Bruce E. Jacobs03.14.08
Manage Your Best Customer Accounts for Growth
By Bruce E. Jacobs
Most medical device manufacturers don’t have enough good customers. Typical customer analyses reveal a classic 80/20 relationship, where 80% or more of a company’s total revenue is concentrated among 20% or less of the total customer base. This relationship is more skewed with start-up companies, where the majority of revenue may be generated by just a single customer or a handful.
Customers—especially good ones—are assets. Too many companies fail to manage their customer base or even their top customers as assets. Only when a good customer gets away is its value as an asset realized, and then it’s too late. Damage repair won’t salvage the account, and competitors will leverage your disadvantage and do everything to help you continue to fail with the customer that got away. If the customer was such a good account and managed as such, it never would have changed suppliers.
In today’s competitive environment, customer loyalty to a supplier is becoming much more performance based, which covers a lot of ground: price, quality, service, lead time, responsiveness, meeting order specifications, payment terms, special services and numerous other performance criteria. If you can‘t meet the performance requirements, go home. In today’s business climate, no medical device company can keep a major customer without first meeting the customer’s performance requirements. Any company that believes it doesn’t have to manage customer accounts to meet these performance requirements suffers from delusions of adequacy.
Managing customer accounts, especially top accounts, requires a systemic approach to achieve today’s revenue targets and grow the accounts in the future. With limited resources, concentrate them on accounts that offer the greatest opportunities. Then, guard your resource investment by managing those accounts to achieve the greatest opportunities and meet the performance requirements. Not all customers are good customers, and diverting valuable, limited resources on those not likely to provide an adequate return for the investment is a waste of time. The customer accounts that are important to your business are the ones that require the resources and attention to keep them important.
Best Customers
If you can’t afford to lose the customer because of the volume of business, then it is one of your best customers. In addition, any customer that has the potential to become a customer you can’t afford to lose also should be considered a best customer. So how do you effectively manage the best accounts as the assets they are and grow your business with them in the future?
First, make a commitment to be proactive in managing the best accounts. The best accounts should not be allowed to drift through your company’s maze of service performance, problem resolution and lack of attention. If these customers are your best customers, they potentially can become your competitors’ best customers, and your competitors know this, just as you know your competitors’ best customers could become your best customers, given the opportunity.
Second, concentrate and focus your limited resources on the best accounts where the effort will pay dividends greater than those achieved by not managing the account. Too many best customer accounts erode because they are under-managed or not managed at all—individuals responsible for the best accounts are delinquent in their duties; numerous changes occur in the best customers that are not known and performance to the customer’s requirements slowly degredates to an intolerable aggravation the customer finally alleviates.
The best customers deserve attention if they are to remain a best customer or become a best customer. Managing the best customer accounts for growth requires a relentless effort that includes the following:
• Focus on the present requirements of the customer and make the present business relationship rewarding for the customer by meeting those requirements
• Keep minor problems from growing into larger problems
• Know the customer’s goals and objectives
• Assume nothing about your customers and be proactive about knowing and meeting their changing needs
• Develop and maintain a process for gathering information about the customer
• Create and execute a best customer account strategy and plan for each of your best customers
Account Strategies
The best customer account strategies are designed to focus on the total account and position the supplier to its advantage to serve each of its best customers. It requires end-to-end thinking about the customer to grow the best customer now and in the future. Setting the strategy for each best account requires you to know the customer and continue to accumulate information about the customer to better adjust your strategy in response to the changes in the customer. The best customer strategies take a longer time view:
• Define the long-term goals to be achieved with the best customer
• Define the opportunities in products and services that can be provided
• Identify the other opportunities that exist
• Leverage the present business with the customer to achieve additional business
• Proactively mitigate problems for the customer
• Recognize what business with the customer should be turned down
Critical to executing the strategy is recognizing where the supplier is positioned with the best customer on the relationship scale:
• Credibility—demonstrated in terms of product and service capability, technical expertise, industry experience and certification
• Trust—demonstrated consistency in performance, meeting customer requirements, specifications and commitments and responding to specific requests
• Influence—ability to influence the customer’s thinking and actions, viewed as a resource and team member to help the customer improve performance
Moving up the relationship scale with the best customers is instrumental in being able to position the supplier to its advantage. When the supplier can influence the customer, the supplier has the ability to increase business exponentially, because the supplier now can begin to sell from the inside by working with proprietary information and knowledge about the best customer, developing a network of information sources and configuring products and services to assist the best customers achieve their goals.
Course of Action
Managing the accounts of your best customers requires a relentless and rigorous commitment of effort. If you’re not prepared to commit to the customer, then the customer isn’t a best customer account, and obviously, losing the account would not hurt your business enough to justify the commitment.
How do you get started?
• Identify your best customers and determine the ones with whom you want to begin a best customer management program
• Establish your goals and the objectives you want to accomplish with the customer, including growth in revenue, improvement in customer profitability and meeting the customer’s goals
• Determine your position in the relationship with the customer and how you are perceived compared to your competitors
• Define your revenue targets with the customer and determine the actions you will implement to achieve them
• Identify the risks and performance issues you need to remedy with the customer
• Determine how to leverage your company’s core capabilities and products to increase revenue with customers and achieve their goals by working closer with them
• Establish a formal account management review process with the performance measurements to evaluate progress. Modify your plan as changes occur and determine the appropriate actions to take
When it’s fully defined, the best customer account plans answer three fundamental questions the chief executive would ask before committing the resources: (1) What does the best account management plan look like when it’s in place? (2) What are the business and economic benefits to be achieved? (3) What are tasks to execute the plan and achieve the benefits?
Realize there may come a time when you need to stop investing resources in a best customer account. This usually occurs when you just are not able to improve business with the customer no matter what you do or because something has changed with the customer. The sooner you recognize this, the sooner you can move on to customers with whom you can make major breakthroughs with a best customer account plan. Your best customer accounts will perform better if you invest in the development and execution of a best customer account plan. It creates focus and priority. If you don’t do this with your best customers, what’s plan B?