Monday, October 20, 2014

Strategic Account Planning Part 7

How to Think About Opportunities

At the mere mention of the word opportunity, most sales guys’ nostrils flare, blood pressures spike and pupils dilate. Perhaps left over from some prehistoric caveman fight or flight gene, they seem to check their cognitive skills at the door and wildly rush ahead. Make no mistake, I like aggressive sellers. But, it’s important to take just a moment to fully understand the full story at an account before investing time, effort and company resources.

The full story comes at the crossroads of three very important variables:

1. Real dollars/gross margin potential
2. Estimated time to achieve business success
3. Level of effort involved with getting the business

Dollar/Gross Margin Potential
Many experienced salespeople miss the dollar/gross margin potential of their accounts for number of good reasons. Often, it’s hard to get accurate estimates of the potential in the early stages. This is one of the reasons why we believe that a certain amount of information gathering is important early in the stages of our work in the strategic plan. Generally speaking, as time goes by, the salesperson’s understanding of the precise opportunity involved should improve. Furthermore, most salespeople tend to be wrong in most of their estimates regarding accounts. This has to do with lack of training and oftentimes the level of thought put in to actually forecasting and thinking of the opportunity. I believe that this is an important skill for salespeople in the future. In many instances, we have recommended that sales managers constantly/continually work with their teams to develop forecasting skills. This, of course, plays well into the team’s ability to measure future potential not only in critical/key accounts (where a strategic plan is developed,) but in all accounts under their charge.

A number of ways to gather information around the real customer potential exist. As I like “good examples of bad examples," one of the worst methodologies is via contact with purchasing groups. Our experience dictates purchasing groups are trained to overestimate their purchases in order to improve their negotiating positions for lower unit prices. Some of your customers may have developed a level of partnership where accurate purchasing information is provided, I believe it is wise to approach the information with a degree of skepticism.

One of the best ways to check buying potential is via contrast and comparison against other similar accounts with verified data. This might be a customer of similar size in a similar business. Or, the estimates might come through ratios and similar breakdowns derived from complementary product. It is not uncommon to see rules of thumb which give an overall better understanding of potential.

Let’s think about this rule of thumb idea. Imagine we were selling office supplies. In a time when most companies are using electronic formatting and digital printing, a relationship between paper sold and toner used certainly exists. Similarly, we find relationships between classes of automation devices such as programmable controllers (automation computers) and field sensors (devices to measure variables which are connected to the programmable controller.)

Establishing a best estimate on a product by product basis gives you understanding, not only of your market share within the customer, but also provides a picture of products the customer is not buying from your organization. For many years, I have suggested our clients use a FOCUS (Fraction of Catalog USed) analysis to contrast product groups sold to the customer against one another using the types of relationships explained above.

Timeline to Success
Let’s break away from the money discussion and move on to another important factor; the length of time required to reach personal growth goals. While it might feel good to say that someday we are going to turn this account in to a million dollar deal, some day does not really allow us to do much towards establishing a real strategic plan. Therefore, if we are like many salespeople, judged by our ability to reach certain growth goals in a timely manner, establishing a timeline is important.

Breaking down our progress at specific accounts into easy to manage and measure steps is both strategically and tactically important. In a previous installment of this series, we talked about the importance of gathering customer particular data. This includes information regarding the customer’s own business model, plans for growth, and operation parameters within the business. Certainly, one of our milestone goals might be to complete the gathering of a subset of this information.

Because a portion of the overall strategy at each strategic account is to increase our importance and therefore attract more business, removal and replacement of small competitors might be a reasonable timeline goal. To redefine our goal we might state the plan calls for a tactic of eliminating short line suppliers selling only one or two SKUs to the account. It might single out companies selling via the internet.

Keep in mind the customer’s cost for administering and dealing with a small supplier is quite high; especially in an MRO environment. If you know an approximate cost of managing a purchase order at your customer, this data could be used to justify paying a little more for the same product purchased from you.

Another timeline goal might be the insertion of your company in to the internal processes of the customer. These include activities such as inventory and crib management, parts kitting, building sub-assemblies, or anything else that puts you in a place where you directly mesh with the customer. Instances where your team actually replaces or enhances the customer’s staff strengthens your position and moves you closer to your longer term strategic goal.

Bringing the strength of other member of your own team to the account might also be one of your time-centric milestones. If your company is one of the many using product managers, specialists, or other support people, why not add dates for their introduction and interaction with the customer. Any activity which creates a new connection between your company’s management team and the customer’s top brass is extremely valuable. Hence, date specific milestones should most definitely include connection of your management team.

Remember, this information must be managed with timelines and dates. What we’re looking for is something which allows us to say something like, “By December of next year, we will have accomplished steps one, two and three. Step four will happen by March first.” Each specific and measurable activity moves us closer to the strategically dominant position at the customer.

How Much Effort Will be Required?
One of the questions I like to ask salespeople is how easy or difficult will it be to get this work accomplished? Let’s just think about it for a moment. Some accounts require massive hand holding, others require lots of technical resources and still more are slow to adopt change.

An example which springs to mind is the difference between OEMs and End User Accounts. Many companies select the OEM sector in order to maximize the revenue in early stages without clogging administrative flow with small one piece orders. By focusing their efforts on the early stages of their growth, they build volume without need for extensive infrastructure.

The difference in account types is not just centered on the OEM/End User example. Some organizations have discovered customer segments which best match their own internal organization. It’s definitely worth exploring. Ask yourself, does our company think about different types of customers and the stress and strain put on our organization in the form of shipping, warehousing, logistical, and other value-add types of labor requirements? Why have these targets been established? Generally, going outside of the boundaries of your company’s sweet spot means extra work.

Further, some accounts are noted for poor or at least unmatched business behaviors. It might be safe to say that if your customer is operating with an unstable financial condition, there could be extra work generated in clearing orders through your credit department and/or collecting payment for your efforts.

On a similar note, if a customer has a known propensity for being very price driven, you may discover that it’s really not worth your efforts to constantly be spending time tracking down prices and doing the additional value engineering.

In many ways, what we want to look for is opportunities for which we have a large chance of success with a minimum of extra effort.
Thinking about the balance of effort, time and potential
On first glance, the thought of strategically identifying the properties of an account based on these three categories is daunting. However, failure to recognize their interaction can send a salesperson’s efforts whirling down the drain.

In many instances, the really huge potential available at an account might outweigh the lower scores in the time and effort categories. The truth is most sales guys are charged with a portfolio of accounts. Some possess lower potential but are otherwise easy to convert; the legendary “low hanging fruit” of sales. Others offer massive gains but require a great deal of time to convert or fall out of your organizations sweet spot.

There is no magic bullet one size fits all approach. Suffice it to say, nothing outweighs good judgment. Build a team, bring your company’s leadership team or other experienced sellers into the discussion.

But remember, skipping this step because it is difficult will only hamper your progress.

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