Andreas, tell us about your journey as a Key Account Management Professional and how do you help companies achieve growth through focusing on their strategic partnership with the key account?
The focus of our activities at Hinterhuber & Partners is pricing, specifically value-based pricing and value quantification. Typically SAMs or CEOs of B2B and B2C companies approach us with the intent to achieve commercial excellence or excellence in pricing. We typically target and achieve margin improvements of 0.5-2% over 12 to 18 months during these pricing projects.
Our collaboration is based on two implicit premises: First, pricing is a critically important profit driver that is frequently not managed very well: unclear understanding of customer willingness to pay, sloppy processes, weak controlling, limited pricing and negotiation capabilities, absence of clear goals, heavy volume orientation and no clear roadmap in pricing. This is quite normal in B2B and also B2C, but the opportunity costs for this state of things are high.
Second, pricing is all about value quantification, i.e. documenting that higher prices are justified by incremental, tangible customer value, i.e. profit improvements. Also in this respect, very few companies have developed the capabilities that are necessary to withstand B2B procurement price pressure and thus, unnecessarily in many cases, respond by discounting, thus eroding company profitability without actually improving the competitiveness of their clients. Best in class companies take a different approach: they have developed value calculators or value quantification tools that document to procurement that the investment in a higher cost product is justified by documented quantitative as well as qualitative benefits that improve customer profitability. These value quantification tools thus show that it would be against the customer’s own interest to purchase the lower cost product. As a result, both parties are better off. The fundamental insight is thus: a focus on value helps to turn an adversarial relationship with procurement into a win-win relationship that improves customer profitability and rewards suppliers for doing so. Developing value quantification capabilities is a key requirement in this respect. Hinterhuber & Partners has recently conducted a research project with US B2B companies that shows that companies that have invested in building value quantification capabilities at the level of sales and account managers have higher performance than other companies that have weaker capabilities in this respect.
Sales and account managers thus have the possibility, through all stages of the offer development process and via value quantification, to transform the nature of customer relationships. Simply put, this drives profits.
When is the right time for businesses to start looking at their client relationships in the more strategic manner?
Suppliers cannot impose this – value is co-created, and customer participation is essential.
Most of the times, however, customers will be receptive to a strategic approach to managing the relationship with their suppliers as long as suppliers can clearly outline the benefits of doing so.
Software is eating the world and account management could not escape! Do you feel there is a need of having specialized platforms or software for strategic account management?
There is a huge gap between the promises and actual delivery in software. “A fool with a tool is still a fool” or so goes a popular saying.
Software is a tool, not more: 20 years ago many companies burnt a lot of cash in attempting to implement enterprise software without changing their business processes. With nuances, we are seeing the same mistakes again with account planning or price management software that companies hope to implement without working on the underlying processes, capabilities or infrastructure.
Software is beneficial, in many cases necessary, to work on the analytics in pricing, but pricing excellence goes far beyond software implementation.
Will such tech platforms become ‘a must have’ for account managers and their leadership or do you feel it constitutes ‘a nice to have’ capability?
Big data and the digitization of manufacturing industries are already fundamentally reshaping the pharma, IT, automotive and other B2B industries: take the internet of things, predictive analytics, remote services, or smart factories where companies such as Siemens, Rockwell or Trumpf are supplementing their traditional product-based businesses with IT-based services.
This, I think, is a very promising area: Wherever large data about customers, products or transactions exists, companies are well advised to invest in capabilities to handle them well in order to increase the competitiveness of their customers.
What is your one mantra for growing strategic client relationships?
Value first, then price.
Would you like to share an interesting business book you have recently read and what was the key takeaway for you?
I just did, and you know it!