Relationship Evaluation Process
Given the number of Clients in a firm's portfolio it is useful to be able to rank them in order of priority for strategic planning and Client management. One analytical technique that can be used takes the relationship and other factors and allocates scores and weights to each. An example of this method is shown in Table 8.2 below, where three Clients are evaluated. Each Client total is found by multiplying weight by score.
Table 8.2 Client Relationship Evaluation Matrix
Most firms classify their most important Clients as Key, Strategic, Premium, and so on. Given the dynamic nature of business and relationships it is useful to review the status of these Clients at least annually or when some trigger causes a change. An example of a trigger is when a Client increases their expenditure or range of services. This would raise the relationship status. Another trigger would be a change of buyer in a Client, or re-organisation, which might lower the relationship status until it develops.
Relationship tracking is the process of regularly reviewing the status of a Client relationship possibly carried out during Client Planning meetings when the multi-disciplinary team discusses business development progress.
Many firms are using more sophisticated marketing techniques to target Clients with whom they wish to develop trusted business adviser relationships. One of these is market segmentation, which clusters those groups with similar requirements across sectors and service disciplines. These research-based analyses are often very powerful indicators of buying behaviour and, if followed, can speed up the process of increasing Client expenditure with your firm.
Typical business drivers researched in market segmentation
• Service usage - type, quality, quantity, breadth, depth.
• Pressure and influences - cost and management initiatives, changing competition.
• Buying practices - fragmented or rationalised supply, use of tenders and bids, adversary or partner.
• Supplier relationships - description of how this is perceived, contribution to success of business.
Supplier selection and evaluation factors
• Technical support.
• Contact and relationships.
• Information and communication.
• Image and reputation.
SEGMENTATION BY PURCHASING BEHAVIOUR
A Client supplying plastic materials in various thicknesses and qualities wanted to improve its market position. At present its factories and sales team covered Europe; within each country there were 5-10 sales people, each selling a particular thickness of material for various applications, based on local factory output. Some were selling thin film, coiled material, others sheet and another team were selling strips. Research interviews were conducted with around 100 of their Clients across Europe in various sectors to discover buying preferences. By asking specific questions about buying habits, priorities and preferences, it was possible to create a number of different behavioural segments, each being given a memorable name for internal classification purposes.
• Alex Alliance' - these Clients had a preference for forming supplier alliances.
• 'Benjamin Benchmark' - these Clients compared attributes of suppliers with those of other services.
• 'Commodity Kevin' - these Clients put price first, looking for the best deal.
• 'Serge Service' - these Clients put service and delivery first.
• 'Techno Ted' - these Clients put technical expertise at the top of their agenda.
Eventually these types were colour coded for internal reference and planning.
The sales team was then retrained and given a behavioural segment identifier tool so that it could identify the most likely buying preferences, and to sell across the product range, offering a package to suit the buyers' different inclinations, regardless of sector. Market share was considerably increased. The sales team was then restructured to serve specific market sectors, including aerospace, automotive, construction, DIY and packaging.
Source: Marketing Improvements Group.
AN EXAMPLE OF SEGMENTATION
It is often useful to map the potential market for your services and use segmentation to target those Clients that you wish to satisfy.
Segmentation starts with a definition of the problem or issue to be resolved - for example, tax level too high.
We then look at the variables, such as:
• type of organisation - public, private, not for profit;
• location - national, regional, local;
- size by number of employees - up to 500,500-1,000,1,000-5,000,5,000+;
• sector - technology, public, food, transport;
• country - Europe, Africa, Asia, Americas.
Each variable is then mapped so that a route through each variable can be chosen. This is shown in Figures 8.2 and 8.3.
Figure 8.2 First Stage of Market Segmentation
Figure 8.3 Selection Stage of Market Segmentation
By mapping the variables, it is then easy to decide on the areas of focus. In this selection, the firm has decided to review the issue of taxes being too high and then to evaluate the different areas of focus. The route shown in Figure 8.3 shows that the selection comprises: private companies, with 500-1,000 employees in the technology sector, nationally located, in European countries.