By Michael W. McLaughlin
From the time you book an airline flight until that plane lands, your pecking order in the airline’s customer hierarchy determines your travel experience. To the airlines, all customers are not equal—they are segmented and managed according to profitability, loyalty, and frequency of travel.
Like the airlines, professional service providers have embraced the concept of client relationship management, yet many struggle with execution. Client relationship management is based on the premise that a subset of your clients will purchase the majority of your services, and that you should manage them accordingly. All clients are important, but some take more of your attention than others.
In an interview in Management Consulting News, Jack Trout, coauthor of Positioning, says that many consultants have a misguided client relationship strategy, which “…is simply to stay on at their clients, no matter what problem needs to be solved. “ Hanging on, hoping for more work from your current clients is not so much a strategy as the lack of a coherent one.
A client relationship strategy that differentiates your clients can reduce your cost of sales, simplify your approach to complex relationships, help you deliver services to clients more efficiently, and increase the profitability of your practice.
More Eggs in Fewer Baskets
At the core of a productive client relationship strategy is a shift in mindset. Consultants are often too willing to chase every new opportunity, when instead they should focus on the clients they’ve got and the referrals that can flow from those clients.
Just as with an investment portfolio, though, spread your marketing resources among selected clients—don’t focus on a single one. Otherwise, you risk the consequences: If the work dries up, your cash flow slows to a trickle.
Is It Right for You?
The first step is to decide if a client relationship program is right for your practice. For larger firms with long client lists, the decision is a no-brainer. Those firms should use a program to focus investments and people on targeted industries and clients.
In smaller firms, the percentage of forecasted revenue from a client relationship program may be less than in a larger practice. Some commitment to client relationships is usually desirable. But not every consulting firm needs a formal client relationship strategy.
Build Your Client Portfolio
Choosing clients and prospective clients to include in a client relationship program is complex, no matter the size of your firm. Assign clients to action categories according to their relative importance to the firm at a given point in time. This initial classification of clients is a one-size-fits-none exercise. Let your practice, culture, clients, and business objectives guide your decisions.
Consider these questions about your clients:
Create a simple 2 X 2 matrix to objectively assess your clients. Rate each client, from high to low, on the strength of the existing relationship (horizontal axis), and the potential for mutual gain (vertical axis).
The clients you place in the upper right quadrant (that is, high on both criteria) have the greatest potential and are your key accounts. The clients in the upper left quadrant are the next generation of key clients, assuming you can build effective relationships with decision makers. The goal should be for clients in the upper left to move to the upper right category.
The strategy for clients in the remaining quadrants could range from letting some clients go (lower left quadrant), to educating clients on opportunities for mutual benefit (lower right quadrant).
This point-in-time snapshot is just the beginning. Regularly revisit each client’s potential and adjust your use of resources.
Take a First Cut at Your Strategy
To achieve the promise of client relationship management, create a specific marketing strategy for each key client that addresses these eight elements:
Once you’ve created the outline for your plan, seek client input. The ideal client relationship strategy is one that’s developed with your partner, the client. Without some client consensus on what you hope to contribute, your plan is wishful thinking.
But Will It Fly?
If your firm chooses to manage key clients in this way, it may seem risky. After all, you could invest the bulk of your marketing resources on a small group of clients who fail to generate the profit you need. So don’t give up on other marketing activities that generate visibility for your practice. As a guideline, commit roughly 60 percent of your marketing resources to your key accounts, and the remainder on filling your pipeline with prospective clients.
Patience is the key. If you’ve selected the right clients to include in a client relationship program, you work the plan consistently, and you have the right level of accountability, the program will pay dividends in the form of long-term profitable relationships, referrals for new business, and a simplified approach to marketing.
As Noel Capon, author of Key Account Management and Planning, points out “Key accounts are the firm’s single most important asset inasmuch as they supply the majority of sales revenues to support its investment and cost structures.” To be successful, consulting firms must do more than just accept this concept. It must become part of the operating practice and philosophy of the business.
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