Till death do our client relationships part

Challenged by service commoditization, margin pressure, and higher client expectations, smart Business-to-Business (B2B) firms are rethinking their approach to business development and client retention.  Since it is increasingly difficult and expensive to acquire new customers, prudent B2B firms are concentrating on maximizing client retention and selling more products & services to them. Maintaining client loyalty makes intuitive sense given the 80/20 rule – 80% of revenue and profit comes from 20% of the clients.  High retention is also strongly correlated with high profitability, operational efficiency and likelihood to refer (i.e. the Net Promoter Score).  For example, loyal clients are more likely to purchase additional offerings, beta test new products and be easier to support.

Creating tighter relationships, however, is easier said than done. Deep connections are often elusive due to a variety of business and organizational factors such as poorly designed reward systems, strategic misalignments and misguided business processes.  How can firms overcome these challenges to get more out of their relationships?

One way is to design your product strategies, service plans and capabilities into your most valuable and highest potential relationships. Tighter integration between firms often leads to higher retention, share of customer wallet and customer satisfaction. For the client, they really get what they need, when they need it and how they need it. This relationship-driven model is best deployed through the sales & marketing functions using a 3-step framework: 

Analyze & Prioritize

Since every company has limited resources and time, leaders need to focus their efforts on identifying and understanding strategic accounts. To find these accounts, managers need to analyze the revenue and margin contribution of each client and then estimate what additional revenue can be garnered by cross or up-selling other products.  Managers should also drill down into these clients to understand their needs, behaviors and business drivers.  Estimating revenue risk is critical so companies need to have a good understanding of competitive offerings and the unique value they bring. Once this analysis is complete, clients can be grouped according to common needs, opportunities and characteristics.  This clustering would enable sales teams to identify cross sell opportunities, at-risk clients and accounts where higher pricing could be supported. 

Design & Implement

Richer relationships are fostered by tightly integrating a strategic client’s current and future needs within your firm’s delivery model (e.g., business development, support and product development functions).  This need not be an onerous task.  Often, firms have the right platform and structure in place but the wrong resources, policies and mandate attached to it. Companies must also ensure that their internal teams and partners are aligned in theory and practice with the vision and that their culture is conducive to a relationship-centric approach. For example, I have often observed how reluctant some sales representatives and channel partners are to asking clients two basic questions:  “How are we delivering on your needs?” and “Will you buy other products and services from us.”

Measure & Manage

To be successful, your relationship strategy needs metrics that can be collected, tracked and managed.  These metrics could include customer satisfaction, Net Promoter Score, cross-selling or retention rates.  Regardless of the choice, they should be part of the company’s strategic planning and performance measurement system  in order to guarantee internal alignment and proper resource allocation. 

Tight client integration must be a vital part of your corporate B2B strategy.  To make this happen, it pays to follow a systematic and cross-functional approach to relationship planning and implementation.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.


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