Dedicated to helping strategic account managers and key account managers manage improve relationships with their most important customers
What does cybersecurity have to do with you? If you’re selling digital solutions, the answer is: Everything. Steve Mustard, President and CEO of National Automation and President of the International Society of Automation, explains why SAMs should care.
Listen to this episode of The SAMA Podcast here.
By SAMA Editors
The winners of the 2020 SAMA Excellence Awards demonstrate the amazing things that happen strategic account management is enshrined at the center of a company’s business strategy. The details of what each of our winners accomplished (and how they did it) differ based on their size, history of account management, business drivers and strategic goals. But what these companies share in common is C-level commitment to the strategic accounts approach paired with incredible vision and execution from top to bottom.
The 2020 award winners pushed into new market segments, put themselves on their customers’ C-level agenda, and broke into geographies in which they’d never done business. Most of all, they proved that getting strategic account management right unlocks huge benefits in terms of growth, profitability, customer satisfaction and attainment of strategic goals.
Category 1: “Customer co-creation that creates mutual business value”
Winners:
Category 2: “Institutionalization of digitalization to create meaningful customer impact”
Winner:
Category 3: “Outstanding young program of the year (< 5 years)”
Co-Winner:
Category 3: “Outstanding young program of the year (< 5 years)”
Co-Winner:
Category 4: “Outstanding mature program of the year (5+ years)”
Winner:
Want to enter this year’s awards? You still can! It’s free to enter and can be done in less than hour. Click here for this year’s categories and for the submission form. Questions? Email Nicolas Zimmerman at zimmerman@strategicaccounts.org.
We’ve all been there before. You’re halfway through your initial contract with a new client. Things are going great. Sure, there were some growing pains in the beginning, but you feel you and your firm are adding a lot of value and you’re confident your client feels the same way.
So why is it that most of us always wait until the current contract cycle is about to wind down to engage about an extension?
At Shapiro Negotiations Institute, we coach the principle that the best negotiation occurs when you have leverage. This article discusses what you, as a supplier, can do mid-contract to make your upcoming negotiations more successful.
One common challenge for renewing or upselling business at the point of a contract extension is simple: alignment. Typically, coordination among departments and team members is never as tight as it is during the initial pitch exercises for that first deal. Once the work is won, however, the contract begins to take on a life of its own. This can become a challenge down the road when it’s time to re-negotiate.
In some cases, we’ve seen companies do a complete “hand-off” at various stages of the project. From winning the deal to kicking off, or from moving a project into a new stage of development, suppliers can become distanced from the actual work and, therefore, from the relationship with the customer. This is usually where an oversight role — like that of a strategic account manager, who’s responsible for the overall corporate relationship with the customer — can be helpful to coordinate everything from start to finish.
Even in working relationships that involve a SAM at some level, it is still critical to keep the team aligned. Especially in larger projects, we commonly see senior partners or directors forming the arrangements but more junior associates or managers doing the day-to-day work. Over the life of the contract, this sometimes results in providing extra services at cost for the good of the relationship or the “leaking” of various intel from your team to the clients.
In any case, we recommend having consistent communications and team check-ins at multiple stages through the life cycle of the project. Establish priorities, discuss future opportunities and even determine talking points around critical internal issues. A united front is imperative to successful (and smooth) renegotiations and extensions.
Negotiations are about promises and clear terms to create a value exchange. Misunderstandings can be catastrophic. Therefore, you should manage your client’s expectations at all times. We’ve coined this essential tenet “Cochran’s Law” after – you guessed it – Yours Truly.
Cochran’s Law boils down to the idea that satisfaction = reality ÷ expectations. If expectations rise, then reality – what your client receives from you — has to rise as well if you want to keep them satisfied. If you provide too little, you put your contract renewal or upsell in jeopardy. But if you provide too much, you spoil them for the next agreement and risk a drop in customer satisfaction.
There are a number of ways to manage expectations throughout the negotiation and project, but two of the simplest will never fail:
The key is to get credit for the extra value you provide and manage expectations on what you’re expected to deliver. Once you know the client(s) and what they value, you can maintain status quo or scale your value strategically to surprise and delight. For example, small tasks like setting up Google alerts to help your client track media mentions and performance could be highly valuable to your client with minimal extra effort on your part.
Your mindset is key. A trick of the trade – something you’ve probably heard a ton and possibly even scoffed at – is that you need to always be selling. Remember: While you’re delivering your work and building your relationship, you’re also always in a constant cycle of negotiation.
Your work product is part of that negotiation. The rapport you build personally and professionally factors into it, too. Another common mistake we see is people referring to the time before your contract expires as “the renewal cycle.” Many companies fall into this trap of “OK, we’re about one month away from our deal expiring, it’s time to start negotiating again.” If you begin your negotiation weeks before your current deal expires, you’re already on the back foot.
The effort you put in in the middle of the agreement is actually often the most valuable for several reasons:
Be prepared, be engaged and be committed. Those three traits will go a long way in your continued success.
Jeff is a partner at Shapiro Negotiations Institute and a frequent presenter and keynoter for Strategic Account Management Association. Connect with him on LinkedIn: https://www.linkedin.com/in/jeffcochran/
By Brandi Greenberg
Vice President, Life Sciences & Health Care Ecosystem Research
Advisory Board
If you like this piece, please register for the Oct. 8 webinar, “The new health system supply chain mandate: What every SAM needs to know,” hosted by SAMA and presented by Advisory Board’s Brandi Greenberg.
As a strategic account manager (SAM), you know how important it is to speak your customers’ language and see the world through your customers’ eyes. But for SAMs across the health care industry, the customers’ language and worldview are changing. With 100 of the largest integrated delivery networks (IDNs) now representing more than 50 percent of U.S. inpatient revenues, the relationship-building stakes for SAMs have never been higher; every customer interaction matters.
Over the last two years, mega-mergers between companies like CVS and Aetna resulted in different-in-kind delivery networks. And Amazon, Apple and Google each announced ambitious plans to improve health care efficiency. Amidst all of this disruption, IDNs see financial and existential threats on all sides: more demanding purchasers, more cost-conscious consumers and more lucrative services moving out of acute care settings.
To grow your IDN customer relationships, you need to understand how the health care market is changing and where your organization fits into the ever-evolving health care ecosystem. These days, there’s no shortage of commentary about health care disruption, but the most successful SAMs are able to go beyond the headlines to separate hype from reality, noise from news.
At Advisory Board, we work with over 4,900 provider organizations, 90 health plans and 400 suppliers to produce syndicated research studies about U.S. health care dynamics. Earlier this year, we took stock of the myriad forces impacting health care delivery and boiled everything down to four major health care trends that every SAM needed to know in 2020. And then COVID-19 struck, disrupting everything and rewriting the health care landscape in ways we are only starting to comprehend.
Our hope is that these insights can help you, as a strategic account manager, ask smarter questions, have more productive conversations with IDN administrators and position yourself as a trusted partner in improving health care delivery.
Trend #1: Payers, technology companies and consumers are all converging on “everywhere care,” changing the locus of control for health care services
Where are we now? While many wrote off house calls as a thing of the past, we were seeing renewed buzz around the benefits of virtual care and care at home even before the coronavirus struck. Patients communicate with their doctors over Skype, order drugs through smartphone apps and even perform basic genetic tests from home. What’s more, payers – both public and private – are expanding coverage for these services while employers are encouraging, if not mandating, that employees get care in the lowest-acuity setting possible. In response to COVID-19, the Centers for Medicare & Medicaid Services (CMS) has reduced barriers to access and expanded coverage of telemedicine services for Medicare patients, further accelerating this trend. “Everywhere care” offers patients the luxury of care whenever and wherever they want it; but as it becomes more common and widespread, it will erode the traditional care pathways that define your health system partners’ operating and financial models.
What to watch for next: It’s tempting to think that we’ll soon live in a world where all but intensive care is delivered at home. But before jumping to that conclusion, it’s worth analyzing some of the risks that come with everywhere care. For example, expanded virtual care can exacerbate the digital divide that excludes individuals without access to or fully understanding of the needed technologies. If we move too quickly without addressing such disparities, everywhere care could end up worsening some of the access and affordability challenges that it professes to alleviate.
Our take: Everywhere care is already decentralizing the locus of control for health care services. Efforts to slow the COVID-19 pandemic have forced both patients and provider organizations to get comfortable with virtual and home-care options far faster than anyone anticipated. Even after the coronavirus crisis subsides, your health system partners, who currently sit at the center of the care delivery ecosystem, will need to accept the “new normal” of everywhere care; they’ll need to work more collaboratively with other providers, payers and third parties to coordinate care and ensure both patients and their health information flow seamlessly across disparate sites.
Trend #2: All eyes are on independent physicians as agents of change, but independence alone won’t drive down costs
Where are we now? Back in 2009-2010, the architects of the Affordable Care Act (ACA) assumed that integrated delivery networks were the answer to health care’s affordability problem. Physician groups thus responded to ACA-era programs by running for cover, aligning with or selling their practices to IDNs. Today, the superior performance of physician-led ACOs has led public and private payers to rethink that assumption. Instead, these payers are implementing programs that encourage physicians to remain independent. With private equity groups, large practice management companies, and innovative practice models (like ChenMed and Iora Health) all looking to grow, physicians have many more options if they want to remain independent.
What to watch for next: This is not the first time the industry has shined a spotlight on independent physician practices. Back in the 1990s, an influx of investment in physician practice management companies (PPMCs) yielded a financial flop; eight of the ten largest groups declared bankruptcy by the end of the decade. This time around, we’re cautiously optimistic, both because many practices are focusing narrowly on specific population segments and because new technologies are enabling smaller practices to coordinate back-end administrative services and cross-continuum care. Still, independents’ success is far from guaranteed. Looking back, some experts posited that PPMCs’ fatal flaw was pursuing growth at the expense of integration. To succeed, they must avoid those pitfalls. Practices that integrate their processes, people and infrastructure in service to defined population segments will help redefine what physician practice looks like in the 2020s.
Our take: Regardless of ownership type or practice size, the most successful independent groups will be those with clear visions, effective governance structures and sufficient capital to withstand temporary disruptions. Even before COVID-19, changes in financial incentives and patient preferences were creating real winners and losers in the physician practice environment. The pandemic’s abrupt, massive disruption of routine office visits and elective procedures will likely force even more small physician practices to close shop or affiliate with larger entities, but only time will tell if those physicians align with IDNs or one of these newer alternatives. Just like IDNs, strategic account managers must understand which physician groups are positioned to be creative, collaborative partners over the longer-term.
Trend #3: Artificial intelligence (AI) is slowly starting to impact clinical care, but broader applications will be limited by the quality of data used to train those systems
Where are we now? In an industry that was overdue for change well before COVID-19 hit, many of us imagined how AI might enable more accurate diagnoses and better predictions about health outcomes. Early in 2020, many health care organizations were already leveraging AI to improve decision making and automate difficult or tedious tasks. For example, we’ve seen health systems use machine learning to manage appointment scheduling or aid in supply standardization efforts. Amidst the pandemic, IDNs and government agencies teamed up with Big Tech in attempts to leverage AI in both microscopic analyses of the viral genome and macro-level analyses of regions primed for potential outbreaks. While these developments are promising, we must temper the hype by remembering that the near-term opportunities for AI in health care remain focused on narrow, administrative tasks. We’re still a ways away from the “doctor robot” or “Big Brother” figure that many imagine when they think about AI in health care.
What to watch for next: Using tools like wearables and connected sensors, providers, payers and third parties have access to more data than ever before. However, many of the barriers that inhibit broader AI adoption pose even greater challenges in the clinical setting. For one, AI is only as good as the data and algorithms that support it. For example, some early clinical applications have revealed unintended racial biases in their recommended care pathways. To advance our comfort with and adoption of clinical AI applications, technology leaders must address patient and provider concerns with bias as well as privacy, workflows and reimbursement.
Our take: Even after the COVID-19 crisis subsides, we don’t foresee a near-term world in which algorithms drive end-to-end treatment. Still, SAMs must remember that your IDN customers are already using AI tools at many points along the care continuum, which, in turn, has implications for all the provider organizations you engage. Whether automating information gathering at intake or aiding clinical documentation, AI as a facet of health care delivery is inevitable. While it’s too early to know for sure, the national response to the coronavirus may also make certain kinds of health care surveillance and personal data aggregation more acceptable in the name of public health. Whether or not your organization’s solutions have an AI-component, you can help your provider partners ready themselves for AI applications by helping them identify their biggest needs and then thinking through the technology, staffing and workflow implications that any AI solution will bring.
Trend #4: Clinical innovations will continue to have transformative potential, but their value may be limited by affordability and workflow constraints
Where are we now? The last few years have brought dramatic advances in manufacturing techniques and treatment modalities, fundamentally changing the care delivery landscape. 3-D printed medical products can be personalized to meet individuals’ health needs and scaled to help address global ventilator shortages. Breakthroughs in treatment modalities such as gene editing technologies or bio-electric therapies may soon allow us to manage previously untreatable conditions. And one or more of the many novel coronavirus drug and vaccine candidates, in trials at the time of this writing, could transform the trajectory of the disease. All of these clinical projects and innovations hold incredible potential, but life sciences leaders must ensure that they are affordable, integrate into clinician workflows and are backed by evidence that supports their medical value – not just their safety and efficacy.
What to watch for next: For many IDNs, innovation is as much about investing in novel technologies as it is about managing the appropriate use of those new (and often expensive) clinical tools. In the coming years, we anticipate more payer and provider scrutiny of all clinical innovations – with a hyper-focus on affordability, efficiency and evidence to support appropriate use. We also see growing purchaser interest in creative contracts that align manufacturer and purchaser incentives. This includes not only contracts with bonuses or penalties tied to clinical outcomes, but also contracts that encourage wide-scale use of vaccines or curative therapies (e.g., Hepatitis C).
Our take: Your companies may be the ones driving clinical and technological innovations, but your success as a SAM will depend on your ability to understand your provider customers’ processes and pain points. Make sure you understand how each innovation will fit into clinician workflows, reimbursement models and broader population health initiatives. Be prepared to help your IDN customers understand not only the clinical benefits of your technology, but also how your innovation fits into the larger web of activities required to improve patient care.
Trend #5: COVID-19 changes everything; at the time of his writing, we just don’t yet know how or for how long
Given the rapid pace of change in state, national and global efforts to fight the COVID-19 pandemic, any attempts to summarize “where we are” or “what to watch for next” will be out of date well before publication of this article. Our nation’s initial response laid bare our health system’s weaknesses and vulnerabilities. But it has also inspired newfound reservoirs of creativity, heroism, scientific advancement and public/private partnership. And it has unleashed a wave of unprecedented regulatory changes, cultural changes and economic changes – with short-term and long-term implications we can’t yet fully surmise. Among the questions we think all health care leaders – in any part of the health care economy – should consider are:
While there are no easy answers to these questions, we anticipate that the COVID-19 crisis will force all industry stakeholders to step outside their silos and seek collaborative, cross-industry solutions to these and other emerging health care challenges.
How SAMs can help providers navigate the path forward
When we project likely trajectories for each of these trends, clear best- and worst-case scenarios emerge. Virtual care will allow patients access to care at any time and in any place, but we run the risk of improving access for some at the expense of others. Propping up independent physicians may counterbalance health systems’ market dominance, but if independents don’t integrate well, then they too will fail to reduce costs. Artificial intelligence tools could prove to be a silver bullet in improving efficiency in health care, but those applications could perpetuate biases and threaten patient privacy. We may achieve unthinkable success in treating the un-treatable, but only if providers, payers, and consumers have the will and the way to adopt new technologies. And society’s response to the COVID-19 crisis could accelerate the adoption of game-changing clinical and technological innovations, or it could wreak such economic and societal havoc that much of our health system will need to be rebuilt.
Collectively, the top trends of 2020 will inevitably shift the balance of power across industry segments; in some cases, the locus of control shifts to payers, other times to consumers and other times to third parties. However, no trend effectively bridges the existing gaps across industry stakeholders. Moreover, the COVID-19 crisis exposed just how fragmented and misaligned our health care infrastructure is today. Outstanding questions around information ownership, social determinants of health, affordability, public/private partnership and change management will be of utmost importance to your provider partners as they navigate the eventual post-COVID-19 health care landscape.
If your business is in any way tied to health care, we hope that our insights can push your thinking on the actions you can take today to support your health care partners in the future. Download and share our infographic that supports this article and join our Oct. 8 webinar, “The new health system supply chain mandate: What every SAM needs to know” to learn more from Advisory Board.
Brandi Greenberg is Vice President, Life Sciences & Health Care Ecosystem Research, at Advisory Board
About the Advisory Board:
Advisory Board helps executives and future leaders in health care work smarter and faster by providing provocative insights, actionable strategies, and practical tools to support execution. With 40+ years of experience, a team of 250+ experts, and a network of 4,900+ member organizations that span the payer, provider, and supplier industries, we support life sciences firms’ commercial leaders with research and educational resources that develop market strategy, enrich customer insight, and more.
By Raj Parekh, Partner, CuebridgeCX
According to Gartner, it’s the “new competitive battlefield.” Per Forrester, 84 percent of firms aspire to be leaders. In strategic account management, companies have to address the never-ending question of how to differentiate themselves and gain market share. And yet most SAM organizations — large and small — haven’t tapped this potentially huge source of competitive differentiation.
I’m talking about customer experience management (CXM), which I would argue may be the single most important investment a company can make in today’s cut-throat business climate. It is absolutely essential to success today.
Leading industry publications and consulting companies have conducted significant research into the growing trend and have found that:
CXM vs. CRM: Do you need both?
Yes! (And here’s why.)
The reasons lie in how these systems are built and the purposes they are built to fulfill. CRM systems are focused on opportunity management, while CXM systems are focused on managing the ongoing delivery of value and the assessment of outcome attainment. CRM tools are not designed to manage triggered work streams or focus on sustaining and protecting ongoing revenue and client relationships – all activities that are fundamental to the successful implementation of a strategic accounts approach. This is where CXM shines.
First, a definition of terms:
CRM CRM software keeps sales processes organized and aligned with best practices up to the point that a deal is closed.
Value Selling A sales approach that focuses on benefiting the customer throughout the life cycle of your relationship. Account managers are focused on taking a consultative approach to selling, such that customer decisions are based on the overall value potential of the supplier’s products and services.
Customer Success Once a deal has closed, customer success continues the relationship by helping to deliver on the promises made during the sales process. Customer success is focused on retention, loyalty and advocacy.
Add them all together, and you get customer experience management. Bottom line: You need both CRM and CXM for your business to succeed.
The basics: What CXM actually is
Does introducing CXM mean implementing a completely separate system from my existing CRM? In a word: No! Customer experience management is complementary to your CRM. When done right, CXM helps optimize your overall technology investment by laying customer experience functionality on top of your existing CRM. How? By bringing the power of digital transformation to your customer relationship through enabling your strategic account managers to provide superior insights and experience to their customers at every stage in their journey with your company’s products and services.
The Customer Life Cycle: From Awareness to Advocacy
With the introduction of digital natives among client organizations, CXM has emerged as the next frontier for account teams. For companies to survive and thrive, cultivating and focusing on growing existing customer relationships has become integral to strategic planning and operational execution.
The implementation of CXM is the ultimate solution.
| Traditional CRM | Next-Gen CXM |
| Unified System | |
| Key accounts data and essential intelligence is spread across the organization (financials in external systems, plans in PowerPoint, Excel and Contacts & Opportunities in CRM, Google search, et al.) | Under one Unified application, CXM combines data silos and digitizes functions by leveraging CRM, social media, and financial and contract data to deliver a superior client experience across their life cycle with your company. |
| Insights to Action | |
| No standardized way for management to trigger best practices and required field actions in real time | CXM system triggers workflows on real-time basis for account teams to take time-critical action to service clients effectively, stay ahead of the competition and be consultative |
| Best Practices at Scale | |
| Best practices are often not standardized across the organization. Disparate approaches rule the roost. | CXM systems are designed to coach users and allow critical thinking at the point of client engagement. It provides periodic updates and expert guidance to users for effectively performing their day-to-day tasks |
| Enterprise Memory | |
| Account intelligence is tacit and ad hoc. Risk of data loss due to employee attrition negatively impacts future growth. | CXM system maintains enterprise memory by combining data like Client 360, activities, engagements, etc. |
| Employee (User) Experience | |
| CRM adoption among employees/users is challenging. Account teams often wonder, “What’s in it for me?” While CRM provides visibility to leadership, it struggles to provide value for the actual users, i.e., the account managers. | Successful CXM systems are designed to add value, simplify day-to-day task management, reduce tedious data entry and create essential utility for the account teams. For leadership, they provide visibility into account team activities and productivity. |
Your customers deserve the best service. By combining CRM with CXM, your business will increase revenue, garner and retain new customers, increase credibility with existing customers and create lasting trust with your long-term relationships.
CuebridgeCX LLC, specializes in key account management and client engagement technology. CuebridgeCX offers out-of-the-box customer experience management (CXM) solutions and value-based go-to-market services. www.cuebridgecx.com
Many sales teams are being asked by their B2B customers to reduce prices to support them during these difficult economic times, a pattern that is all too familiar for many sales teams. This article proposes an approach on how suppliers can respond to this procurement tactic and how sales organizations can move the dialogue back to a value-adding conversation with the customer and their professional buying team.
“Never let a good crisis go to waste.” The quip Winston Churchill formulated in the ‘40s has become a business management mantra. Any economic downturn is used as an excuse to optimize company cost structures and to improve inefficiencies. The COVID-19 health crisis turned economic crisis is no exception.
The resulting actions by many companies and their respective procurement functions will make many B2B suppliers feel like they’re living through “Groundhog Day,” receiving yet another request to support their customer during these unprecedented and extremely difficult times.
If you are in B2B sales, you either have been – or soon will be – contacted by your customer’s procurement team asking for help or – to put it more bluntly – for money.
Why your customer asks for money
Let me be clear: This time around, we are indeed in an extreme situation with end-consumer demand tumbling fast, corporate investments on hold and world trade under extreme scrutiny. Value chains and supply chains are disrupted, and “cash is king” more than ever before. In these circumstances reducing costs fast is for some businesses a matter of life or death. Every stone needs to be overturned to see how the cash burn rate can be contained and how cost can be reduced fast.
Such price reduction requests from your buyers will follow a standard trajectory, namely:
(1) Savings and cash-flow targets will be defined by your customer’s CFO and passed onto his or her procurement function for execution.
(2) The existing supply base will be grouped into categories depending on their contractual value to the business.
(3) Suppliers will then be approached and asked to lower prices immediately by a certain percentage and/or to increase payment terms by X number of days.
The size of these requests will be based on the classification category the supplier falls into and will often be accompanied by direct or indirect threats to reduce contracted volumes or contract lengths, as well as suggestions to restrict access to future business opportunities in case the supplier does not swiftly support the customer demands.
While aggressive tactics like these might be merited under certain circumstances, they more often risk causing serious harm to customer-supplier relationships by destroying trust that’s been carefully developed over the course of years. This can endanger supplier collaboration on new product development, on supporting future market expansion plans or mitigating tight supply situations, leaving the buyer’s business at a competitive disadvantage and resulting in lost sales and lost market share in a worst-case scenario.
Despite these significant risks, the approach has become a regular occurrence of many procurement organizations, who apply these tactics on a regular cadence – crisis or not.
How you should respond to the requests to cut prices.
So how should your sales team react to these cost-cutting requests by your customers and their buying teams? These aren’t easy conversations to have, but there are ways to manage these exchanges that can actually allow you to benefit from this buying tactic.
First and foremost, maintain an open dialogue with your customer – even if they have decided to engage in these rough cost-cutting tactics. Your instinct will be to respond tactically. Resist this temptation in favor of maintaining an open and consultative posture vis-à-vis your customer.
Equally important: Before you respond to your customer’s request for “help,” map out how you will structure your response. In these situations, it is crucial that your communications be clear and concise. The following five steps are designed to help engage your customer in discussions that divert their attention away from pricing and toward discussions about how and where you can offer meaningful help to your customer in these difficult times.
Step 1: Care about your customer.
This may sound straightforward, but it is the most commonly neglected area by many sales teams, especially in high pressure and extreme situations. Caring means building a thorough understanding of your customer’s end-to-end value chain, starting with your own supply base all the way up to your customer’s customer and the end consumer.
Ask yourself: Where in the supply chain is value added or lost? What combined or independent actions by you, your co-suppliers or even your competitors could lead to improved efficiencies for the customer? How can you help realize these efficiencies? What savings could be derived by optimizing your supply chain, e.g. through adapting the minimum-order quantities, by elaborating improved forecasting mechanisms or other creative ideas? What are your customer’s total-cost-in-use elements that you could work on without decreasing your per-unit prices?
Do not expect your buyer to know the ins and outs of the value chain! For any efficiencies you identify, estimate their value and determine what support you would need to implement them.
Step 2: Compete for your business and understand your level of competitiveness.
Many suppliers believe firmly that they are strategic to their customers. Sorry to break it to you, but in many cases this is not the case. In reality, your buyer has specific expectations of you depending on the spend category they’ve put you in, and nothing is more counterproductive than misalignment between you and your customer on this front.
That is why it is of paramount importance that you clearly identify how and where you fit into your customer’s supply chain. A good approach is to self-apply the tools your buyer is using to categorize you – like the Kraljic matrix. .
Once you have determined the supplier category you’re in, you will be in a much better position to understand your customer’s needs and expectations – and, as a result, how you can help them with their current predicament. Take your findings and start over at step 1, readjusting your proposal(s) to reflect your competitiveness and strategic position.
Step 3: Continuously improve
It may seem like an obvious point, but it’s an area I found most sales teams underperforming during my procurement career. Simply put: Do not wait for your buyer to request price cuts. Rather, proactively suggest interventions and efficiencies in your supply chain that can anticipate and even mitigate your buyer’s problems. If you regularly showcase an understanding and support for your customer’s business challenges, you will be much less likely to fall under the scope of a tactical cost cutting program in the first place.
In case you have been lagging behind in this area, take this opportunity to announce (or reiterate) your commitment to continuous improvement in this regard and try to lay out a multiyear plan to contribute to your customer’s competitiveness moving forward. Keep the focus on the measurable value you bring to the partnership. Every crisis will come to an end eventually, and your customer wants to make sure they’re doing business with suppliers who contribute end-to-end value.
Step 4: Communicate clearly, proactively and regularly
Understand your individual buyers’ challenges and how you can contribute to keeping their internal stakeholders happy. During a price-cutting exercise, your customer’s CFO and CEO might be your procurement counterpart’s most important stakeholders. Manage your communication approach with an eye to supporting your buyer’s efforts to communicate internally, e.g. by providing your buyer with valuable market information on your input price developments in a format that their CFO can understand. This will help your buyer to better position opportunities and risks with regards to these cost-cutting efforts.
Map out which stakeholders your buyer and your organization need to influence, and create an action plan that showcases your commitment to helping your customer’s organization. Who is important? Who is influential? Figure 3 shows a simple stakeholder assessment tool that can help clarify your communication approach.
Step 5: Define your goals
This may feel like an obvious point, but in my experience it’s another area suppliers tend to overlook, namely: What do you want to get out of this customer relationship? What does success look like to you? In the absence of clarity, your buyer will just assure you care only about increasing their margins – which, to them, will offer the perfect justification for demanding price concessions. To avoid this, provide them with your short- and long-term vision and seek to get them excited about the future value you plan to co-create together.
In my many years as a procurement professional I did, unfortunately, have to engage in many cost-cutting exercises. And one thing I noticed is that those suppliers that followed these five steps tended to come through these programs much better than the ones that either fell in line and reduced their prices or those that took a more confrontational approach.
Jens Hentschel is founder of THE FIVIS PARTNERSHIP. Before that he served in a variety of senior, buy-side leadership and director roles at companies including Procter & Gamble and KFC. This article originally appeared on LinkedIn on August 17, 2020. Learn more about FIVIS at https://www.fivis.io/ Contact Jens Hentschel at https://www.linkedin.com/in/jenshentschel/
Over the course of this year we’ve experienced tremendous change. Whether it’s the way we work, the way we socialize or the way we get around, the COVID-19 crisis has fundamentally changed pretty much everything. Having shifted mostly to the virtual arena, negotiation is no exception.
As both a global account director AND the parent of young children, I can’t overstate the importance of negotiation skill. Whether it is negotiating a multimillion-dollar contract, compensation particulars with a potential employer or appropriate screen time with your children, strong negotiating acumen is critical for survival.
While virtual negotiations might be perceived as time and cost efficient, if they’re not done right they can hinder social awareness, social interaction and cooperation. Having worked in different countries, cultures and roles, I’m cognizant that myriad nuances must be taken into consideration to promote smoother, less contentions negotiations. However, I have observed that the need to be a skilled negotiator is agnostic of culture, industry, profession and job level and that certain negotiating principles are near universal.
Here are my top five.
#1: Make the first offer. There is a widespread belief that it is wise and strategic to let the other person make the first offer. However, there is virtually no research that supports this claim. In fact, research shows a strong and powerful positive effect of making the first offer.
Admittedly, it does takes courage to make an offer, especially in situations of ambiguity or when you’re in a low-power position. However, first offers have a strong anchoring effect, which exert a strong pull throughout the rest of a negotiation. Even when people know that a particular anchor should not influence their judgments, they are often incapable of resisting its influence. As a result, they insufficiently adjust their counter-offer away from the anchor.
#2: Focus on differences. Conventional wisdom says that we negotiate to overcome the differences that divide us, so we look for win-win agreements by searching for common ground. Common ground is generally a good thing, yet some of the most overlooked sources of value arise from “differences” among the parties.
Differences of interest, priority or hierarchy-of-needs can open the door to unbundling different negotiation elements, leading to outcomes that potentially give each party what it values the most, possibly at the least cost to the other.
#3: Zoom-in on interests, not just issues. Three elements are at generally play in a negotiation:
• Issues: on the table for explicit agreement
• Positions: where each party stands on the issues
• Interests: each party’s underlying concerns.
Don’t just negotiate the issues. Great negotiators understand that the dance of opposing positions is only the surface game, and they focus instead on probing behind their counterpart’s positions to identify their full set of interests at stake. Before any negotiation begins, seek to understand the interests and positions of the other side, and weigh/measure them against your own interests and positions.
#4: Listen. There’s a widely held assumption in the business world that negotiation is mostly about talking and that the best negotiators are the best conversationalists. That view overlooks perhaps the most crucial aspect of the negotiation process: listening. In the words of de Callières, “one of the most necessary qualities in a good negotiator is to be an apt listener.” Your attention should be focused on the words and actions of the other side, your own words and actions, and the effect of your words and actions on the other side.
#5: Help your counterpart sell. The person on the other side of the table might agree that your offer is reasonable, but they will still reject it if they can’t sell it to others in their organization. Your job as a negotiator is not simply to convince the person with whom you’re negotiating but also to help them be an effective ambassador for you when they speak to their boss, their board, their partners or others who have a stake in the outcome. Keep an eye on all of the people who can influence the negotiation on their side and help craft a narrative that will allow your counterpart to get the buy-in he or she needs.
Final thoughts
These are some key principles that have helped me negotiate large and complex contracts at work and also keep the peace with my young children at home. One bonus tip from personal experience: To be a good negotiator, you must practice patience.
Patience is difficult, especially when you have a deal that is constrained by a time limit imposed by a leader or a contract expiry. But if you’re impatient or time constrained by a deal that isn’t moving fast enough, you may make unnecessary concessions in order to get it over the finish line. This can have long-term consequences.
It can also be counterproductive, as the other side may be less satisfied with a concession made easily in quickly, as they will perceive it as being of low value. Practicing patience, whether with your customer’s Procurement team or with your children, encourages flexibility and provides time for the other side to accept otherwise-tough choices.
Further reading:
“6 Habits of Merely Effective Negotiators”
“Should you Make the First Offer?”
“Five Reasons Good Deals get Rejected”
Kunal Bhatia is senior global account director at Johnson & Johnson, where he has worked for 16 years in a variety of sales, marketing and leadership roles. Connect with him on LinkedIn.
By Jonathan Hughes, Partner, Vantage Partners; Ben Siddall, Partner, Vantage Partners; and David Chapnick, Principal, Vantage Partners
In November 2010, Jonathan Hughes, Aram Donigian, and Jeff Weiss published an article in the Harvard Business Review titled “Extreme Negotiations” that highlighted lessons in effective negotiation under extreme pressure from the U.S. military that also apply in the business world. Today we revisit those lessons in a very different world. The COVID-19 pandemic has shaken world markets, created significant political and financial instability, and reduced business predictability. Many companies have experienced a slowdown in business activity, with resulting revenue losses over the past several months.
As the news changes every day, timeframes for recovery are uncertain and will vary significantly by industry sector. As we saw in the 2009 financial crisis and subsequent recession, challenging contract renegotiations are a predictable result of this new reality. As companies in many industries confront shrinking demand, higher levels of unused inventory and increased uncertainty, they will undoubtedly turn to suppliers for cost savings while simultaneously looking for guarantees of supply assurance.
Sales teams will need to respond to heightened pressure from customers to reduce pricing, while negotiating to protect revenue and margins — even as they work collaboratively with customers to meet their needs and address their constraints. The current environment thus raises the stakes in customer negotiations and also increases the risk that negotiations become adversarial.
A key insight underlying the ideas in the 2010 HBR article is that negotiation behaviors tend to be deeply ingrained and are often reactive rather than deliberate, especially in high-stakes and stressful situations. Today’s environment can be viewed through the same lens. These strategies are not only useful at the bargaining table but can (and should) also serve to reshape planning and positioning far in advance of formal negotiations that we know are coming. A strong (collaborative) offense is the best defense.
Editor’s note: This article has been edited for length. The full piece, featuring multiple customer examples, will appear in the Fall issue of Velocity magazine.
Start by identifying key assumptions and subject them to scrutiny; use negotiation planning and execution to continually gather new information and revise strategies accordingly.
One hallmark of the “extreme” negotiation is a feeling of danger creating pressure to act fast to reduce the level of perceived threat. In the face of this pressure, negotiators often begin acting before they fully assess the situation. They act and react based on gut feel and initial perceptions. Given the added pressure to look strong and gain (or remain in) control, they tend not to test or revisit their initial assumptions even as the negotiation progresses. As a result, they often negotiate based on incomplete or incorrect information. This often leads to conflict, impasse, or, at best, a resolution that addresses only a part of the problem or opportunity at hand.
If you aren’t building and maintaining deep, wide relationships inside your strategic accounts, you’re in trouble. We talk to the co-founder and CEO of Arpedio about the importance of creating meshed relationships with your strategic customers.
Listen to this episode of The SAMA Podcast here.
Ever wonder how your customer’s finance team evaluates supplier proposals? It’s a lot easier to position your company’s value when you understand how the customer buying team thinks. Chris Ferguson – who has worked as an investment banker and held executive roles in sales and in finance – spills the beans.
Listen to this episode of The SAMA Podcast here.