In this first of a two-part series, Sterling Chase MD Steve Eungblut explores the five most common mistakes that cause failure in today’s world of B2B customer-supplier relationships.
Regardless of your company’s past performance as a supplier, increasing demands on your customers have led them to place a much greater focus on cost-justification and return on investment. This means that customers are now demanding more value from their supplier relationships. However, suppliers often miss this, resulting in an increasing level of customer dissatisfaction across multiple industries. With more choice and greater access to information than ever before, more and more B2B buyers are now either switching to an alternative supplier or looking to re-negotiate agreements at a lower price for the same products and services.
It is important to consider that, from the moment a contract is signed, the value of the ensuing relationship will set out on a trend whereby its value will either be growing or diminishing in the minds of the customer’s key decision makers and influencers. This means that, to make your customer relationships sustainable, your sales and customer service teams need to take a systematic approach in which they work together to create ongoing tangible and incremental value both for the client and your own organisation.
Critically, you should aim to avoid the five most common mistakes that supply-side organisations make in their key and major client relationships:
1. Non-delivery against agreed targets.
In at least 75% of B2B customer-supplier relationships, suppliers fail to deliver against one or more important contracted performance targets. This is typically because their sales people either knowingly oversold the solution or their service delivery people naively agreed to targets which they didn’t fully understand when signing the deal. While delivering against agreed targets won’t grow the value of your relationships alone, a failure to do so will inevitably make your customers know that they aren’t getting the value they expected when they agreed to place the business with you.
2. Failing to deliver tangible and sustainable incremental value.
Most suppliers see themselves as adding value to their relationships by simply hitting their agreed targets. However, this approach typically causes the value of relationships to erode over time, particularly when these targets aren’t explicitly linked to business outputs (such as an increase in sales or a reduction in costs) or they don’t adapt to the customer’s changing business needs. Of course, a change in scope may require additional commercial consideration between the two organisations, but that’s different to constantly checking that your perception of value creation over time is aligned to that of your customers. If your company is not creating tangible incremental value for its clients in a way that stays relevant in the context of their changing business pressures, they will quickly start to question the value of the relationship.
3. Forgetting that the customer is king.
A lot of suppliers suffer from a failure to remember that the customer is king. This might be due to a clash of personalities in key positions, a culture of arrogance within the sales or customer service teams or a reliance on a process that is inadvertently geared towards the interests of your own organisation rather than those of the client. Despite the fact that relationships often break down because of the customer organisation not fulfilling its own responsibilities, a failure to remember that the customer is king will inevitably lead your clients to question the value they are getting from their relationships with you and consider seeking alternative suppliers.
4. Creating value that is missed by the decision making unit.
Unfortunately, many companies create tangible value for the customer organisation, but they allow the value to go unnoticed or unrecognised by the person or people who make (or influence) the decision to renew the supply contract. The result is that all of their hard work and achievements are ultimately meaningless when the decision to renew the contract is made. Don’t just assume that the people who you deal with on a day-to-day basis will sell for you at the level that the big decisions are made. They may not have the time, the motivation or the skills to get the right messages across to the right people in the right way to get the right results.
5. Failing to react to changes in the client organisation.
Another common mistake that prevents sales and customer service teams from adding value to their relationships is a failure to react to changes in the client organisation. A change in personnel in the customer’s decision making unit can completely destroy the value of your relationship if your teams are unprepared. This is particularly the case if a relationship encounters “new broom syndrome” whereby a new decision maker joins the client organisation and feels that he or she needs to demonstrate a change of strategy to achieve recognition. This can have even worse implications if the new person favours a competitor of yours that he or she has worked with in the past.
To make your relationships successful, your sales and customer service teams must systematically work together to avoid all of these common mistakes. In doing so, they should strive to not simply deliver against targets set out in the original service level agreement. They should also take a systematic approach to creating ongoing incremental (and, if possible, transformational) value that is perceived by the client as an important factor in differentiating you from the alternatives and in maintaining loyalty to you as a supplier.
To systematically succeed in avoiding these mistakes, as a sales or customer service leader, you need to put processes in place which enable your people to develop the necessary insight to deliver on your customers’ expectations, create additional value and react to changes in client organisations. This means putting processes in place which embed professional consultative selling skills, can-do attitudes and value-creating behaviours in all of your people (including the service teams – yes, your service people are sales people too), enabling them to consistently develop insight into the customer’s needs while taking ownership of any problems that arise, having a clear vision for where they want to take the relationship and executing against a clear plan that will get them there.
At Sterling Chase, our Innovator Model provides a step-by-step process that you can put in place to transform the value of your B2B customer relationships. To understand how you can apply the Innovator model to your own marketplace, don’t miss part 2 of Transforming B2B Customer Relationships, coming soon.
Written by: Steve Eungblut, Managing Director of Sterling Chase