Getting, retaining and maximising the profitability of key clients remains essential to the survival of any organisation.
Why is it then that, in a recent benchmarking study on business development, the construction industry recognised it did not perform well in many aspects of key client management?
After all, excellent client management means that your clients will:
- buy more, even if your fees are slightly higher than competitors.
- recommend you to colleagues and friends.
- make your firm the standard for their organisation.
- look to you for help in other aspects of their business.
So, what is missing? The answer is will. In many businesses there is not the fierce will and motivation to make key client management a reality. There is the desire – sure. People would like to look after their clients better, they would like to win a greater share of their work, and they would like to know that competitors would find it extremely difficult to win work from their clients. But desire and will are not the same thing. With desire the imperative is missing.
What is required is leadership. Someone has to decide that managing the client base more effectively, and in line with the business’s direction, is critical to the future of the business.
He or she must conclude that the present way of managing things is not sufficient and that changes (possibly major changes) to current custom and behaviour will have to be carried through.
This person must than have the ability to communicate this vision to the rest of the organisation and to get buy-in from every level. Great energy is required to see new processes designed and implemented. And the ability to empower others who now share the vision and to delegate much of the implementation is paramount. This leader must have integrity and mental toughness to confront and persuade those who do not choose to buy-in to the new ways of doing things.
It follows then that the person who leads the key client management programme must hold a senior position and have great credibility within the business. The person must have the attributes and skills of a leader, beginning with the will to make effective client management a key process in achieving the business’s objectives.
Generally, this requires a change process. To change successfully, a business needs to have many things in place. However the fundamental element to client management is the existence of a credible champion of change.
Why is client management more important than new business development?
In a simple assessment of a firm’s client base, it is possible to piece together a hierarchy of clients based on fee revenues. Invariably, this exercise will demonstrate the Pareto Principle, with 20% of clients accounting for 80% of business.
It is also likely to illustrate how:
- 20% of clients can deliver 100% of profits, and
- existing clients deliver up to 90% of revenues.
Once you can visualise where your clients sit in the pecking order, you can determine also the contribution each of your clients make to your firm’s revenues now, and what their potential will be in the future. You can even ascertain the financial impact that might occur with client movement (up or down the order).
An appreciation of your business’s financial dependence on these key clients can help explain how, for most firms in most situations, creating new clients is the issue to begin to examine only when:
- the current client relationships are so strong that you can be ‘guaranteed’ any recurring work.
- you have positioned your firm so positively (and widely) within your current clients that they will always include you in any discussions about new work opportunities.
- you have identified all opportunities likely to occur within your current clients in the foreseeable future and have a plan in place to follow these through.
- you have proactively examined every likely profitable are in which you believe you can sell your capabilities within your existing clients.
Are your clients worth the effort?
The answer to this question may appear obvious…but is it? It depends on your organisation’s strategy and values.
While there are some organisations that choose to work with a small number of high reward, high profit clients, there are others that work with a large set of low reward, low profit clients. The question is, are we starting with a client set that will not only appreciate improved client focus, but will also have significant additional profitable work available to win? If the answer is “no” then we may have a serious repositioning task ahead of us. Alternatively, if we choose to stay in the low volume, low profit end of the market, we may then implement a strategy of low cost and efficient delivery with minimum time spent in building client relationships and loyalty.
In an entirely different scenario, an organisation may find that it does not enjoy working with a certain client due to some fundamental difference or value. In this case, it may be more appropriate to find other clients capable of providing similar financial returns.
Key client development is not a prerequisite for every organisation as it is not a strategy that fits every business scenario.
Starting the journey
When leadership of the key client management process is strong and key clients are identified, is this enough to ensure that the client service teams will have the motivation and discipline to make a key client management really work? Experience tells us not.
In order to achieve success, each person must want to carry out the actions that will build strong relationships. This real motivation requires real ownership:
- Ownership of the vision – what does good key client management mean and what does it look like?
- Ownership of the planning and review process – people may respond negatively or fabricate results if it is perceived as being a ‘policing’ system.
- Ownership of the values embedded in the key client management process – if staff perceive this to be undermining their technical expertise, they may passively resist (or actively sabotage). If, however, they believe it is built on providing the highest possible value to their clients – and can see how it does – they are likely to pledge their support.
Ownership does not come from being told what to do – especially when, in some organisations, many key client service team leaders are also senior managers in the business.
Without motivation – even a passion – for key client management, people will always be too busy to practice good business development. If, however, they are involved in the design, development and implementation of the key client management process, receive effective leadership and appropriate rewards and recognition, and are proficient and confident in the skills to carry out this activity successfully, then this initiative can motivate them to feel involved.
Explore best practice
This is the first in a series of articles on key client management. The forthcoming articles will explore best practice in client management. Remember that one sure way to kill off a change in key client management practice is to introduce many new and additional ways of working simultaneously. This may result in the whole process appearing so burdensome that the entire organisation unites in a fight against the new regime.
Instead, you may choose initially to simply focus on improving the way you sell to existing clients. You may choose to focus on more effective cross-selling. You may decide to implement one tool that will help you think more constructively as to how the client relationship can be built more strongly, or you may aim to put in place the most rudimentary key client plan for your top ten clients. You may look externally for a specialist’s advice and support. Any one of these initiatives could be a realistic way forward.
- The circle of success Published 5th June 2008
- Holding onto your Key Client Relationships Published 20th July 2009
- How to reel in the right fee Published 5th November 2008
- What makes the perfect pitch Published 31st May 2008