Wesley Johnston and Karl Hellman: Assessing the strategic relationship - presented by smm...

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Assessing the Strategic Relationship:How to Dance the Dance Your Customer Wants

Karl HellmanPresident,Resultrek

Dr. Wesley JohnstonProfessor of Marketing,Georgia State University

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About The Presenters

Dr. Wesley J. JohnstonThe Executive Director of the Center for Business and Industrial Marketing at Georgia State University (http://robinson.gsu.edu/marketing/Centers/CBIM/index.htm), Dr. Wesley Johnston is Professor of Marketing at Georgia State University. Dr. Johnston is one of the leading experts in B2B marketing and sales management. He is author of a textbook on Sales Management and is currently writing Strategic Selling Playbook (co-authored with Karl Hellman) based on his workshops and consulting practice in strategic selling. About Karl HellmanKarl Hellman is President of Resultrek, (www.resultrek.com) a global marketing consulting firm dedicated to creating great marketers and sales people. Karl is also Executive in Residence at the Center for Business and Industrial Marketing at Georgia State University. Karl's most recent book, The Customer Learning Curve, explains the power of The Customer Learning Curve through 24 "real life" marketer examples: scenarios readers can call their own. Karl is co-authoring Strategic Selling Playbook with Dr. Johnston.

Strategic Account Management:Assessing the Strategic Relationship

A webinar for SMMConnect

Wes JohnstonKarl Hellman

Center for Business and Industrial Marketing

Georgia State University

5

Increasingly, a greater percentage of revenue comes from the few,

largest customers

Strategic Relationships are becoming more important.

% customers

5%

30%

65%

% revenue

60%

10%

30%

6

Increasingly, a greater percentage of revenue comes from the few,

largest customers


% customers

5%

30%

65%

% revenue

60%

10%

30%

7

Does your firm rank

customers by revenue?

Indicate Yes or No

And the importance of managing the profitability is even more critical:


% customers % profits

20%

70%

10%

225%

0%

<125%>

8

And the importance of managing the profitability is even more critical:


% customers % profits

20%

70%

10%

225%

0%

<125%>

9

Does your firm measure

profit by customer?

Indicate Yes or No

And the preponderance of work, issues, and challenges in

implementing strategic relationships, are internal.


% customers

5%

30%

65%

% revenue

60%

10%

30%

% challenges

25% 75%Customer

issues

Internal

issues

10

Webinar participant poll

Do you have a strategic account program?

What was the growth of your strategic accounts in 2009 (over 2008)?

What was the growth of your average accounts 2009 (over 2008)?

What percentage of the challenge of executing your strategic account

program is external/internal

11

Reasons for key account programs

1.

2.

3.

12

Typical reasons for a SAM program

Gain competitive advantage

Find additional sales opportunities

Increase market share (38%)

Change in business strategy (34%)

More customization needed (26%)

Ensure better client relationships (26%)

Enter a new market (21%)

Win larger deals (20%)

Improve network of influential executives (6%)

Develop sales competitive advantage (5%)

Increase customer satisfaction (1%)

13

Consistent

Inflexible

Expensive

Adapted from Value Migration by Adrian Slywotzky

Low-costDistribution

GeographicSales Organization

Key Account Teams

Sa

les

Traditional geographic sales organization

14


GeographicSales

Organization

Key Account Teams

Sa

les

Cost of Sales

Three powerful forces

Three powerful forces have changed the

optimal sales force forever. Namely:

Skyrocking cost per sales call. The web.

And Strategic Account Management.

Field Visits Call Center Website

$500+

$65

< $5

Technology Strategic

Account

Management

15

Indirect

Telesales

Direct Mail/ Catalogs

Internet


GeographicSales

Organization

Key Account Teams

Sa

les

Technology

Cost of Sales

The Collapse of the Middle: Effect of Technology

16


GeographicSales

Organization

Key Account Teams

Key account teams

Global coverage

Industry focused channels

Virtual team selling

Sa

les

Centralized BuyingIndustry Consolidation

Global Sourcing

The Rise of Strategic Account Management

17

Strategic Accounts pass through stages.

Stage 1 Stage 2 Stage 3

Cost

Value

Price

BAU

Implications: Selection and Speed

18

Stage 1 Stage 2 Stage 3

Cost

Value

Price

BAU

Implications: Selection and Speed

19

Did your program go through an implementation stage of cost (investment)exceeding revenue?


Which stage are you in now?Implementation: Cost greater than pricePrice greater than cost and customer value greater than both

45%

33%

27%

20%

5%2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

MoreAttentionfrom Mgt.

DedicatedSales & Svc.Resources

CustomizedProducts &

Services

SpecialPricing &

Terms

Emphasis onRelationship

Other

Key Account Differences

20


What do customers want?

21

What do customers want?

What special advantages do customers want from key acct programs?

– Commitment of dedicated personnel (78%)

– National or global coordinated approach (56%)

– Access to skilled resources (41%)

– Early knowledge and influence in your product development plans (39%)

– Integration of customer information systems with yours (i.e., EDI) (39%)

– Early access to new products and services (29%)

– Co-development of new products and services (15%)

– Sharing of development costs and pricing risks (12%)

22

How successful?

How successful has your key account program been over the last year?

36%

Very s

ucce

ssfu

l

32% 14%13% 5%

Mod

erat

ely su

cces

sful

Neutra

l

Mod

erat

ely u

nsuc

cess

ful

Very u

nsuc

cess

ful

23

Measuring Success

How do you measure key account program success?

Sales volume (80%)

Customer satisfaction (53%)

Profitability (45%)

Volume of recurring revenue stream (29%)

Incremental orders from existing accounts (22%)

Number of customers with strategic account agreements (11%)

Number of transactions/orders (6%)

Number of product units shipped (6%)

New product sales (2%)

24

Criteria to Identify Valuable Customers

Revenues/Amount of supply

Contribution Margin

(Discounted) Cash Flows

Contribution to Capacity

Utilization

Innovation Effects

Spillover Effects

Cooperation Effects

Informational Effects

Quantitative criteria(“hard facts”)

Qualitative criteria(“soft facts”)

25

Scoring Model to Evaluate Customer Attraction (Example)

Points1 2 3 4 5

Score(Maximum

total score: 30)

Customer‘spurchasing volume

X

Potential growth ofpurchasing volume

X

Pricing X

Payments X

Potential for gainingcontribution margins

X

Overall loyaltytowards suppliers

X

Total score 16 = 53%(relative to max.

total score)

Source: Köhler1999, p. 346

Criteria

3

2

1

3

3

4

Scoring Model to Evaluate Supplier‘s Position (Example)

Points1 2 3 4 5

Score(Maximum

total score 30)

Quota of customer‘ supplies

X

Duration ofrelationship

X

Continuity ofcustomer‘s orders

X

Customer satisfactionwith supplies

X

Own company‘s image X

Contributionmargin

X

Total score 22 = 73%(relative to max.

total score)

Source: Köhler1999, p. 345

Criteria

4

3

4

5

4

2

Portfolio of Business Relations

F C A

H E B

I G D

Importance of the customer

for the supplier

Importance of the supplier for the customer

source: Plinke 1997, p. 149

28

Customer Portfolio

low middle high

high

middle

low

Competitive position

Customer attraction

Source: Schleppegrell 1987, S. 3229

Customer Portfolio

Supplier‘s position

Customer attraction

Source: Homburg/Schneider/Schäfer 2001, S. 181

Question marks Stars

Take along Return

+

+

-

-

Key decision:

Big Step or Out

Hold or extend

position

Hold positionSelective retreat

30

The value hierarchy

Top management

Middlemanagement

Purchasing management

Profit/productivity

Price/performance

Problem/solution

31

Moving the relationship up or down

Buyer’s Understanding of the

Value proposition

Good

Vague

Satisfaction with current supplier

Good Poor

ReplacementRepurchase

InnovationExpansion

32

Where is the relationship?

Investmentby Customer

Investmentby Supplier

Repurchase

Expansion

Innovation

Replacement

Customer service

Competitive intelligence

Business development

LVF CXO support

33

Where is the relationship?

Investmentby Customer

Investmentby Supplier

TransactionalMarketing

ConsultativeMarketing

EnterpriseMarketing

Strip cost

Create newvalue

Createextraordinaryvalue

RISKcompetitive vulnerability

WASTEover resourcing

34

Relationship Assessment Questionnaire

35

Situation Perhaps our vision of the ultimate Strategic Account

Relationship is one with extensive cooperation in which

the customer considers us a valued, trusted member of

their most important strategic initiative teams.

But as exciting as these kinds of complex, interdependent

relationships are, we need to keep our feet on the

ground, and define the relationship that is mutually

profitable and appropriate.

There are different levels of strategic relationships and

presents a tools for determining where you are and where

you can go in the strategic account relationship.

Relationship Assessment

36

There are four types of strategic relationships along

a continuum of simple to complex, arm’s length to

interdependent.

Investment by Supplier

Solve problems,

increase share of wallet and

premium pricing

Invest in creating mutual

strategic advantages—all topics, all

levels

There are four types of strategic relationships along a

continuum of simple to complex, arm’s length to interdependent.

Complexity and interdependence

Simple, arm’s length

Complex, interdependent

Invest to reduce costs, increase

margins

Invest in service

augmentations

Transactional Vendor

Credible source

Problem solver

Trusted advisor

37

The Relationship Assessment tool.

The Center for Business and Industrial Marketing at Georgia State University uses a

Relationship Assessment Survey to help clients diagnose their current status and uncover

opportunities for improved performance.

The survey consists of 32 questions for members of the client’s internal account team to

answer about their relationship with the Strategic Account.

All questions have four possible answers, lettered a through d.

An answer of a corresponds to a transactional relationship.

An answer of b corresponds to a credible source relationship.

An answer of c corresponds to problem solver.

And d corresponds to trusted advisor.

38

The Relationship Assessment tool.

The survey’s 32 questions break down into three sections:

Section One: Fifteen questions that assess the Customer’s View (how the team members

think their customer views their company.) Two example questions illustrate how the survey

helps you assess and label your strategic relationships:

Section Two: Eleven questions that measure the vendor’s Investment in the relationship.

(What the vendor is or is not doing, affect the relationship.) An example question illustrate

how the survey helps you assess your investment:

Section Three measures the Potential of the relationship to evolve.

39

The Relationship Assessment tool questions.

1

You generally first learn about the project when you are asked to respond to a formal evaluation

process from the Purchasing Department.

You typically know about the project in advance from the customer's management, but you must

respond to a formal evaluation process.

You generally help write or influence the criteria in a formal evaluation process with the customer so

that it gives you a competitive advantage.

You are given the opportunity to offer a solution in lieu of a formal evaluation or purchasing process.

When the customer is initiating a large, highly visible project which potentially involves your

products/services, how and when do you get involved?

A.

B.

C.

D.

transactional

credible source

problem solver.

trusted advisor.

Examples of questions from section 1—The Customer’s view of the relationship

40


transactional

credible source

problem solver.

trusted advisor.


41

4

The customer will often share your ideas and proposals with other suppliers to get the best price.

The customer will occasionally act on your ideas, but will protect your contribution.

The customer often acts on your ideas and proposals and will publicly recognize your contribution.

The customer seeks out your ideas, publicly recognizes your contribution, and ensures that you receive all related business.

When you introduce new ideas or unsolicited proposals…

A.

B.

C.

D.

A.

B.

C.

D.


transactional

credible source

problem solver.

trusted advisor.


42

11

You read about it in a publicly available forum.

The customer often shares the plan with you before it is final so that you can validate information directly related to your products/services.

The customer includes you in the planning process for projects in those areas related to your products/services.

The customer includes you in their strategic planning process.

When it comes to the customer's planning for the future…

A.

B.

C.

D.

A.

B.

C.

D.


transactional

credible source

problem solver.

trusted advisor.

Examples of questions from section 2—Your Investment in the relationship

43

17

You are restricted to the Purchasing Department.

You focus all of your time in a single function, department, or location.

You regularly cross multiple functions or departments in the customer's business.

You cover the entire enterprise and have provided solutions at multiple locations.

How broadly have you penetrated the customer?

A.

B.

C.

D.

A.

B.

C.

D.


Examples of questions from section 2—Your Investment in the relationship

19

You know the customer's primary lines of business.

You know the competitive advantages of the customer's products and their major markets and/or

customers.

You can explain the performance measurements that corporate and/or business division executives

use to measure the success of their business.

You understand the customer's business well enough to anticipate how the customer will react to

events and changes in business conditions.

How well do you know your customer's business?

A.

B.

C.

D.

A.

B.

C.

D.

transactional

credible source

problem solver.

trusted advisor.

44


transactional

credible source

problem solver.

trusted advisor.

Example –a question from section 3—The Potential in the relationship

45

28

The customer wants many suppliers and those that can be easily replaced.

The customer has a broad range of suppliers and evaluates each on a project basis.

The customer has a few "preferred" suppliers who are chosen based on the overall business value provided.

The customer has formed relationships with suppliers so close that they have become interdependent.

What is the customer's attitude towards suppliers?

A.

B.

C.

D.

A.

B.

C.

D.

Compiling your answers:

Teams give themselves 1 point if they answer a, 2 for b, 3 for c, and four for d. They

then calculate their average score for each section.

Then they plot their average score for each section on the graph below:

The team plots an (x,y) point as follows:

their average score for Section One—Customer’s View is the vertical (y-) value.

their average score for Section Two—Your Investment is the horizontal (x-) value.

A second point is posted along the diagonal as follows:

their average score for Section Three—Potential is the value along the diagonal.

46

4321

4

3

2

1

Trusted advisor

Problem solver

Credible Source

Transactionalvendor

Resources overcommitted

Customer at risk

Y-axisCustomer’s perception

X-axisVendor’s investment

Diagonal-axisRelationship’s potential

Graph your answers:

47

Assess the Problem/Opportunity

Define objectives

Initiate a project

Evaluate products

Prove the concept

Negotiate and sign contract

Implement Measure results

Trusted advisor

Problem solver

Credible source

Vendor

The Customer’s decision process

48

Your status mapped onto the customer’s buying

process


How do the competencies of SAM executives differ from avg acct execs?

49

Competency Differences

How do the characteristics and competencies required of your

strategic account managers differ from your “regular” field sales

person?

Broader business experience (53%)

More strategically oriented (39%)

More senior executive sales experience (34%)

Must work well with many decision-makers (9%)

No difference (6%)

Higher quota (3%)

Must be more adaptable to changing market (1%)

50

Roles of Key Account Managers

What roles do your key account managers assume in their

relationships with customers?

Rainmaker: stimulates customer interest in key account programs (55%)

Team Captain: marshals and coordinates company resources for key account

programs (76%)

Coach: advises and oversees sales organization’s execution of key account

programs (52%)

Strategist: establishes general key account program policies, but does not

execute them (33%)

Consultant: assists customers directly with their strategy development (3%)

51

Differences in training:- More complete sales

skills training- Customization training- More in-depth

business training

Strategic Account Manager Training

Is the training for strategic account managers different from that of “regular” salespeople?

28%

Traini

ng d

iffers

34%38%

Same

traini

ng

No tra

ining

pro

vided

52

Do you assess your SAM executives?

A Yes, we have job specific assessments

B No, our assessments are general “personality” tests

C No, we don’t assess—but are interested in doing so

D No, not us

E Other, comments

53

Assessment is one of the keys to success

A lot of variation in the design and management of “account

management programs”

Success varies depending on a number of factorsIt has to be more than a sales initiative

Alignment and commitment has to permeate the company

Selection criteria for accounts is critical

Programs have to be carefully designed and supported

Multi-functional and multi-level touch points are necessary

Metrics and communication of results are important

Value received/Value given

Technology can help, but be careful

Need to assess skills of sales executives and support with specific training.

54

Dr. Wesley Johnston

Director, CBIM

[email protected]

(404) 413-7851

Karl Hellman

Executive in Residence, CBIM

[email protected]

678 793 7343

55

Contact CBIM:

To discuss Strategic Account Management Program best practices

To ask questions about your Strategic Account Management Program

To learn about the Center’s Relationship Assessment Questionnaire

To learn about the Center’s Assessment tools and process.

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