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… Coverage

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CRM in B2B Markets • B2B Markets
• Customer Value Management
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• Key Account Management
• KAM in the software industry

G. SHAINESH
Professor of Marketing
Indian Institute of Management Bangalore
shaineshg@iimb.ac.in

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… …
…
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… Realities of Business Markets … Interconnected Relationships
M N

• Customised Markets G H
I

• Interaction – not action and reaction

• Multi-person interactions B
C
Continental
• Episodes within relationships
• Choices under complexity D E F

J K L

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… …
…
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… Buyer-Seller Relationships … Buyer-Seller Relationships

Developing Stage
• Learning Intensive mutual learning Stable Stage
Building trust through Routine and
• Investment investment & informal Institutionalization
adaptation
• Adaptations Exploratory Stage
Investment of time for
• Trust and commitment learning & distance reduction
No routines or commitment
• Distance Wider experience
– Social, Changed requirements
– Cultural, Insufficient resources
Pre-relationship Stage Lack of commitment
– Technological – High Inertia
What will we both get?
How much investment?
What adaptations?
What learning?
5 Trust? 6

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… …
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… Business Marketing Process … Value in Business Markets

• Value in business markets is the worth in monetary terms of the

Understanding Value Creating Value Delivering Value
economic, technical, service and social benefits a customer firm
receives in exchange for the price it pays for a market offering

Crafting Marketing Managing Market Gaining Customers

Strategy Offerings

Understanding firms as New Offering Sustaining Reseller

customers Realization partnerships
Market Sensing Business Channel Sustaining Customer
Management relationships
Anderson, J. and Narus, J. (2004), “Business Market Management – Understanding, Creating and Delivering Value”, 2nd Edition, Pearson Prentice Hall, Upper Saddle River, New Jersey
Source : James Anderson and James Narus (2004), “Business M arket M anagem ent – Understanding, Creating and Delivering Value”, 2 nd Edition, Pearson Prentice Hall, Upper Saddle River, N.J.

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… …
…
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… Value in Business Markets … Value Equations
Value = Benefits – Costs (other than price)
• Value is expressed in monetary terms e.g. rupee per unit , or rupee V f = Bf - Cf (1)
per year.
Vf -Value of the Offering by firm f ,
Bf - Benefits of the offering by firm f, and
• Benefits represent the net benefits i.e. all costs incurred by the
customer, except price, is deducted to calculate the net benefits. Cf - Costs incurred by the customer firm in obtaining the desired
benefits
Customer Incentive to Buy (CIB) = Value - Price
• The market offering comprises of two elements: value and price.
Value is what a customer firm gets in return for the price paid. CIBf = Vf - Pf
CIBf > CIBa (CIB for the Alternative)
(Vf - Pf ) > (Va – Pa) (2)
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9 10

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…
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… Levels of Customer Relationship
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…
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Align Account Management to bring greater
focus to high value customers
Increase
(per account basis)
Degree of Strategic Accounts
Resources
Integration Strategic Value (2-5 Customers)
Strategic Tier 1
Partnering
Key Accounts
Tier 2
(10-20 Customers)
Key Account
Relationship Major Accounts
Sales Process Tier 3
(50-75 Customers)
Major Account
Complexity
Relationship Tier 4 Service Accounts
(3000+ Customers)
Sales & Service
Relationship
Decrease
(per account basis)
Extent of Service and Cross-
Functional Support
Source: Dr Atul Parvatiyar
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The Customer Pyramid and Account …
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Management … Leaderspeak

IT Services - Kris Gopalakrishnan https://goo.gl/v1CTUi / https://bit.ly/2MbMqWf

Strategic Account Strategic Accounts
Manager/Team (2-5 Customers)
Tier 1 Buhler - Prashant Gokhale http://bit.ly/2sKxiJB
Key Account
Manager/Team Key Accounts
Tier 2
(10-20 Customers)
Major Account Major Accounts Pidilite & audience Vivek Sharma https://goo.gl/1RorPa
Manager Tier 3
(50-75 Customers)
Service Account Service Accounts
Representative Tier 4
(3000+ Customers)
Fevicol & stakeholders Vivek Sharma https://goo.gl/kyAHDX

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… CUSTOMER APPROACH EVOLUTION AT TATA STEEL …
… Tata Steel in 2000 – B2B Customer Base
Strategic
Partner
Collaborative
Working

Transactional Enterprise Accounts

(80 Customers)
Control era Tier 1
Key Accounts
Tier 2
(150 Customers)
1907 - 1992 1992 - 2000 2000 - 2004 Beyond ’04 Distribution Accounts
Tier 3
•Cost plus •Low Cost Producer •Segment •Comprehensive (~1770 customers served
through 50 distributors)
focus need fulfillment
•Ration •Technology upgrade
•Alignment •Integrative
•Price focus
negotiations Total Customers ~2000, Top 200 (10%) customers – 85% sales, Top 50 (2.5%) customers – 60% sales
•Long term
strategic view •Shared destiny ?
B Muthuraman, Anand Sen, Peeyush Gupta, D V R Seshadri, James A Narus (2006) Understanding the Process of Transitioning to Customer Value
Management Volume: 31 issue: 2, April, pp. 1-28 https://doi.org/10.1177/0256090920060201 15 16

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… CVM Objectives for Tata Steel …
…
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… …
… PRE-REQUISITES for the PARTNERSHIP MODEL

ry
st ip C
ndu ersh L ult
I d
Grow with select a Th ong ure
Commodity Trap Le in -te of
customers CVM prerequisites ing rm
k
CVM Objectives (for supplier
and customer
firms)

De o-d
l

C
na

si est
s
es

re in
tio n

fo y
a d
is

r
e
an ty ar
rg turi rep
Develop non - Price Capture Value O a P
M nd
agenda (~ 10% of Revenue) a
Source : Prof. DVR Seshadri, IIMB Source : Prof. DVR Seshadri, IIMB
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… CVM PROCESS HAS FOUR KEY ELEMENTS …
… VALUE DRAIN AND VALUE CREATION OPPORTUNITIES
…
… …
… EXIST IN A VALUE CHAIN
Buying factors Level of fulfillment
Supplier Customer Technical support % of Revenue 1.5 8-10
Delivery 4

Commercial

Supplier Customer Logistics

2.5

Optimally fulfill : Choose what to get right!

Cross-functional approach 0-2
(0.05)

Tata Steel Customer Hygiene Share Operations at Tata & New Process Total
modifications
Customer Products

Tata Steel Customer VALUE DRAIN VALUE CREATION

"One firm concept" Empowering/

(system-cost philosophy) energizing employees
19 * Based on 16 CVM implementation, 200+ ideas 20

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… IDEAS PUT IN 3 CATEGORIES FOR IMPLEMENTATION …
…
… …
… … PRINCIPLES OF VALUE SHARING

Hygiene
(43)
Necessary to go forward
Systemic change recommended Win 31 39 64 • r• Hygiene / Regulation ideas
• Non shareable : Customer/
Key : Patience Supplier retains

CUSTOMER
38
26
• Non shareable: Requires

Value
Indifferent
•r •r challenge & maturity to
implement
• Key Points Extraction • Shareable : To be agreed jointly
7
idea groups Joint study
•r •r
Lose
Operational
Efficiency • including
Challenges
New Products • No of Ideas
(88)
(74) Lose Indifferent Win
Supplier
Jointly done over 3-12 months Investments ; takes >12 months
Data support and transparency Buy in of both managements Key Aspects in sharing:
Key : Perspicacity Key : Perseverance Focus on implementation to develop congenial atmosphere for sharing
Use reviews to seek involvement and build trust
( ) : No. of ideas: Research data based on 16 CVM
Transcend into joint study ideas in subsequent improvement cycles
Source : Prof. DVR Seshadri, IIMB
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… KEY CONCEPTS IN VALUE SHARING …
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… SUPPLY “RING SHAPE” BLANKS FROM TATA STEEL
… …
INSTEAD OF PLATES / COILS
Auto Ancillary : Wheel maker

Maturity : to address Win – Lose group of ideas Phase#1 Phase#2 Phase#3 Phase#4
Constructive pressure to propel generation of new ideas by both sides 550
– non-adversarial virtuous cycle 1100

Methodology : a key to resolve win-win ideas

Implicit part in value sharing : Plugging Value drain Value creation = $

= $ 600 K per year 350 K per year
Integrated value transfer
(2.5% of Revenue) (1.3% of Revenue)
Recognize and reflect in other aspects of business
Resolution mechanisms :
Drop or postpone tough ideas
Use risk assessment model
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A COMPLEX VALUE CHAIN WITH MULTIPLE INTERFACE …
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… METAMORPHOSIS IN THE VALUE CHAIN (1/2)
… …
US$ 1.2 Bn : Automotive Plants (P1, P2) Service Centre (S1) Results
Inventory = 4000 T Service Center
Supply Service Automotive Yield=99.1% Coil sizes :
plants Centre Divisions 200 nos Yield = 98.25% Inventory : 3000 T
Plant 1 Components Club sizes Yield : 98.05%
Auto Assembly 1 61 Sizes Tata Steel
S1 Ancillaries* Avoid double trimming at P1
& S1 Yield: 99.55%

Plant 2 Stockyard Auto Assembly 2 Improve packaging Inventory

Customer
Win at S1: $ 31 Kpa : $ 60 K pa

SKU System value

Salient points of relationship Rationalization: created :
Indifferent
$ 22 K pa $ 116 K pa
• Market share leader ; Deming award winner ; long term association
• 200 sizes flow through the chain with value drains at each interface •r Yield
Lose at S1 : $22K
• Intermediaries operate as profit centre and focus on local optima
at P1 : $ 56K
Tata Steel
* 4-5 key ancillaries 25 Lose Indifferent Win 26

25 26

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METAMORPHOSIS IN THE SUPPLY CHAIN (2/2) …
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… … Relationships in SW
Modernization at Service Center From To Investment by
customer
Slitting capability 1270 mm 1600 mm • 35 $100 million clients
~ $ 550 K
Coil handling capacity 14 MT 30 MT
• 84 $50-$100 million
clients
• 190 $20-$50 million
Inventory : clients
Customer

New products :
Win
Customer : $78 K • FY 16 revenues
$122 K pa
Scrap : $45 K pa Supplier : $47 K System value • Same clients, same
created :
Throughput : services
Indifferent
$ 512 K pa
$ 220 Kpa • Same clients, new
•r services
• New clients
Lose
Lose Indifferent Win
Tata Steel Source: TCS

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… TCS … Infosys - 2018
• High percentage of
• 9 years journey with repeat business
a client • $2.1B from top 10
clients
• Repeat business is
• 634 Mn. $ clients
20% cost of new
• 283 new clients
business
• Large deal teams for
• Relevant service contract renewals
(98.5% repeat business)
portfolio
• Large clients have
multiple supplier Source: Annual Report Infosys

relationships

Source: TCS 29 30

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… KAM in the SW Industry … Client Concentration
FY07 FY06
Revenue (Rs. Cr.) 9,028
• CRM evolution 13,149
– Business Development Manager
– Pre 1996 – Onsite coordinator
Top client contribution to revenues 7.0% 4.4%
• Account Manager circa 1997
• Evolution of an integrated Client Facing Group Top 5 client contribution to revenues 19.4% 17.8%
– Account Manager
– Business Development Manager Top 10 client contribution to revenues 31.4% 30.3%
– Engagement Manager?
Number of active clients 500 460
New clients added in the period 160 144

Repeat business % 95.3% 95.0%

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… Client Concentration …
… Configurational Model - KAM
FY 10 FY09
Revenues Rs. 21,140 cr. Rs. 20,264 cr. • Activities
Number of active clients 575 579 • Actors
New clients added 141 156
• Resources
Repeat business % 97.3% 97.6%
• Formalization
$100 Mn. Clients 6 4
• Outcomes
$50 Mn. Clients 26 20
$10 Mn. Clients 97 101
$5 Mn. Clients 159 151
$1 Mn. Clients 338 327

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… Vision for Strategic AM … Account Structure for Strategic AM

• Collaborative with client

– Representation designed based on client’s organization structure
and dynamics

“Constant innovation in value creation for the client
leading to partnerships that result in a higher share of
client’s outsourcing spend at high margins”
• Steering committee or Program Management Board
– Senior executive sponsor from the client’s organization
– Select senior managers from the client’s organization
– Senior executive, preferably a member on the board
– Account Manager
– Select senior managers

• Board level relationships are critical for success

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… Collective Structure for Strategic AM … Relationship Scorecard

• Senior management focus, Scale benefits, Share best practices • Audience - Steering Committee or Program Management Board
• Quarterly basis
• Easy accessibility to Senior Management • Value created by relationship for both companies
• Performance evaluation metrics for the relationship to mirror goals &
• Governing Body of Strategic Accounts objectives for the relationship
– CEO, COO and CFO • Reflect the projects engaged in and value created for the client
– Heads of business enabler functions -HR, Marketing, R&D etc.
• Reflect satisfaction scores from client organization
– Heads of select divisions
– Account Managers • Highlight the investments and returns
• Refine initiatives the two companies are engaged
• Account Manager skills span 3 areas - business management,
relationship management and leadership & team building
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… Collaborating with Customer and
… Account Scorecard …
Suppliers
• Audience - Governing Body of Strategic Accounts Traditional Business Marketing
• Monthly SUPPLIER CUSTOMER
• Report performance metrics mirroring objectives set for account SALES PURCHASING
• Highlight accomplishment of account level strategies ?
SERVICE USERS
• Financial performance of the account - revenue, profitability, repeat
business, resource utilization, productivity
• Metrics on client satisfaction and employee satisfaction Collaborative Marketing
SUPPLIER CUSTOMER
• Capture intangibles - # references by account, brand enhancement INFORMATION INFORMATION
value, contribution to knowledge and competency assets SYSTEMS
HUMAN RESOURCES
SYSTEMS
HUMAN RESOURCES
CASH FLOW CASH FLOW
• Review and refine account plan LOGISTICS
CONTRACTS
LOGISTICS
CONTRACTS
INVENTORY INVENTORY
SALES SALES
MARKETING MARKETING
SERVICE SERVICE
Source: Jagdish Sheth ETC. ETC.
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… CRM Value Proposition -
… The Practice of Collaborative Marketing …
Customer Benefit Categories
SUPPLIER’S ABILITY 1) Economic Benefits

INTERNAL
TO IMPROVE COST -Pricing

COLLABORATION EFFICIENCY 6) Social and

-Financing
-Development
Emotional
Funds 2) Conditional Benefits
Benefits -Quality Product
- Premier Club
-Worldwide delivery
- Customer
-Assured product
Advisory Group supply
Better end Strategic/Key
SUPPLIER COLLABORATIVE user value at 5) Developmental
Account Program
COLLABORATION MARKETING lower cost Support Benefit
Benefits 3) Service Benefits
- Dedicated team
- Product development
- Market development - Preferential
4) Information line of
- Market research
Benefits communication
- Infrastructure
-Sharing of
support
COMPETITIVE expert knowledge
-Sharing info on
COLLABORATION CUSTOMER’S
customers’ business
COMMITMENT TO across locations
REDUCE CHOICES
Source: Jagdish Sheth Source: Dr Atul Parvatiyar
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… Integration and Automation of
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… Integrating and Automating Customer …
… Enterprises
Facing Functions
ON LINE

Externally SUPPLY CHAIN E-BUSINESS

Connected
Networked AUTOMATION AUTOMATION
Enterprise
(Extranets) (SCM) (EC)

FUNCTIONAL INTEGRATED
SILOS ORGANIZATION

BUSINESS CUSTOMER Traditional

Internally
PROCESS RELATIONSHIP
Networked Enterprise
AUTOMATION AUTOMATION
(Intranets) (ERP) (CRM)
TIME SILOS
Back Office Front Line
Productivity Productivity
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Thanks
More Questions?

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