Key Account Retention in a service business Tenacity Europe

Tenacity - Protecting Revenue All our clients are B2B companies offering managed services to very large clients Strategic Account Management Leading to Client Retention and Profitable Growth Clients for Life® client retention process Best practice in the Service Management industry Protecting over $ 23 billion Clients for Life protects over $ 23 billion in contracts worldwide

Key Account Retention in a services business The essence of Client retention and Contract profitability Why your Client retention strategy should be different for services How to overcome margin erosion with every contract renewal KAM tasks and processes in Key Account Retention Why What How

The 3 keys to achieving and sustaining Profitable Growth % Retention Increase Time % Increase % Profit Increase Awesome Leverage! Retain Existing Clients Increase Revenue from Existing Clients Sell New Business Explain: This really applies to larger accounts in the area of $500,000 or greater. An established company will achieve profitable growth in these three ways. This is in the order of the greatest magnitude: 1. The greatest is to Retain Clients 2. The second greatest increase will come from providing extra services to existing clients. 3. Sell new business to new clients. As an example, by improving the client retention rate 1–2 % per year, it is very possible to improve the profitability growth 10-15% per year. Account Accounts Sold 50 25 Lost 5 1 Which is Better? Flip Chart Example

What is the difference between a product and a service? In services value is to be created continuesly after the sales is done.

Client Decision The essence of retention and profitability Value Creation by the Organization Value Perception Client HOW IT WORKS Retention, margin and revenue are results. They all come from decisions clients make. Client Decision

MONEY FLOWS TO VALUE All organizations spend their money on things they consider to be of value for their future. To summon this up in one law of economics: money flows to value

(Bain & Co. from Harvard Management Update) 80% OF COMPANIES BELIEVE THAT THEY DELIVER A SUPERIOR CLIENT EXPERIENCE, BUT ONLY 8% OF THEIR CLIENTS AGREE WITH THEM.  (Bain & Co. from Harvard Management Update) 80 % 8 % We all consider money flows to value as a no brainer, but this research shows common sense is not always common practice. Actually more often it is not all that well incorporated as we believe it to be.

PERCEPTION OF VALUE Business Value Contract Value Service Value Perception of the Client That what is agreed upon in the contract. SLA/KPI Help achieving goals (outside the contract) Goals That what is mentioned on the invoice Invoice Business Value Contract Value Let’s dive into where we mess up and where also the opportunities are to get more money flowing our way, both in retention and in margins. Service Value Perception of the supplier

The Services Life Cycle High Problems the client experiences Value Gap Often there is a business reason for changing suppliers, - Ask for examples of why are we contracted but don’t we keep valued on that level because services have a life cycle The problem is at the end of the life cycle, co Fee the client is paying Low Time

The Services Life Cycle Value The client perceives value relative to what they are paying High Support The client is supportive, but questions the added value Too expensive The clients perceives the price as too high Low Year 1 Year 2 Year 3

The Services Life Cycle New decision maker High Problems This will happen at all accounts! The client experiences Value Gap Fee The client is paying Low Time

The Services Life Cycle Innovation High Additional services Innovation Low Time

How

Execution cycle report evaluate Sales process Contract Standard execution. Execute on contract and report on performance against kpi’s But when you (just) deliver what you promissed, that will get you fired as we saw in the services life cycle. This is also positioning yourself as a supplier on the service and contract level where you are interchangeable for any competent competitor. And when that happens, clients start to buy on price. Ask: How to solve this problem?

Manage value in services report Expectations session Sales process Contract Best practice in services: Don’t look back, look forward and do so on the decision making level. Ask for expectations in the next year, Report on impact on your cients business = report on expectations Expectations show you threats and opprotunities.

Expectations are: everything the client thinks is possible and necessary in the cooperation i.e. the clients definition of value

Account Management Processes Managing client expectations Managing Professional relationships Delivering technical expertise Here is a wrap up. Every key account management process should have a well structured way for managing expectations. Especially in services. Relationship management, sales and execution just aren’t enough to deliver a premium service leading to high retention and profitability. Value Perception Client

Questions for Discussion What is the average lifetime of a key client in your company? What would it take to lengthen the lifetime for key clients significantly?