Customer is the most vital asset
The basic tenet of B2B sales is this: "Existing Customer is the most vital asset for the company". The company lives & thrives on the cash given by the customer. Every sales person knows that the customer is important - once this realization sinks in, the next thing to do is to manage the customer relationships.
( CEO & all managers may say "Our employees are our most valuable assets". But the salesman knows better - Employees exist because of customers. I am not saying that employees are not critical - they are critical for success, but a business exists only because of customers)
Every businessman knows that customers are important, but most of them make a mistake in managing customer relationships. The common practice of thinking that your biggest customer is your best customer is a fundamentally flawed concept. Most companies classify customers based on the revenues generated from them - banks have "Platinum", "Gold", "Silver", "Bronze" and "Lead". This type of classification helps in allocating resources for customer service - but this does little to building customer relationships.
Therefore a salesman should have a different classification of customers which is independent of the revenue. In my earlier article on levels of customer relationships, I had explained how customers see their relationship with the vendor. This implies that to be successful, a sales person should at least classify customers into two broad categories - Strategic & Tactical.
Who is your strategic customer?
In most companies, the largest customers are also the oldest customers. But they need not be your strategic customers. In today’s dynamic business world, the strategic customers are those who can give you a huge business advantage or a competitive advantage or those who help you innovate or those who will ensure your success in the future.
To understand this concept, consider this example. For Intel, Lenovo is a big customer. But HP and Apple are strategic customers. Lenovo sells lots of PCs: desktops & laptops but for Intel microprocessors which are used in these products are not what it plans to sell in large numbers in the future. Intel’s plans to sell different products in future - low power high density blade servers, cell phone based computing devices, Home entertainment servers etc. These products are not what Lenovo is selling today - nor does Lenovo has a road map for such products.
Therefore Lenovo, though is an important customer, is not a strategic customer for Intel. HP & Apple on the other hand have a very interesting road map. HP leads in mobile computing and servers. HP already has a planned road map for the future products - a complete home entertainment/computing server, a mobile cellophane which doubles as a mobile computer, low power high performance computing servers etc. Therefore Intel can develop new products by working closely with HP - and that will give Intel a strategic advantage in the future. Intel & HP have collaborated extensively in the past - which led to the development of a 64-bit server chip - Itanium. Itanium has helped Intel gain a valuable market share in high end server markets - where it had no presence before.
Similarly, Apple & Intel can collaborate to develop exciting products in home entertainment & computing platforms. This collaboration may help Intel gain a strategic advantage over AMD.
Another example: For Crisco, British Telecom is a vital strategic customer. Though today, British Telecom contributes less than 1% of Crisco's total sales volume - and in terms of volume British Telecom may not be that important in terms of revenue. But in terms of the future technical advantage, British Telecom’s 21CN program (21st Century Network Program) and BT’s Global Services division which offers IP network solutions to Fortune-1000 companies, British telecom offers tremendous strategic advantages to Cisco. If Cisco can work closely with BT and develop unique set of products to meet the future demands of On Demand IPTV, Dynamically configurable secure corporate networks, Fiber to home etc., then Cisco will gain immense market share in these products - thus secure a strategic advantage over its competitors. Thus for Cisco - BT is a strategic customer.
Levels of Customer Relationships
As mentioned earlier, relationship between buyer and seller can be identified in 6 distinct levels.
Level-1 being the lowest level of relationship and level-6 being the deepest level of relationship.
Level-1: Utility Need
Level-2: Convenience Need
Level-3: Comfort Need
Level-4: Personal Recognition Need
Level-5: Self-expression Need
Level-6: Co-Creation Need
From a strategic marketing perspective, the importance of any customer over the lifetime of the relationship lowest at level-1 and is highest at level-6. And this is independent of the revenue or sales generated from a customer. Customer with whom a company enjoys the highest level of relationship, Level-6, will also be the most strategic customer because in this level of relationship, the customer will be co-investing in creating new products for the future. It is therefore in the vendor’s best interest to have very deep relationship with such customers.
Strategic Account Management
The concept of strategic customer leads to the idea of Strategic Account Management. Though, the term "Strategic Account Management" was coined by Miller Hieman, the meaning of ‘Strategic Account Management’ I am referring to is entirely different. Strategic account management implies managing the relationships with the strategic customers - i.e., customers who can help the vendor gain competitive advantage in the future. In other words, managing customer relationship at level-6.
Level-6 customer relationships are personal and rational. At this level of relationship, the customer loyalty & trust is very high. Customers are willing to invest for joint development of products/service. Customer feel closely bonded to the vendor - to the point that the customer seeks a joint destiny with the vendor. I.e., some aspects of customer’s interests merge with that of the vendor’s interests.
Strategic account management requires two major changes in the typical corporate mindset:
- Think about Customer first
Earlier account planning used to be all about ‘us’ and ‘ours,’. In other words account management policies were driven by internal compulsions such as improving products & services, maximizing revenue, profits, needs, improving operations etc. But at level-6 of customer relationships, the account management means to focus on customer’s future strategy, customer’s products & services and how the vendor can capitalize on the upcoming opportunities. - Think about Solving customer’s problems
Theodore Levitt, a famous Harvard Business School marketing professor and the former editor of the Harvard Business Review, is widely quoted as telling his students that customers don’t want a quarter-inch drill; instead, they want a quarter-inch hole. In other words: They’re not shopping for products; they’re shopping for solutions. Think about the problems that must be solved. Understand the problems and issues at least as well as your customers do, if not better. That requires more than just knowing what your customers need. In strategic account management, successful firms help their clients run their businesses and not just purchase supplies or utilize services. The overall goal of any good strategic account management process is to ensure better business returns for the targeted key customers.
Closing Thoughts
CRM is all about managing the relationships with your customers. It starts with developing an understanding that not all customers are equal and a few customers are of strategic importance to your success in the future. Once a strategic customer is identified, and the customer feels comfortable to invest in co-development, the account management policies has to be crafted such that the vendor now becomes an integral part of the solution to a problem that the customer is trying to solve. Care must be taken to ensure that both the vendor and customer maintain their independence and have equal rights over the new products which are being developed. This will not only enable the customer gain significant competitive advantage and that advantage is also shared with the vendor - albeit in different market segments.
Also Read:
Customer Relationship Management & Sales
No comments:
Post a Comment