realized that the source of greatest profitability for their company was people who owned their own business. This was followed by higher net worth persons, either retired or still working. These types of clients needed the broader and more custom array of financial products and services that the firm offered. At the bottom of their list was lower net worth people who needed rudimentary tax or estate services. As a result, this company decided they wanted to focus their business on the more fulfilling and more profitable business endeavors. They consequently decided to refer the lower-end business to a colleague in their industry who was best equipped to handle this type of business. By doing so, this company not only lifted a sizable burden from its limited capacity, but also created a strategic partnership with a colleague where there would be good opportunity for cross-referral.

This financial service company also took another significant step. They rated each new prospective client using a number of criteria, including potential profitability, which would tell them whether they would be willing to take on that new client in their business. This allowed them to focus their business’s products and services on the clients who would fit best with both what their firm could offer and how they liked to work, and be the most lucrative for them.

Strategize Your Positioning

When a manufacturing company categorized their customers, they discovered, to no surprise, that the no-frills commodity end of their business was the least profitable. Their ultimate desire was to guide their business to customers who wanted value-added services for which they would pay additional money (e.g., custom product design, warehousing, purchasing and packaging of product accessories, etc.). However, they just could not say "no" to their commodity-business customers, some of whom had been loyal customers since the day the company was founded. To resolve this dilemma the company decided to use product price and delivery as their tools for pruning unwanted business. If they could not easily fit the commodity business into their production schedule then they raised their price somewhat, or extended delivery times. Rather than say "no", this company took low-end business only if the customer would accept these price and delivery adjustments. 

As a rule of thumb, it’s good to examine the bottom 10-15% of your business’s customers, in terms of profitability, and then create a consistent and doable strategy for dealing with all those customers. One service firm gracefully contacted every customer in that firm’s bottom profitability tier. They told each of them where their service firm was heading and how that customer could fit into that possible future, if they so desired. Then they gave each customer a choice to stay with the firm, by moving to higher end products and services, or to take their business to a complementing firm that would better handle their lower-end business. As a result, a number of unprofitable customers left on good terms, and others chose to upgrade their products and services and stay with the firm. This ended up as a "win-win" approach for all.

You can effectively grow your business "garden" when you know where to prune the bushes and trees that represent your customers. By cutting or clipping here and there, and being deliberate about removing any unprofitable customers, or ones that are draining your company’s resources, you have a greater chance of surviving and even thriving in today’s ever complex and more demanding marketplace.

With best wishes

Dr Wilfred Monteiro