How to pick a winner?

Google

By Gary Peacock

As the excitement mounts for the Melbourne Cup, the horse race that stops Australia, many people are trying to pick winners. In horse racing you win, not by listening to what the owners say, you win by looking at form: what the horses have done.

“The spirited horse, which will try to win the race of its own accord, will run even faster if encouraged.” Ovid.

In business, with your customers, how do you pick winners? By winners we mean profitable and loyal customers. Similar to horse racing don’t listen to what customers say, you win by watching what customers do. In some markets when a customer says they want to partner with you, what they mean is they just want to reduce your prices to take some of your margin. If they really wanted to partner you would see some specific actions to show they were serious about building a stronger and deeper business relationship. Later we will explain what you should see if your customer is serious about being a partner.

Our first tip about picking winners is a technical one: segment your customers.  By segmenting we don’t mean what the marketing department means— segmenting using customer demographics and customer needs. We mean segment customers by their relationship with you.

We use a simple method: how important is the relationship with you to them; how much value do you deliver to them, as they see it. This gives us four possible segments:

Relationship (to them)	Value (To them)	Segment
Low	Low	Transactional
Low	High	Technical
High	Low	Relationship
High	High	Partner

To pick winners, once you segment your customers you must treat them how they want to be treated. Some people think winners can only come from the Partner segment. In our experience, winners can come from any of the four segments.

For the sake of brevity, we will discuss just two segments. Transactional customers are the toughest. They want your lowest price and fastest delivery. Nothing else. Spending time on relationships or spending time sharing technical information is wasting time and wasting money.

If you want to pick a winner with a Transactional account: make it as easy as possible for the customer to do business with you. Find ways to automate transactions and take all possible costs out of the relationship. Spend less time and money with them. Automate the transactions in ways which build barriers to your Transactional customer swopping to another supplier. Can you create unique connections to their systems and processes?  

Some of your people will resist automating transactions and talk of moving this account to another segment. In our experience, it is tough to move a Transactional account to another segment. If you are going to assign time, money and people to moving an account from one segment to another, then try to move a Technical account to a Partner account. It’s easier and more likely to succeed.

So, how about customers in the Partner segment? Typically, your staff want to put more of your customers in the Partner segment than belong there. The killer question is: how much of their time, money and people are they investing in the relationship, compared to your company? If you have been investing far more in the relationship for more than two years, then this customer does not belong in the Partner segment.

If your customer is serious about being a Partner, then what should you see? Over two years you should see more of their people, more senior of their people attending more meetings to discuss more strategic issues in their business.  If you see this, you have picked a winner.

For more insights into segmenting customers look at: http://www.gordianbusiness.com.au/strategic-account-management/ or contact us on +61 2 9450 1040 or email gary@gordianbusiness.com.au. Please share your comments below and subscribe at the top right of the page.

Are you fostering the 6 kinds of trust in your strategic relationships?

Google

By Peter Browne

The 1991 movie “Proof” - starring Hugo Weaving and Russell Crowe had a simple message: whether or not you love someone is based not on what you say but on what you do. It’s the same in business relationships. Over time your business partners and customers evaluate you and your company by your actions. 

To create and sustain strategic customer relationships you and your account team must focus on continually learning from relationships, and how to foster all of the six kinds of trust:

Honesty - to be free of deceit; truthful and sincere. If you are found being dishonest with an account the relationship won’t recover. Ever. Be honest even if it may cause short-term issues.

Fairness – treating people equally without favouritism or discrimination. Increasingly companies work with others who share the same values. Make sure you walk the talk.     

Openness – not concealing one’s thoughts or feelings; frank and communicative. You are an important source of knowledge and insights for your strategic accounts. They value what you think, so be proactive and speak up.

Credibility – able to be believed; convincing. People work with you and your company because you are experts. Credibility grows as your knowledge and ideas create better results for your account.

Reliability – consistently good in quality or performance. Do what you say you will do and deliver on your promise. Keep working hard to earn the right to stay a key partner.      

Confidentiality – able to keep a secret. Strategic customers will tell you critical information. Information about their business, the industry and your competitors. Treat such information as it was intended and never take the passing on of confidential information for granted.

Trust is not something you can conjure up – it must be earned. Also trust is like the share market. It increases gradually over a long period. However it only takes one event that creates a loss of confidence for trust to crash. But unlike the share market trust often doesn’t recover. For strategic business relationships this means losing a major contributor to revenue and profit, and your reputation.

To learn how to build trust in your strategic relationships click here: http://www.gordianbusiness.com.au/strategic-account-management/ or contact us on +61 (02) 9450 1040 or email peter@gordianbusiness.com.au. We would love to hear your views so please add your comments below and subscribe to our blog at the top right of the page.

Don’t just retain your key accounts – Grow your revenue and profit as well!

Google

By Peter Browne

One critical aspect of managing accounts more strategically is to retain them by increasing barriers to entry against competitors. However, what companies’ often overlook and misunderstand is the potential to grow revenue and profit.

Typically when companies begin a Strategic Account Management program, their objective is retaining their most important accounts. This includes defending share against aggressive competitors, reducing margin erosion, and creating a compelling value proposition that differentiates them from the market. However managing accounts more strategically also helps grow share of wallet and grow margins.

This is supported by the Strategic Account Management Association's (SAMA) 2012 Report on Current Trends & Practices in Strategic Account Management.  SAMA surveyed 700+ global respondents across 30 industries. In the report, SAMA  noted that “the average revenue growth in the strategic accounts surveyed in 2011 was 14%, up 2% from 2009”. Even with low growth in the economy, these accounts are beating the economic trend. SAMA reported improved profitability – showing growing revenue was not caused by discounting prices. If improved profitability was not enough, customer satisfaction scores also increased.

These findings make sense. Companies who manage accounts strategically understand their customers more deeply. So, they can identify problems that need solving for their accounts. Then they can solve the problems with their products and services, or find other ways to help their account solve the problem. Solving problems creates new revenue opportunities that would otherwise not have been obvious. Opportunities identified in this way are also unlikely to be offered to the market. So typically companies achieve better than average margins.

Also, companies that segment their customers using best practice segmentation tools can identify the small accounts most likely to grow. Small but fast-growing accounts get less focus from competitors, so you benefit from revenue growth and good profitability. In addition, you can position your organisation as a critical business partner. As a partner, you can provide fast-growing companies external expertise and insights to manage the challenges they encounter during their growth.  

So when you consider a Strategic Account Management program, don’t just view the initiative as a way to defend key accounts. Also consider the potential to grow revenue and grow profit from the accounts that are most critical to the future of your company.

We have work with many companies in many industries and many geographies to help retain key accounts and grow revenue and profit. If you would like to discuss how we can help, please contact us on +61 2 9450 1040 or www.gordianbusiness.com.au.

The role of the Account Manager

By Peter Browne
Many companies speak about their Account Manager (alternatives titles include GAM, SAM, KAM and AD) as a single point of contact. Whilst initially this sounds like a good idea for the company and the customer, on deeper assessment it does not do the role justice, and is inviting failure by setting up the relationship to be managed this way.

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With your best customers, should you Persuade or Negotiate?

When consulting, clients often ask when should I negotiate with my best customers? To answer this question we need to understand the difference between persuasion and negotiation.
By Gary Peacock

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