Thursday, March 04, 2010

Creating Continual Value for Your Clients(From Neil Rackham, founder of Huthwaite)

Want to increase market share? Want to increase revenue per account? Want to build referrals? Of course: what organization wouldn’t? Building a strategic and tactical plan to retain and grow your existing clients will do all three. Building one plan, to fit all your clients, will do none.
Are your client retention activities carefully segmented by both profitability and buyer type? In his ground breaking research, Creating Real Value for Customers Neil Rackham, Huthwaite’s founder, argued that there are three core buyer types:
1. Intrinsic value buyers: the value is intrinsic to the product alone, they already understand what they are buying and how to use it, the sales force adds nothing. One of the most well known intrinsic value buyers is Wal-Mart. These are called "Transactional" customers.
2. Extrinsic value buyers: the value is not so much in the product, but chiefly in how it is used. These customers put a premium on help and advice. These are called "Consultative" customers.
3. Strategic value buyers: they demand an extraordinary level of value offering, the product or advise is insufficient, they are looking to leverage all of their partner’s core competencies and will transform their own organization and strategies to make the most of their strategic value relationship. These are called "Enterprise" customers.
The successful sales organization will sell to each buyer type differently, creating real value in the sales process itself. The successful whole organization, will manage the on-going client relationship to each buyer type differently, thereby creating continual value for its clients.
Think of your single most profitable intrinsic value client. Now think of your single most profitable strategic value client. These are your two extremes. Given that the value they purchased was dramatically different, it is highly probable that what they will continue to value, will be dramatically different. Therefore, if your client retention activities look the same for both these clients, you have a fundamental problem. They do not value the same things.
For example, offering on-going nuggets of advise to an intrinsic value buyer is more likely to build irritation then retention. In the same way, sending weekly product schematics with no explanation or support to an extrinsic buyer suggests that you do not understand them as a client.
Continual is the key. After all, what they value is not a surprise. You know the value that you sold and that they bought. You know their needs and their perceptions. Now, you just have to embed them throughout every touch point in your organization. Client focus by buyer type needs to become habitual.

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