I had lunch recently with Mark S., owner of a small manufacturing and distribution firm who announced, “I had to divorce one of my largest customers today.” I wasn’t taken back by his statement, as I have always known Mark to manage his business well. However, I was curious to know, “Why?” His response was simple, “We weren’t making any money, and I don’t have the deep pockets to keep them without compromising other business.” Six months prior to removing this customer off his books, Mark’s service manager came to him, complaining about the account. He let Mark know that the customer’s shipments had dropped outside their negotiated volume rate schedule and that service calls to the customer had doubled.  Mark and his Service, Operations, Finance, and Account Managers committed to a system of internal Quarterly Business Reviews (QBR) for all major accounts. Mark and his team uncovered additional customers who had taken this vendor’s value for granted which sadly, was the result of Mark’s Account Managers giving value away.

The intent of an internal QBR is to help businesses better manage their pipeline by focusing their customer’s mindset on the value a company delivers over time and educating the customer on the financial impact they are making and surfacing unmet needs. Additionally, companies use the QBR to identify ways to increase their profit potential by examining profit-eroding bad habits and costly scope creep that results in better decisions for resource allocation and project funding. Ideally, the QBR should be outlined, scheduled, and agreed upon with the customer at the signing of the contract or early in the relationship. Customers will initially push back saying, “We don’t have time.” However, if you have a strong value message that is backed up with financial results for the customer, persevere in your attempts to meet with them to communicate the value your company has delivered.

No matter the size of the company, it is easy to miss opportunities to forge financially rewarding relationships and sink into profit-eroding habits with customers. Let’s have a look at a global financial services firm who has "deep pockets" but has avoided the slippery slope of giving value away to keep the customer happy with the disciplined practice of internal QBR followed by customer facing presentations.

To initiate the process, Account owners across the enterprise who share the same account provide an Executive Summary of their current account status to senior leadership in advance of the scheduled QBR. The summary is contained to three-month’s prior activity in the account citing critical outstanding issues from a later period only when those issues have the potential to interfere with future buying decisions. This allows for adequate time during the meeting for the review team to assess:

1. Value Proposition. What financial impact have we made on this customer’s business? Marketing can play an integral role in ensuring these messages are strategically aligned.
2. Risk vulnerability. What internal/external threats need to be managed? Finance, Sales, Engineering, and Technical support can provide insight to quality measurements and compliance issues.
3. Relationship connectivity. Who is in the line of sight re new contacts, third parties, and the buying center? Senior leaders can make introductions and connect Account owners to influential contacts.
4. Execution of the current 30-60-90 day action plan. How aligned are fee schedules, volumes, etc.? Sales operations can provide data and insight and ideas on how to advance to the next 30-60-90 day plan.
5. Progression in the pipeline. When can future revenue be realized? Account owners can position where they are in the sales cycle and cite the potential for roadblocks.
6. Key financial indicators. What is our NIAT with this account? Finance provides numbers to explore and answer the question, “Are we making enough on this account to continue our investment of resources?”

At the completion of the QBR, the review team has sufficient information to develop a meaningful presentation for their customer that is focused on the compelling reasons to continue in the relationship.

The following are a few examples of the net result of the internal QBR:

1. To satisfy the growing needs of a customer, engineers had spent significant resources to make incremental software improvements, without charging back the development costs to the customer. Over the course of time, the engineers had effectively re-invented the original offering and the customer didn’t pay a dime! The engineers believed they were doing the right thing to keep the customer happy. Senior leadership put policy in place to end this profit-eroding habit and protected their margins with other accounts to keep both customer and vendor happy.
2. The company was having difficulty establishing a footprint in an emerging market. By involving other Account owners from across the enterprise, a strategy to leverage strong customer relationships developed in another BU led to $10M piece of new business within a new region.
3. A series of three consecutive QBR raised the need for organizational change that involved
   • client segmentation,
   • re-definition of roles for 350 client-facing managers, and
   • established formal criteria and process for removing customers off the books.

   A customer recently told us that, like exercise, it is difficult to get back into the discipline of working out; joints ache and you discover muscles you didn’t know you had. Implementing or, in some case re-instating the discipline of QBRs, may be painful to start, but hang in there, the pay-off is worth it. Next month, we will explore the key components of an effective Customer Business Review where the findings of the internal QBR are presented to the customer and provide a complete picture of the QBR framework.