Note: Names have been changed to protect the mortified.
Bill Connor simply could not believe what he had just heard. He was devastated.
Sitting in his car in the visitor’s lot, eyes welled with tears and his head in his hands, he thought to himself, “What am I going to tell my boss? How am I going to pay for my daughter’s college?”
A few minutes earlier, in a fifteen-minute meeting, Bill’s life changed dramatically. Bill had just lost his largest account, Lassiter Logistics, resulting in a $1.5 million loss in revenue to the company and $90k in commissions to Bill.
“How did this happen?” he asked himself repeatedly in a state of disbelief. “They loved me!”
After Bill works himself through the stages of grief—denial, anger, bargaining, depression and acceptance—Bill will realize the signs of client defection were as apparent as the nose on this face. He just chose not to pay attention to the signs.
Bill was a self-professed “relationship guy” and as long as his relationship with the buyer was strong, Bill thought he had nothing to worry about. He had a nine- year relationship with Jim Cummings that included golf, late-night dinners and ballgames. They talked every day and Bill was confident both he and his company were “rock solid.”
So, where did Bill go wrong?
Unfortunately, this situation plays itself out approximately every six minutes all over the United States every single day and yet 99% of company executives still cannot answer the question with facts and data:
“Are your clients at risk?”
In this new world of big data, machine learning and predictive analytics, there is simply no excuse to not have an early detection system associated with client risk that provides actionable insights to prevent potential defections before they happen.
So, what were the early warning signs with Bill’s nine-year client, Lassiter Logistics? There were many!
A key measurement in Butler Street’s proprietary ClientFit® key account management program is relationships. Notice the word relationship is plural. We look at both the quantity and quality of those relationships. Unfortunately, Bill put “all of his eggs in one basket” with the buyer Jim Cummings.
When coached numerous times by his boss on how to expand the relationship, Bill always responded that “Jim insists everything go through him and that there would be a price to pay if we went around him.” Sound familiar? Two months ago, Lassiter hired a new CFO (Jim’s new boss) from outside the industry and, as fate would have it, the CFO terminated Jim Cummings one hour before Bill’s meeting. A single-threaded relationship is a sure-fire risk factor. A management change is another.
2. Operational Performance
Another sign is how the company is performing operationally v. historical performance and v. the competition. If Bill had paid attention, his company had more missed delivery dates, had more returned products and more credits issued than prior years. Jim Cummings accepted Bill’s “growing pains” excuse and that his company would be back on track in no time. But Bill was late in processing the credits, which caused using departments to become irritated and hold up signing off on the invoices. Additionally, there was a reduction in the number of products ordered over the past six months.
Bill dismissed the reduction in orders because the revenue did not drop due to a major new customer secured by Lassiter. “The revenue didn’t drop much, so everything must be ok,” Bill rationalized time and time again. This is where the optimism in sales, works against the salesperson. Anyone with experience in client retention will tell you that revenue is a LAGGING indicator. By the time the revenue drops, you may as well be pouring water on the ashes as the house has already burned to the ground!
3. Cross-Selling and Expansion of New Products and Services
Finally, Bill was not a believer in cross-selling additional products and services. His single-threaded relationship was made worse by selling a single product/service to Lassiter. He rationalized that Jim Cummings liked it that way. He liked specialization in vendors and often referred to the fact by not putting all his eggs in one basket, he would keep all his vendors “on their toes.” That seemed to make sense to Bill, because no one could touch his $1.5 million.
When the new CFO explained why he was making the change, he highlighted the increase in operational issues that Bill’s company caused Lassiter, but focused on the fact he felt they could consolidate the number of vendors by 80% if the right service level agreement and key performance indicators were put in place. Not being familiar with all the services Bill’s company provided, the CFO assumed his company was limited in service offering and was eliminated from the Managed Service Provider contract.
Bill Connors thought the customer “loved” him. That was the prevailing view that Bill’s boss was sharing with upper management. Unfortunately, Bill’s company did not have a system for detecting early warning signs of defection, resulting in the loss of a major customer.
At Butler Street, with over $2.5 Billion in customer accounts protected by our ClientFit® app, coupled with our world-class Key Account Management Training Program, your company will have the foundation to making client retention and expansion a top priority. The results will include a stronger brand, better client relationships and ultimately, profitable growth. Click CONTACT to learn more.