Segmenting clients into different tiers is a strategic approach to effective use of account management time, optimising business relationships and maximising value.
Often when tiering clients, we will start at the easiest measurement, revenue, or transaction volume, which makes sense as an initial sorting criterion. However, it is important to dig deeper into our client base and considering crucial factors such as retention risk, profitability, opportunity for optimisation, and the need for high-touch engagement. Based on how an account measures against these additional factors you can move clients up or down the tiers.
Retention Risk:
Retaining clients is pivotal for sustained business growth and a key account management KPI. Assessing retention risk involves analysing factors such as historical engagement, satisfaction levels, and potential external influences that could jeopardise the client relationship. Identifying clients with a higher risk of churn enables proactive measures to be implemented, such as personalised retention strategies, targeted communication, and enhanced support, thereby safeguarding valuable partnerships. High risk – move up, unless there is a reason why you don’t want to spend the time retaining this client, for example a client that is unprofitable.
Profitability:
Beyond revenue alone, profitability provides a nuanced perspective on client value. Evaluating the profitability of each client involves analysing not only the revenue generated but also the associated costs, including servicing, support, and overhead expenses. Clients with high revenue may not necessarily translate into highly profitable clients if the cost of servicing outweighs the returns. By discerning the most profitable clients, businesses can allocate resources efficiently, prioritise investment, and cultivate mutually beneficial partnerships. High profitability – consider moving up.
Opportunity for Optimisation:
Identifying opportunities for optimisation involves assessing the untapped potential within client relationships. This entails analysing current engagement levels, identifying areas for improvement or upselling, and leveraging data-driven insights to tailor offerings to specific client needs. By identifying clients with substantial room for growth or optimisation, businesses can formulate targeted strategies to unlock additional value, foster loyalty, and drive incremental revenue. Strong optimisation opportunities – move up.
High Touch Engagement:
Recognising the varying degrees of client engagement is imperative for allocating resources effectively. High-touch clients typically require a more personalised and hands-on approach, characterised by frequent communication, dedicated account management, and tailored solutions. By segmenting clients based on their need for high-touch engagement, businesses can allocate account managers strategically, ensuring that valuable resources are directed where they can yield the greatest impact, whilst also fostering stronger client relationships. A warning here, if a high touch client is unprofitable with little or no opportunity for optimisation and they’re not a marquee or advocate client – move down .
Effective tiering of clients goes beyond simplistic metrics and demands a holistic approach that considers diverse factors such as retention risk, profitability, optimisation opportunities, and the need for high-touch engagement.
By adopting a nuanced approach to client tiering, businesses can optimise resource allocation, maximise client value, and cultivate enduring partnerships that drive sustainable growth and success.
If you would like help in creating a more effective account management function, contact Sharon for a complimentary discovery call.