By Harvey Dunham, Managing Director for Business Development, SAMA
By stirring the Board to force B2B companies’ CEOs to reduce the cost of their companies’ centralized functions, activist investors are unwittingly putting their most strategic customer relationships — and their colossal lifetime value — at significant risk.
In my role as Managing Director of Business Development for SAMA, I’m talking to customers every single day. And lately, I have received at least a half-dozen first-hand reports from our Corporate Member companies who have succumbed — or are actively resisting pressure from — their Boards to move their strategic account management programs out of their company’s central function organization and into either a business unit or region.
I won’t “name names,” but these include some of the world’s most venerated, recognizable companies. In all cases, activist investors are cited as the root cause and drive. The justification? To reduce costs by eliminating a handful of SAM program key roles in an effort to reduce costs and give shareholders a short-term profit lift.
Doing so is short-sighted, wrong-headed and flat-out self-defeating. Here’s why.
When done right, SAM programs work. SAMA research over the past two decades has shown, again and again, that a well-funded, well-executed strategic account management approach produces 2X growth (compared to a traditional approach), 10 percent higher margins and significantly improved customer satisfaction.
A SAM approach is required to sell innovation. According to research by Thomas Steenburgh and Michael Ahearne published in Harvard Business Review, senior leaders of companies express confidence in their ability to develop innovations but not in their ability to commercialize them. After studying more than 2,500 salespeople, those who effectively practice strategic account management dramatically outperform others in selling new products, services and solutions. The authors site SAM’s focus on balancing short- medium- and long-term growth in the service of helping their strategic customers achieve stronger business results — not just short-term sales growth.
Customers demand the ease-of-doing-business offered by strategic account management. Large and strategic customers do not want to deal with their suppliers’ internal complexity. They demand a single point of contact from their strategic suppliers who are
- Responsible and accountable for the entire relationship, including all of their company’s products, services, solutions and innovations — at all of the customer’s geographic locations
- Tied directly to the supplier’s senior leadership.
- Focused on helping them (i.e., the customer) become a better company
- Willing to organize their own company to achieve this outcome
And it’s not just this. Our current uncertainty about how much longer global economic growth will continue, how global political unrest will affect the future, and the threat of new disruptors in every industry leads to another sobering (yet often forgotten) reality: A supplier’s best chance of surviving the next recession DEPENDS on its largest, best managed and most loyal customers!
Note that the top 10 percent of a supplier’s customers produce more than 80 percent of a company’s customer lifetime value! Couple this fact with SAMA research showing that a SAM program, on average, saves at least one strategic customer per year thanks to the high, wide and deep relationships good SAMs cultivate. Clearly, your ability to weather the next economic and/or political storm will depend on a handful of strategic customers.
Given all this, our advice is clear.
To CEOs: Resist all activist investor pressure to send your SAM program back to your regions or business units. You would be much better served by putting your strategic accounts at the center of your strategy as your best insurance policy to ride through the next macro-economic crisis.
To SAM program leaders: Help your CEO by making the clear and undeniable business case for SAM.
To strategic account managers: Aspire to be exceptional in the eyes of your customers! As we know, top-performing SAMs are three times as likely as average ones to produce exceptional growth, profitability and customer satisfaction.