Karl Hellman & Wesley Johnston: The Economics of Poor Hiring Decisions - presented by SMMConnect.com

SMMConnect.com presents The Cost of a Ghost: The Economics of Poor Hiring Decisions Karl Hellman President, Resultrek Dr. Wesley Johnston Professor of Marketing, Georgia State University

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About The Presenters Dr. Wesley J. Johnston The Executive Director of the Center for Business and Industrial Marketing at Georgia State University (http://robinson.gsu.edu/marketing/Centers/CBIM/index.htm), Dr. Wesley Johnston is Professor of Marketing at Georgia State University. Dr. Johnston is one of the leading experts in B2B marketing and sales management. He is author of a textbook on Sales Management and is currently writing Strategic Selling Playbook (co-authored with Karl Hellman) based on his workshops and consulting practice in strategic selling. About Karl Hellman Karl Hellman is President of Resultrek, (www.resultrek.com) a global marketing consulting firm dedicated to creating great marketers and sales people. Karl is also Executive in Residence at the Center for Business and Industrial Marketing at Georgia State University. Karl's most recent book, The Customer Learning Curve, explains the power of The Customer Learning Curve through 24 "real life" marketer examples: scenarios readers can call their own. Karl is co-authoring Strategic Selling Playbook with Dr. Johnston.

Strategic Account Management: Assessing the Strategic Relationship A webinar for SMMConnect Wes Johnston Karl Hellman Center for Business and Industrial Marketing Georgia State University

Increasingly, a greater percentage of revenue comes from the few, largest customers Strategic Relationships are becoming more important. % customers 5% 30% 65% % revenue 60% 10% 30%

Increasingly, a greater percentage of revenue comes from the few, largest customers Strategic Relationships are becoming more important. % customers 5% 30% 65% % revenue 60% 10% 30% Does your firm rank customers by revenue? Indicate Yes or No

And the importance of managing the profitability is even more critical: Strategic Relationships are becoming more important. % customers % profits 20% 70% 10% 225% 0% <125%>

And the importance of managing the profitability is even more critical: Strategic Relationships are becoming more important. % customers % profits 20% 70% 10% 225% 0% <125%> Does your firm measure profit by customer? Indicate Yes or No

And the preponderance of work, issues, and challenges in implementing strategic relationships, are internal. Strategic Relationships are becoming more important. % customers 5% 30% 65% % revenue 60% 10% 30% % challenges 25% 75% Customer issues Internal issues

Webinar participant poll
Do you have a strategic account program?
What was the growth of your strategic accounts in 2009 (over 2008)?
What was the growth of your average accounts 2009 (over 2008)?
What percentage of the challenge of executing your strategic account program is external/internal

Reasons for key account programs
1.
2.
3.

Typical reasons for a SAM program
Gain competitive advantage
Find additional sales opportunities
Increase market share (38%) Change in business strategy (34%) More customization needed (26%) Ensure better client relationships (26%) Enter a new market (21%) Win larger deals (20%) Improve network of influential executives (6%) Develop sales competitive advantage (5%) Increase customer satisfaction (1%)

Traditional geographic sales organization Consistent Inflexible Expensive Adapted from Value Migration by Adrian Slywotzky Low-cost Distribution Geographic Sales Organization Key Account Teams Sales

Three powerful forces Low-cost Distribution Geographic Sales Organization Key Account Teams Sales Cost of Sales Three powerful forces have changed the optimal sales force forever. Namely: Skyrocking cost per sales call. The web. And Strategic Account Management. Technology Strategic Account Management Field Visits Call Center Website $500+ $65 < $5

The Collapse of the Middle: Effect of Technology Indirect Telesales Direct Mail/ Catalogs Internet Low-cost Distribution Geographic Sales Organization Key Account Teams Sales Technology Cost of Sales

The Rise of Strategic Account Management Low-cost Distribution Geographic Sales Organization Key Account Teams Key account teams Global coverage Industry focused channels Virtual team selling Sales Centralized Buying Industry Consolidation Global Sourcing

Strategic Accounts pass through stages. Stage 1 Stage 2 Stage 3 Cost Value Price BAU Implications: Selection and Speed

Did your program go through an implementation stage of cost (investment)exceeding revenue? Webinar participant poll Which stage are you in now? Implementation: Cost greater than price Price greater than cost and customer value greater than both Stage 1 Stage 2 Stage 3 Cost Value Price BAU Implications: Selection and Speed

Key Account Differences

Webinar participant poll What do customers want?

What do customers want?
What special advantages do customers want from key acct programs?
Commitment of dedicated personnel (78%)
National or global coordinated approach (56%)
Access to skilled resources (41%)
Early knowledge and influence in your product development plans (39%)
Integration of customer information systems with yours (i.e., EDI) (39%)
Early access to new products and services (29%)
Co-development of new products and services (15%)
Sharing of development costs and pricing risks (12%)

How successful?
How successful has your key account program been over the last year?
36% Very successful 32% 14% 13% 5% Moderately successful Neutral Moderately unsuccessful Very unsuccessful

Measuring Success
How do you measure key account program success?
Sales volume (80%)
Customer satisfaction (53%)
Profitability (45%)
Volume of recurring revenue stream (29%)
Incremental orders from existing accounts (22%)
Number of customers with strategic account agreements (11%)
Number of transactions/orders (6%)
Number of product units shipped (6%)
New product sales (2%)

Criteria to Identify Valuable Customers
Revenues/Amount of supply
Contribution Margin
(Discounted) Cash Flows
Contribution to Capacity
Utilization
Innovation Effects
Spillover Effects
Cooperation Effects
Informational Effects
Quantitative criteria (“hard facts”) Qualitative criteria (“soft facts”)

Scoring Model to Evaluate Customer Attraction (Example) Points 1 2 3 4 5 Score (Maximum total score: 30) Customer‘s purchasing volume X Potential growth of purchasing volume X Pricing X Payments X Potential for gaining contribution margins X Overall loyalty towards suppliers X Total score 16 = 53% (relative to max. total score) Source: Köhler1999, p. 346 Criteria 3 2 1 3 3 4

Scoring Model to Evaluate Supplier‘s Position (Example) Points 1 2 3 4 5 Score (Maximum total score 30) Quota of customer‘ supplies X Duration of relationship X Continuity of customer‘s orders X Customer satisfaction with supplies X Own company‘s image X Contribution margin X Total score 22 = 73% (relative to max. total score) Source: Köhler1999, p. 345 Criteria 4 3 4 5 4 2

Portfolio of Business Relations F C A H E B I G D Importance of the customer for the supplier Importance of the supplier for the customer source: Plinke 1997, p. 149

Customer Portfolio low middle high high middle low Competitive position Customer attraction Source: Schleppegrell 1987, S. 32

Customer Portfolio Supplier‘s position Customer attraction Source: Homburg/Schneider/Schäfer 2001, S. 181 Question marks Stars Take along Return + + - - Key decision: Big Step or Out Hold or extend position Hold position Selective retreat

The value hierarchy Top management Middle management Purchasing management Profit/productivity Price/performance Problem/solution

Moving the relationship up or down Buyer’s Understanding of the Value proposition Good Vague Satisfaction with current supplier Good Poor Replacement Repurchase Innovation Expansion

Where is the relationship? Investment by Customer Investment by Supplier Repurchase Expansion Innovation Replacement Customer service Competitive intelligence Business development LVF CXO support

Where is the relationship? Investment by Customer Investment by Supplier Transactional Marketing Consultative Marketing Enterprise Marketing Strip cost Create new value Create extraordinary value RISK competitive vulnerability WASTE over resourcing

Relationship Assessment Questionnaire

Situation Perhaps our vision of the ultimate Strategic Account Relationship is one with extensive cooperation in which the customer considers us a valued, trusted member of their most important strategic initiative teams. But as exciting as these kinds of complex, interdependent relationships are, we need to keep our feet on the ground , and define the relationship that is mutually profitable and appropriate. There are different levels of strategic relationships and presents a tools for determining where you are and where you can go in the strategic account relationship. Relationship Assessment

There are four types of strategic relationships along a continuum of simple to complex, arm’s length to interdependent. Investment by Supplier Solve problems, increase share of wallet and premium pricing Invest in creating mutual strategic advantages—all topics, all levels There are four types of strategic relationships along a continuum of simple to complex, arm’s length to interdependent. Complexity and interdependence Simple, arm’s length Complex, interdependent Invest to reduce costs, increase margins Invest in service augmentations Transactional Vendor Credible source Problem solver Trusted advisor

The Relationship Assessment tool.
The Center for Business and Industrial Marketing at Georgia State University uses a Relationship Assessment Survey to help clients diagnose their current status and uncover opportunities for improved performance.
The survey consists of 32 questions for members of the client’s internal account team to answer about their relationship with the Strategic Account.
All questions have four possible answers, lettered a through d.
An answer of a corresponds to a transactional relationship.
An answer of b corresponds to a credible source relationship.
An answer of c corresponds to problem solver .
And d corresponds to trusted advisor .

The Relationship Assessment tool. The survey’s 32 questions break down into three sections: Section One: Fifteen questions that assess the Customer’s View (how the team members think their customer views their company.) Two example questions illustrate how the survey helps you assess and label your strategic relationships: Section Two: Eleven questions that measure the vendor’s Investment in the relationship. (What the vendor is or is not doing, affect the relationship.) An example question illustrate how the survey helps you assess your investment: Section Three measures the Potential of the relationship to evolve.

The Relationship Assessment tool questions. 1 You generally first learn about the project when you are asked to respond to a formal evaluation process from the Purchasing Department. You typically know about the project in advance from the customer's management, but you must respond to a formal evaluation process. You generally help write or influence the criteria in a formal evaluation process with the customer so that it gives you a competitive advantage. You are given the opportunity to offer a solution in lieu of a formal evaluation or purchasing process. When the customer is initiating a large, highly visible project which potentially involves your products/services, how and when do you get involved? A. B. C. D. transactional credible source problem solver . trusted advisor . Examples of questions from section 1—The Customer’s view of the relationship

The Relationship Assessment tool questions. transactional credible source problem solver . trusted advisor . Examples of questions from section 1—The Customer’s view of the relationship 4 The customer will often share your ideas and proposals with other suppliers to get the best price. The customer will occasionally act on your ideas, but will protect your contribution. The customer often acts on your ideas and proposals and will publicly recognize your contribution. The customer seeks out your ideas, publicly recognizes your contribution, and ensures that you receive all related business. When you introduce new ideas or unsolicited proposals… A. B. C. D. A. B. C. D.

The Relationship Assessment tool questions. transactional credible source problem solver . trusted advisor . Examples of questions from section 1—The Customer’s view of the relationship 11 You read about it in a publicly available forum. The customer often shares the plan with you before it is final so that you can validate information directly related to your products/services. The customer includes you in the planning process for projects in those areas related to your products/services. The customer includes you in their strategic planning process. When it comes to the customer's planning for the future… A. B. C. D. A. B. C. D.

The Relationship Assessment tool questions. transactional credible source problem solver . trusted advisor . Examples of questions from section 2—Your Investment in the relationship 17 You are restricted to the Purchasing Department. You focus all of your time in a single function, department, or location. You regularly cross multiple functions or departments in the customer's business. You cover the entire enterprise and have provided solutions at multiple locations. How broadly have you penetrated the customer? A. B. C. D. A. B. C. D.

The Relationship Assessment tool questions. Examples of questions from section 2—Your Investment in the relationship 19 You know the customer's primary lines of business. You know the competitive advantages of the customer's products and their major markets and/or customers. You can explain the performance measurements that corporate and/or business division executives use to measure the success of their business. You understand the customer's business well enough to anticipate how the customer will react to events and changes in business conditions. How well do you know your customer's business? A. B. C. D. A. B. C. D. transactional credible source problem solver . trusted advisor .

The Relationship Assessment tool questions. transactional credible source problem solver . trusted advisor . Example –a question from section 3—The Potential in the relationship 28 The customer wants many suppliers and those that can be easily replaced. The customer has a broad range of suppliers and evaluates each on a project basis. The customer has a few "preferred" suppliers who are chosen based on the overall business value provided. The customer has formed relationships with suppliers so close that they have become interdependent. What is the customer's attitude towards suppliers? A. B. C. D. A. B. C. D.

Compiling your answers:
Teams give themselves 1 point if they answer a, 2 for b, 3 for c, and four for d. They then calculate their average score for each section.
Then they plot their average score for each section on the graph below:
The team plots an (x,y) point as follows:
their average score for Section One— Customer’s View is the vertical (y-) value.
their average score for Section Two— Your Investment is the horizontal (x-) value.
A second point is posted along the diagonal as follows:
their average score for Section Three— Potential is the value along the diagonal.

4 3 2 1 4 3 2 1 Trusted advisor Problem solver Credible Source Transactional vendor Resources overcommitted Customer at risk Y-axis Customer’s perception X-axis Vendor’s investment Diagonal-axis Relationship’s potential Graph your answers:

Your status mapped onto the customer’s buying process Assess the Problem /Opportunity Define objectives Initiate a project Evaluate products Prove the concept Negotiate and sign contract Implement Measure results Trusted advisor Problem solver Credible source Vendor The Customer’s decision process

Webinar participant poll
How do the competencies of SAM executives differ from avg acct execs?

Competency Differences
How do the characteristics and competencies required of your strategic account managers differ from your “regular” field sales person?
Broader business experience (53%)
More strategically oriented (39%)
More senior executive sales experience (34%)
Must work well with many decision-makers (9%)
No difference (6%)
Higher quota (3%)
Must be more adaptable to changing market (1%)

Roles of Key Account Managers
What roles do your key account managers assume in their relationships with customers?
Rainmaker: stimulates customer interest in key account programs (55%)
Team Captain: marshals and coordinates company resources for key account programs (76%)
Coach: advises and oversees sales organization’s execution of key account programs (52%)
Strategist: establishes general key account program policies, but does not execute them (33%)
Consultant: assists customers directly with their strategy development (3%)

Strategic Account Manager Training
Is the training for strategic account managers different from that of “regular” salespeople?
Differences in training: - More complete sales skills training - Customization training - More in-depth business training 28% Training differs 34% 38% Same training No training provided

Do you assess your SAM executives?
A Yes, we have job specific assessments
B No, our assessments are general “personality” tests
C No, we don’t assess—but are interested in doing so
D No, not us
E Other, comments

Assessment is one of the keys to success
A lot of variation in the design and management of “account management programs”
Success varies depending on a number of factors
It has to be more than a sales initiative
Alignment and commitment has to permeate the company
Selection criteria for accounts is critical
Programs have to be carefully designed and supported
Multi-functional and multi-level touch points are necessary
Metrics and communication of results are important
Value received/Value given
Technology can help, but be careful
Need to assess skills of sales executives and support with specific training.

Dr. Wesley Johnston Director, CBIM [email_address] (404) 413-7851 Karl Hellman Executive in Residence, CBIM [email_address] 678 793 7343
Contact CBIM:
To discuss Strategic Account Management Program best practices
To ask questions about your Strategic Account Management Program
To learn about the Center’s Relationship Assessment Questionnaire
To learn about the Center’s Assessment tools and process.

Karl Hellman & Wesley Johnston: The Economics of Poor Hiring Decisions - presented by SMMConnect.com

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