Free Resources, Checklists and Work Tools on the Topic of Business Development
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Marketing & Client Acquisition for Consultants, by M. Hirt
Peter Drucker knew it all
As Peter Drucker already predicted in the 1950s, the demand for continuing education, which includes consulting, training and coaching, is growing rapidly in the knowledge society. Unfortunately, the supply is growing even faster, as new providers enter the market every week, creating a rapidly growing oversupply.
In addition, clients and buyers of consulting have become much more professional in the last 15-20 years and many consulting products, have become mass products ("commodities"), where the client decides primarily on price.
As a result, consultants are operating in a buyer's market and the client has become a bottleneck over which a fierce battle has broken out.
Price war is self-destruction
Anyone who believes that the answer to this lies in reducing fees and costs for consultants is embarking on a slide that can only end in the ditch.
It is already the case that most consultants, trainers and coaches would have to discontinue their business if they were to take a serious commercial view of it. They generate income, but this is neither commensurate with the complexity and value creation of their service and the entrepreneurial risk, nor does it create a basis for a solid retirement provision through generous annual savings to build a proper nest egg.
Incidentally, this is a problem that exists not only in the German-speaking world, but also in other highly developed markets (e.g. North America) and also affects many lawyers and architects, for example. Here, subsistence economy and self-exploitation is practiced to a large extent.
How to get out of this mess
The way out of this mess for the consultant can only be found through successful marketing and high sales competence.
The "successful consultant" is characterized by high factual competence for his consulting topics, in connection with high marketing and sales competence.
A consultant who has a high level of expertise but low marketing and sales competence would probably be better off as an "employee" or pure implementer who receives his business from colleagues.
The consultant who only has a high level of technical competence will very rarely succeed in reaching really attractive fee regions in competition with the consultant who also brings in marketing and sales competence.
Expertise and competence in your chosen consulting field is a prerequisite for success, but it is not sufficient.
A consultant who has low technical competence but high marketing and sales competence is a "dazzler" whose success cannot last in a reasonably transparent and efficient market.
And, if both expertise and marketing and sales competence are missing, the end is near anyway: bankruptcy.
Many consulting products are "commodities"
In the age of "commoditization" of consulting, i.e. when consulting has become an interchangeable mass product in many areas, one can even argue that factual competence is less important than marketing and sales competence, because in many consulting areas it is possible to subcontract implementation competence and the corresponding methodologies, e.g. for the implementation of 360° feedbacks, employee surveys, management audits, overhead value analyses, quality improvement programs, etc. (this list can be continued virtually indefinitely).
Sales success requires "non-trivial" skills
Marketing and especially sales success, however, require skills that are much rarer, difficult to subcontract or outsource, and that in many cases only be learned through the hard school of experience, since failure and rejection are the daily bread of the sales person.
Key attributes for success are stable self-esteem, high stress resistance, and the ability to deal constructively with setbacks. The average salesperson fails perhaps with 8 out of 10 sales calls.
The above-average salesperson may only fail in 4 out of 10 sales calls, and is successful in the remaining 6 calls. But even a top salesperson regularly experiences rejection and failure. Actually, if you're not failing as a top salesperson, you're not trying hard enough.
In practice and on the basis of sensibly preselected "addresses", you can imagine it like this: out of 10 sales calls, 1-2 are "automatic winners", i.e. that you sell with a suitable product/service anyway, because it just "fits" and you "don't screw up". In other words, you are simply "lucky".
1-2 sales calls out of 10 are "automatic losers", no matter how good you and your sales pitch are, you won't sell. "Tough luck."
There remain 6-8 sales situations in this simple statistic where you can influence success in your favor through competent behavior.
And it is precisely these 6-8 conversations out of 10, which are "on the edge", so to speak, that are the issue. For these you need skill, technique, sensitivity and courage.
And it's performance on precisely those 6-8 more difficult conversations that makes the difference between mediocrity and excellence, between languishing and leapfrogging growth.
That's why it's so important to have concrete, repeatable sales skills and behaviors.
It's about 10 to 20 key conversations per year
This becomes even clearer when you know how difficult and expensive it is, to secure a meeting with a real decision maker, someone who can actually place an order and approve the budget for it. If you are in the large project business, then such key meetings are reduced to 10 to 20 meetings per year.
What top consultants do differently
Over the last few years, I've done a lot of research on marketing and sales for complex services, especially consulting, and I've talked to many, very successful consultants.
If you measure, for example, a successful solo consultant quite simply by his/her sales, you can say that he/she is in a yearly sales range of €700,000 to €1 million. In the German-speaking region you can find about 20-30 solo consultants (or solo consultants with a small support team) with this sales volume.
The difference to less successful consultants is basically quite mundane. These very successful consultants have LUCK.
But they don't define "LUCK" as "luck", they define it as "Labor Under Correct Knowledge". That is, they are more successful, because they know better how it works to be successful. To this end, they work extremely hard to understand how to market themselves and also invest heavily to be successful in the marketplace.
Knowledge workers invest in knowledge!
In the industrial revolution it was mainly about capital as a factor of success (money, land, factories, machines) and therefore also investments were always seen from the perspective of investing in the increase or improvement of capital. In the knowledge society, the focus of investment is on the multiplication and harnessing of knowledge.
Therefore, knowledge workers, and there is hardly a profession like the lawyer or management consultant that better represents the species of "knowledge worker", need to invest in their knowledge and in their skills, much more than in land and machines.
That means investing in training and development, coaching, mentoring, marketing, websites, external presence, etc.
The important thing here is to really understand how the activities that are critical to success work in detail - e.g., How do I write a book? How do I market a book? How do I give a good talk? How do I fill an open seminar? How do I make a successful sales call? How do I handle objections competently in a sales call? etc.
Successful consultants who are in the yearly sales range of €700,000 to €1 millions have made the effort to acquire this knowledge and apply it consistently.
Why marketing & sales are really important
Before we delve deeper into what separates the highly successful consultants from the rest, let's briefly consider a few arguments, beyond the sheer money-making, that should make us really invest in developing our marketing and sales skills.
The answer is simple. If I have excellent marketing and sales skills, then I have more requests and project opportunities than I can handle, and that brings me not only the potential to increase my fees, but also to pick the clients and projects that I really have high interest in, even enthusiasm for.
If I am good at marketing and client acquisition, I can realize the consulting practice of my dreams.
The most important thing
The central point in marketing and sales is to be clear, and convinced, that you are bringing the "good news". If you are convinced that you are bringing value to your clients, effective sales and marketing is an ethical obligation for you. It would actually be highly unethical not to spread the good news!
However, if you are not convinced of this, you have a big problem and need to improve your product.
Positioning in the consultant and trainer market
First of all, positioning is needed - you need to know what you stand for and how you can be special. Unfortunately, if you don't figure that out, you are simply a "commodity", a mass product.
“Commoditization" is one of the big trends in the consulting industry. While this industry was something exotic 30 years ago, it is not anymore and many consulting products are mass products that clients can buy based on price comparisons. Of course, this is bad for business, because it leads to comparability and price competition.
The purpose of marketing is mainly to get out of comparability. The purpose of all marketing tools is for the client to say, "I want this Hirt guy bring me this Hirt guy! He'll solve my problem."
The goal is to position oneself in such a way that the client rates their return-on-investment from consulting, as so high that the fee becomes secondary. To achieve this, there is a lot behind it.
If, on the other hand, you do not position yourself sufficiently, i.e. as "nothing special", and you also do not actively promote yourself to the outside world, not much will happen and you will not achieve a unique positioning.
Jack Welch's quote applies here, "Don't wait for your competitors to say good things about you, do it yourself." Without marketing and sales, it is virtually impossible to achieve a unique positioning.
Ultimately, the positioning must be so attractive that clients will come on their own. The top people have many more requests than they can handle - they turn 25% of the requests they get into assignments, they can pick and choose the best clients and projects.
A small digression for the skeptics among us: There are exceptional colleagues who are successful without a major marketing and sales presence that is visible to the outside world. But from my observation, these are rare exceptions and, as a sensible businessman or woman, I am not going to bet the future of my company and my family on the fact that I may be this incredible exception, who is successful with a probability of, let's say, 1:100 "against all odds".
A positioning in the consulting market can mean, for example, to clearly stand for a topic, such as Lothar Seiwert for time management or Matthias Horx for futurology.
In order to take up such a positioning, development work is necessary. Central is the creation of own intellectual capital, especially in the form of books, articles and other publications (blogs, newsletters etc). Nothing has to be completely reinvented. But you do have to have your own spin, your own take on something, which can then be cleverly marketed.
But there are also other ways to position yourself. For example, one can position oneself as a specialist for a particular method, problem or client target group and/or position oneself through guarantees (e.g., through an "unconditional client satisfaction guarantee" along the lines of "if they don't like your work, don't take their money").
Skillful image creation
Another differentiator of top consultants is that they promote themselves well. They have a good website, good appearance, good demeanor, they use the latest technology.
Most of the time, clients for consultants are people who are CEOs or board members - they need to be met at eye level.
Consultants should not see themselves as mere suppliers ("vendors"), nor should they appear as such.
Top consultants seek a business partnership with a company at eye level, where they create value for that company and receive appropriate compensation in return.
Top consultants have strong marketing materials for a wide variety of marketing activities and methods.
One of these is, in any case, a great website with references and client lists, which also acts as a credibility tool in the consultants' business - an important sign of respectability.
Often underestimated are written reference letters. Such reference letters from the most important clients can be enclosed in a marketing document or a folder that you send to your potential clients. Letters of reference convey credibility.
What could be more effective than a written recommendation from an enthusiastic client? Of course, you can only top that with a personal recommendation from an enthusiastic client to a prospective client they know personally.
Another thing that is done by most top consultants is to do public relations in one way or another.
This doesn't necessarily mean that you have to use the services of a PR agency, but in principle media presence is something really valuable, but only if it happens regularly.
Media have a very high credibility in our society. Especially for people in top management positions, who usually have a short attention span for conventional marketing materials, media exposure has a great impact.
A note for advanced players
As noted above, specialization is important, especially at the beginning of a consultant's career, but one must be careful relatively soon not to "paint oneself into a corner."
Too much specialization also creates a serious problem. If you specialize too much, clients will label you. However, in our fiercely competitive economy, the client relationship is the most valuable thing there is.
For example, if the client knows that consultant X is the strategy workshop specialist, she will hire him for one. The next time, however, she needs a consultant for an organizational problem. In this case, she does not even think of consultant X because he is only "the strategy guy". The consultant then has no chance of selling on to the client.
However, the goal is to have long-term client relationships. So, while specialization is incredibly valuable at the beginning of a career, in order to develop further, one must increasingly move into new fields.
For example, Simon, Kucher & Partners originally specialized in pricing, but now also offers many other consulting products.
So the logical progression is to clearly specialize at the beginning, and then intelligently go broad and skillfully diversify, so that you can sell on to the client and not get earmarked as a "one-trick pony".
First, two cautionary notes:
People often immediately think of new client acquisition when they think of sales. However, even in consulting, the most profitable client is not the new client, but the existing client.
The larger client is also normally more profitable than the smaller client - in order to win a €10,000 project, usually just as much must be worked as for winning a €100,000 project.
The 3 most important marketing tools for client acquisition are (1) publications (books, articles, etc.), (2) keynote speeches and presentations at conferences, and (3) referrals from satisfied clients.
Creating books and professional publications requires a certain amount of time, but has incredibly important marketing value. Books are instant proof of competence and that you are serious, and know your subject. The effort is manageable if you approach the matter with intelligence and a sense of proportion.
In addition to keynotes and lectures, small-scale seminars with a small number of participants (decision-makers), who can then be addressed personally, are helpful. This is more valuable than speaking at large conferences and then disappearing.
If you speak at large conferences, you should insist on getting a follow-up session or a small workshop where only those people who are really interested in the topic show up.
So the basis is content ("intellectual capital"), if the consultant has it, then it's a matter of getting it out to the people, making direct, personal contact with decision-makers as quickly as possible.
Sales in consulting ultimately only take place from person to person, because it is a relationship business. The decisive factor is whether decision-makers find you credible and appreciate you.
The goal is to have a conversation with a decision maker as quickly as possible.
The central principle is that personal communication (face-to-face) is much more valuable than anything else. Letters, emails and even phone calls are nearly useless for initial sales calls.
The most effective way is to work towards a 60-90 minute personal meeting with a decision maker.
If you are offered the opportunity for such a meeting, don't skimp on this, even if the journey may be a further one, geographically speaking - this is money well spent.
Emotions and trust decide
Finally, it is important to say that the client's decisions are not based on facts, but on emotions.
Questions the client asks themselves here are: "Do I trust this person?", "Will this person help me achieve my personal goals as a manager?", "Can I rely on this person's word?" etc.
That is why the key skill of the successful "salesperson" in consulting is to gain the trust of decision-makers quickly and effectively.
Fortunately, there are proven and learnable methods and conversation techniques for this purpose.
The 10 Commandments for Successful Business Development from Goldman Sachs
John Whitehead, Vice Chairman of the investment bank Goldman Sachs formulated the following principles for successful business development in the 70s, which are still the key to success today:
1. Don’t waste your time going after business you don’t really want.
2. The boss usually decides - not the assistant treasurer. Do you know the boss?
3. It is just as easy to get a first-rate piece of business as a second-rate one.
4. You never learn anything when you’re talking.
5. The client’s objective is more important than yours.
6. The respect of one person is worth more than an acquaintance with 100 people.
7. When there’s business to be found, go out and get it!
8. Important people like to deal with other important people. Are you one?
9. There’s nothing worse than an unhappy client.
10. If you get the business, it’s up to you to see that it’s well-handled.
Source: Charles D. Ellis, "The Partnership: The Making of Goldman Sachs"
Stop Selling! by M. Hirt
As long as we see selling as a process of trying to convince someone else to buy something they don't need, don't want, or even does them harm, we are at a loss.
In fact, it should be the case that our products and services are so attractive and useful to our customers that it would almost be a "crime" not to fully inform our customers about them, because after all, we are bringing the good news!
And this good news must not be an empty promise - as advertising unfortunately often is - but must be the truth. Because sales success means that "the customer comes back, and not the merchandise". Without regular customers, sustainable success is impossible for most companies!
Therefore, we must not only promise that our products and services are top, it must, from the customer's point of view, really be true!
Have a product or service that really creates high value for your customers!
If this is not yet the case, improve your product or service until they are really top, or stop selling them and find new ones!
Only sell products that you yourself are convinced of and enthusiastic about. How are you supposed to convince and inspire others of something that you yourself are not convinced and enthusiastic about?
Anything else would not only be unethical, because it is a lie, but also commercial nonsense, because we spend a lot of money to gain customers through marketing and sales, which we then immediately lose again when our full-mouthed promises turn out to be untrue, because our products and services do not keep them.
Never Stop Selling! by M. Hirt
Selling never starts and never stops. Acquiring new customers is such an expensive and laborious undertaking, that it is crucial for us to make the most of our existing customers.
Therefore, we are particularly interested in customers who have the potential to buy many of our services or products over time, or who have an above-average number of contacts ("multipliers") and can recommend us to others.
Treat every encounter with a customer as a "moment of truth", an opportunity to prove your high value to the customer and deepen the relationship!
Don't wait for your customers to recommend you on their own, but actively and systematically approach your customers for further recommendations!
Consider the long-term potential of this customer with every customer contact. It's nice to sell now, but it's even better to sell to a customer over and over again for years to come and still be recommended by them to others!
At the end of the day, most businesses are relationship businesses. By that I don't mean any naughty or illegal relationships, but that business success is built on relationships based on mutual appreciation, value creation and trust.
The customer buys from you because he or she has the feeling that you value him or her, are really committed to his or her interests and benefits, and he/she can trust that this will continue in the future. In return, any reasonable customer will gladly give you a fair return.
Classic Mistakes That Even Good Salespeople Make, by M. Hirt
In my experience, for example, I have noticed the following 2 mistakes that even experienced salespeople and business developers make again and again:
Wrong interpretation of positive signals
Many bureaucratic buyers, but unfortunately also sometimes real decision makers, absolutely want to have as many bidders as possible in the process, because this corresponds to their bureaucratic idea of an optimal purchasing process.
Therefore, they will constantly send you positive signals and also be very friendly, affable and encouraging with you, even though they may not be taken seriously as a bidder at all and have no chance of winning at all.
Therefore, learn to assess your chances of success realistically and independently and don't be blinded by friendliness.
Already the ancient Latins said "Timeo danaos et dona ferentes", i.e. "I fear the Greeks, even if they bring gifts".
Incorrect self-assessment by customers
In many cases, especially with larger decision-making teams, individual client employees are notoriously bad at correctly assessing their own influence on the decision.
Typically, most customer employees overestimate or overstate their influence on the decision.
This is true in small companies as well as large ones.
Which owner-manager of a successful small or medium enterprise admits gladly that his wife is actually the treasurer, and that he has to ask her for permission for every single expense?
Which successful middle manager in a large enterprise, who has a few hundred employees, admits gladly that she cannot even decide a procurement of 10,000 € alone?
The most important facts in a nutshell
As a salesperson and business developer, learn to assess your chances of success realistically and independently, and don't be blinded by friendliness and false promises.
How To Win Large Contracts and Clients, by M. Hirt
Large contracts and Clients are crucial steps for many companies to massively accelerate their growth trajectory.
Winning large contracts and Clients is a complex and multi-layered task that requires strategic thinking, planning, disciplined and coordinated execution, and perseverance, because large contracts and Clients typically have a much longer sales cycle and more multi-layered sales process than individual sales of products or services. So we're talking more about a marathon than a sprint.
The following points have worked well in my experience in winning large contracts and customers:
Understand the purchasing process
The award of most large contracts is decided well before the Clients's request for proposal (RFP) goes out to potential vendors. Therefore, develop a comprehensive acquisition strategy that specifically allows you to also influence the way the Client, designs the purchasing process, creates his purchasing budget, defines his requirements, and designs the RFP.
In an ideal world, of course, you position yourself as the "sole source", i.e. as the only supplier that can bring a satisfactory solution at all, thereby preventing a tender from taking place. Unfortunately, we don't always live in the ideal world.
Pick your prey well
Hunting for large contracts is time-consuming and costly. Professionals need clear criteria on which potential contracts to pursue, and then, by concentrating forces and their best people, achieve a high success rates with the selected situations.
Develop a clear battle plan
The key point is how you differentiate your offering from the competition, especially in the dimensions that are relevant to the Client's key decision makers.
In doing so, there are numerous things you can and must influence, such as how your potential Client perceives you and your offering, but also how the potential Client perceives your competition and its offering.
Last but not least, you also need to start as early as possible to anticipate and adapt your technical solution to be strong in those technical dimensions that are highly weighted for the Client's decision and not waste time and money on developing and perfecting technical dimensions and performance features that are ultimately not relevant for the decision.
All of this means that you need to start developing and implementing your battle plan as early as possible. After all, by the time you receive the invitation to tender, it is usually already too late. By then, in most cases, you are nothing more than a "stalking horse", i.e. a horse that is used to increase the pace of the overall field, but has no chance of winning.
Find the optimal price
To win in tenders, you not only have to help shape the tender ("presales"), but you also have to offer a bid price that strikes the right balance between meeting the Clients' technical needs and price requirements, and doing it better than the competitors' bids.
This requires that you have as much knowledge as possible about the technical solution, strengths and weaknesses, and the likely bid price of your competitors. Just to be sure, we're talking about professional "competitive intelligence" here, not some illegal trick that will land you in jail.
Develop and coordinate a team
Major contracts are typically landed by cross-functional or cross-departmental teams with clear objectives and appropriate resources. Ensure that the numerous team members proceed in a well-coordinated manner, speaking the same language and delivering the same message to all Client units.
Stick with it to the end
Once you submit your bid, the story is usually far from over. Typically, negotiations with a selection of bidders still take place after that point.
Therefore, it is important that you have already recognized and factored into your bid the negotiation process that is still to follow.
Now it is important to continue to influence the Client's decision-making team in your favor.
In addition, informal interventions at the highest level, by you or your competitors, may occur in this phase, even after the contract has been awarded to a bidder. You should be prepared for this as well.
Why go through all this?
If, after all these points, you are wondering why you should go through all this, then I can recommend that you add up the effort required to win ten medium-sized contracts and then compare it with the effort required to win one large contract.
My experience is that for most companies, if you know what you are doing and proceed in a structured way, the effort required to win a large contract, that is ten times the size of a medium contract, is only 2-4 times the effort required to win a medium contract.
Large contracts are therefore usually a very good use of your time and resources and put your company on an exponential growth curve.
The key points in a nutshell
Winning large contracts is a complex and multi-layered task that requires strategic thinking, planning, disciplined and coordinated execution, and perseverance, because large contracts typically have a much longer sales cycle and more multi-layered sales process than individual sales of products or services. So we're talking more about a marathon than a sprint. However, large contracts are usually a very good use of your time and resources and put your company on an exponential growth curve.
How To Screw Up Any Negotiation, by M. Hirt
Negotiations are the daily bread of business life, whether with clients, suppliers, employees or superiors. I have gained extensive experience in this area over the past 25 years and have learned from numerous mistakes, both my own and those of others. Here's a subjective hit list of effective ways to screw up negotiations:
Shy away from direct conversation and try to do the entire negotiation by email.
Many people shy away from direct, face-to-face negotiation, thinking that they can save time and avoid possible confrontation by doing the whole thing in writing or by email. This is a serious mistake, because in most cases it is only in a face-to-face conversation that the real understanding for the interests and thus the compromise points of the other side can be found.
E-mail or other indirect communication dramatically increases the likelihood of misunderstanding and escalation, and thus the risk of failure or a poor outcome.
Rather, seek personal contact with the other side. From my experience, this can also be established by telephone/video if personal face-to-face discussions have already taken place beforehand. It is also easier to negotiate more consistently on the phone, but you can still usually pick up on nuances and come to reasonable compromises.
Attack the other side personally.
Try to destabilize the other side by personal underhandedness and attacks. I consider such tactics a serious mistake because they are unobjective and destroy basic trust in your fairness and principled negotiating skills.
Good negotiators, in my experience, are "people first" people who have learned to be tough but fair on the issues and engaging and respectful with people. This, in my experience, is how you get the best results.
Try to defeat, to destroy the other side.
This negotiation tactic is also not useful in long-term business relationships, because it does not create motivation to work together in the long term.
Good negotiators make sure that all sides can live well with the outcome, especially by understanding that negotiation success means something different to everyone and ultimately also has a strongly subjective component.
This means that a good negotiator sets up and leads the negotiation from the beginning in such a way that all parties can feel like winners at the end of the negotiation.
Do not prepare for negotiations.
Bad negotiators completely underestimate the importance of preparation and structuring on the success of negotiations. They don't do their homework, don't research background information on the people on the other side, don't raise price benchmarks, and don't think about what might actually be important to the other side. Just rely on your ability to improvise at the last moment, it will work out!
Make sure you don't have any alternatives.
Bad negotiators believe that negotiation is a competition of who has the stronger will, instead of understanding that the most important point to negotiate with confidence are the alternatives you have yourself.
The more alternatives you have to a bad negotiation outcome, the better you will negotiate.
Good negotiators invest time, money and energy in making themselves independent of the outcome of the negotiation and always have a plan B, a "walkaway option", because once you have decided that you absolutely need this house, this car, this job or this client, then you have already lost the negotiation.
The most important thing in a nutshell
Seek personal contact with the people you are negotiating with. Learn to be a "people first" person. Make sure that all sides, at least subjectively, come out of the negotiation as winners. Prepare well for negotiations and create alternatives for yourself to a bad negotiation outcome.
How To Get The Most Out Of Your Customer Types, by M. Hirt
Prof. Das Narayandas of the Harvard Business School (which I attended) identifies four types of customers that companies can recognize when they analyze the loyalty of their customers and compare the benefits of that loyalty to the company, with the corresponding cost of serving that customer.
For each of these four customer groups, there are clear strategic recommendations.
1. Commodity buyer
This type of customer sees your products as mass-produced, easily switches to other suppliers with lower prices, and is not interested in additional services. Commodity buyers have low loyalty and, but only if you get it right, low support costs.
Recommendation: Don't waste time trying to convince these customers of your value-added services, but focus on minimizing your support costs and establishing long-term supply agreements. You may eventually be able to move a few of these customers to the other customer groups described below.
This group contains customers who expect free additional services in order to remain loyal to the company and customers who are not directly profitable to the company, but are kept for reputational reasons. Underperformers have low loyalty, but high support costs and therefore usually look unprofitable.
Recommendation: Underperformers should be migrated to one of the other three customer groups, if this is not successful, you should separate from them.
This customer group is complex and expensive to serve, but the profits that can be made to compensate the company adequately for this.
These customers want high quality, customized products, services and solutions, but are willing to pay for them appropriately and enter into a long-term cooperation.
Partners have a high level of loyalty and high support costs, resulting in good overall business for the provider.
Recommendation: Partner management requires a great deal of attention. On the one hand, the suppliers own technology is constantly maturing and threatened by commoditization. On the other hand, the partner is also maturing and e.g. purchasing managers may play a stronger role who do not (want to) understand the value proposition of their products and services.
4 Most Valuable Customers ("MVC's")
The most valuable customers, are the customers who are as loyal as partners, but less costly to serve. This may be because suppliers have become very efficient in serving these customers, or because the customer takes over certain tasks from the supplier that would normally be performed by the supplier itself.
Recommendation: MVC's should be vigorously defended. When new technologies or competitors emerge, try to make MVC's partners by offering them additional benefits and services.
In a nutshell
Serve Commodity Buyers efficiently or migrate them to other customer groups. Migrate Underperformers to other customer groups as quickly as possible or separate from them. Manage Partners with high attention. Defend MVC's vigorosly.
How You Can Tell How Loyal Your Customers Are, by M. Hirt
Studies by Professor Das Narayandas of Harvard Business School (which I attended) show that for most business-to-business companies, a clear hierarchy of customer behavior can be identified that reveals step-by-step increases in customer loyalty.
Loyalty stage 1 - Purchase of further Products & Services
The first stage is that the customer is interested in expanding the relationship with the supplier by buying more products and services.
Loyalty level 2 - Referrals
The second level of loyalty increase is that the customer is willing to recommend the supplier by word of mouth.
Loyalty level 3 - Loyalty, despite strong Competition
In the third stage, the customer is willing to stay with the existing supplier despite better competitive offers, because the customer believes that the existing supplier will develop similarly good products in the future.
Loyalty level 4 - Higher prices
In the fourth loyalty level, the customer is willing to pay higher prices than for comparable competitor products.
Loyalty level 5 - Cooperation
In the fifth stage, the customer cooperates with the supplier, because he/she believes that his feedback will support future product and service improvements.
Loyalty level 6 - Investment
In the sixth stage, the customer is willing to invest in the supplier.
In a nutshell
Once this customer loyalty hierarchy has been worked out for the specific case, it can be used to estimate, based on historical data and sales people's assessments, which existing clients have the highest potential to move up this hierarchy and thus become increasingly loyal, and what the typical costs and benefits to the company are.
How To Build High Customer Loyalty, by M. Hirt
The benefits of high customer retention and loyalty in the business-to-business (B2B) market are enormous.
One of Professor Narayandas (Harvard Business School) key research findings is that most B2B companies are so busy trying to figure out how to create value for their customers, that they don't pay enough attention to clearly communicating the value they create for their customers.
Many salespeople assume that customers will see and understand the value and benefits of their products and services on their own.
This is a serious misconception. Especially in longer customer relationships, which are often the most profitable ones, in many cases the value and the relationship move imperceptibly, step by step, into the background, and become self-evident things that are not considered worth mentioning.
This is exactly when crucial mistakes happen that allow a competitor to get a foot in the door and possibly even take over the customer completely.
It is similar to a marriage. If you don't nurture the "customer relationship" but take it for granted and the value of the relationship becomes more and more diffuse to the other person, then it can easily happen that competition appears, for example in the form of the proverbial "tennis coach" or "sensitive neighbor with daytime free time".
The value or benefit created by your products or services, for a B2B customer, can be distinguished and analyzed based on four categories.
1. Tangible financial benefits
These have a value that the seller can clearly communicate and the buyer can verify.
A car has more HP/KW, a machine has lower power consumption, a production device has higher output, all always compared to the competition.
The problem with tangible financial benefits is that competitors can also offer them, and a price war inevitably results.
2. Non-tangible financial advantages
These are financial benefits that the seller can convey but the buyer cannot easily verify, such as expected increases in sales, productivity, or cost reductions in the future.
The easiest way to make these promises credible is for the vendor to offer a pay-for- performance contract.
If one's product or service is truly superior, then one should be willing to share some of the risk and, of course, receive a corresponding reward for the additional performance actually achieved.
3. Tangible non-financial benefits
These are benefits that are difficult for the seller to quantify, but are very recognizable to the buyer.
"No one was ever fired for hiring IBM" is an example of this. Vendors work hard to build a strong reputation in the marketplace that allows them to command premium prices.
4. Non-tangible non-financial benefits
These have a value that neither the vendor nor the buyer can quantify, especially express in monetary terms.
For example, some sellers regularly go the "extra mile" in a collaborative relationship and provide significantly more than is included in the pure contractual relationship.
These benefits have proven to be particularly effective in establishing long-term customer relationships and loyalty.
In a nutshell
Can you accurately define the specific, potential benefits that your B2B products or services produce for your customers based on these four categories? Do you engage in a dialogue with your customer's decision-makers that enables you to find out which of these benefit opportunities is actually relevant and creates value for this specific customer and should therefore also be the focus of your sales dialogue and your product and service delivery to this customer?