This quarter’s SEI Executive Membership blog discusses the progression of customer-supplier relationships. This continuum begins with transactional relationships and ends with a strategic relationship of equal partners. We will focus on the right side of the continuum.
The Progression of Customer-Supplier Relationships
Sales literature is filled with different models of this continuum. Many of these models use sets of three. In Key Account Management and Planning, Noel Capon describes three steps along a continuum: vendor, quality supplier, and partnership. In Rethinking the Sales Force, Neil Rackham identifies three types of customer–supplier relationships: transactional, consultative, and enterprise. Churchill, Ford, and Walker, in Sales Force Management, list the three levels as market exchange, functional relationship, and strategic partnership. For Senn, Thoma, and Yip, in Customer-Centric Leadership, there are three customer asset management perspectives: sales, consultative, and network. In all of the above cases, and others listed in sales literature, the relationship progression describes an increasingly closer, deeper connection, with broader value for both companies as they move up the continuum. For example, the explicit involvement of both parties in product innovation (value co-creation) is not part of the first relationship level but is desirable in the third.1
Be on the Right
What is the value of being on the right side of this progression for both the customer and the supplier? And, how do you get there?
To answer these questions let’s start with two examples. The first example involved Ecolab, a large company with a broad product line, but are best known for selling chemicals, especially dish soap, to restaurants and hotels. An Ecolab District Manager (DM) told me about the impact he had on one of his small independent restaurant customers when he was a salesperson. He had managed a small French restaurant account for some years and knew the owner and manager well. The restaurant was located in Houston, near Rice University and the Texas Medical Center. There was a period of time when the restaurant had a problem, a significant drop in the number of customer visits. After some discussion between the sales rep, the owner and the manager, the Ecolab salesperson recommended some menu changes that he felt would be better options for the restaurant’s health conscious and environmentally aware customer base. He also suggested some ideas to market these changes. Business improved 30% almost immediately. They went from unprofitable to very profitable.
The second example involved Chevron’s problem locating and quantifying hydrocarbons in the complex geology in Nigeria. The Global Account Manager (GAM) for Halliburton’s Landmark division was aware of this problem. Working with the Chevron Earth Sciences Asset Manager for Nigeria, they created a joint team that worked together on the problem for almost 3 years and developed a seismic interpretation solution. This solution increased Nigerian Asset production by 17%. This was approximately 10,000 BOE/Day – that’s an additional $100,000,000 per year.
Some questions to think about:
- Why was a dish soap salesperson asking questions about a restaurant’s menu?
- Why did he recommend changes to the menu and a marketing plan?
- Why did Landmark, a product company, help Chevron develop their Nigerian oil field?
- What would the restaurant manager do if an Ecolab competitor’s dish soap was $1.00 less per pound?
- What would the Chevron Nigeria Asset Manager do if a Halliburton competitor has a completion tool that is $15,000 versus Halliburton’s $17,000?
The Value of Business Value
The answer to the last two questions is that the customer would likely tell the respective competitor to get lost. The Ecolab DM and the Halliburton GAM added value to their customer that went way beyond the value of their product. Looking at this visually, where are these two salespeople on the relationship progression described in the ladder below?
This ladder is another way to describe the progression of customer relationships. It is adapted from MIller-Heiman’s Large Account Management Process.2 I like it better than the models described above because of its simplicity and clarity. The relationship our two salespeople have with their respective customer is solidly on the top two steps of this ladder. They both made an important contribution to the business; they added a lot of value to their customers. So in both cases, competition, price and specific features are less important.
Why do Salespeople do this? (Questions 1-3 above)
Much of current sales literature discusses the necessity of salespeople to add value beyond communicating the value of the features and benefits of their products. This is especially critical when this kind of information is readily available through Google. Today a customer doesn’t want a salesperson to talk about products and services. But Google can’t provide a customer with what the DM and GAM provided. Why? Because the most important criteria necessary to solve these problems was knowledge of the restaurant and knowledge of the Chevron Nigerian oil field. In other words, the critical difference was intimate, deep customer knowledge and a passion to learn and use that knowledge to improve the customer’s business.
At the Sales Excellence Institute, we call this passion the two C’s that separate a good, adequate salesperson from a great salesperson. These two C’s are Curiosity and Confidence. Curiosity causes salespeople to learn more about a customer’s business than what is necessary to sell the features and functions of products or services. Curiosity is often accompanied by and encouraged by empathy. Because the Ecolab DM was curious, he asked questions that determined there was a problem. Then he identified the nature of the problem. Because he was empathetic he looked for solutions that had nothing to do with himself. Then he was confident that he knew enough about the customer and the restaurant business that he could find a solution.
In the Chevron example, the GAM also had confidence in Halliburton’s ability to provide resources to help solve the problem. The confidence we are talking about is confidence in one’s own ability and in the supplier’s ability to deliver resources to solve the problem.
Curiosity and Confidence – When salespeople have these traits, customers get real business value from the relationship and suppliers get increased customer retention and profitability.
As an aside, when interviewing salespeople, look for the traits of Curiosity and Confidence. It is relatively easy to determine if the candidate is curious and confident, especially compared to other equally important traits like honesty, integrity and work ethic.
- Solving customer’s business problems that are beyond a supplier’s product/service scope is the value differentiator for salespeople
- Salespeople that do this have higher customer retention, profitability and growth and less competitive threats
- Confidence and Curiosity are traits that are necessary to create this kind of relationship
- Joel Le Bon, Carl Herman: Key Account Management, Business Expert Press, 2015
- Robert B. Miller, Tad Tuleja, Stephen E. Heiman: The New Successful Large Account Management, Business Plus, 2005
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