The Account Manager’s Moment of Truth

In moments of truth your decisions and actions must be right

Moments of truth

Moments of truth are situations where it is difficult to find the right answer, behaviour, or reaction; situations where it is very easy to get it wrong. If you get it wrong though, the consequence for the future can be detrimental.

It will be very difficult for you to change the consequences of your behaviour in the “moment of truth” because you created expectations that will be more and more difficult to correct.

Example of a Moment of Truth

If one of your team members is permanently late for meetings with you, you will accept excuses or apologies at most twice. The second occasion of this happening is already your moment of truth. You will take the team member by the side, state clearly that you do not accept being late at meetings and that you will reprimand further occurrences.

If the team member is late again, you will experience your second moment of truth: you have to act on what you communicated before. By this, you demonstrate integrity that will lead to respect amongst your team members.

If you miss the two moments of truth in this example, ie you do not openly communicate what your requirements are and you do not act if your requirements are being ignored, you will lose the respect of your team.

As a consequence, you will not be taken seriously and your team will not perform the way you would like.

Armin L Rau presents these moments of truth on a regular basis in his blog series based on real life cases to help you spot them and avoid the classical pitfalls.

The Real Life Case: “Please reduce your daily rates”

20/12/2015

This week I had a very interesting coaching session with a Key Account Manager at one of my clients’. Let’s call her Anna. Anna took over responsibility for a medium-sized client in the High Tech industry. The company is part of a global High Tech leader.

Anna’s company, let’s call it TransTec, helps this client with the development of IT solutions and charges its services on a time and material basis with daily rates. Currently, TransTec has 40 professionals working full-time for the client.

A few months ago, one of the newly appointed Directors of Anna’s client asked her to reduce daily rates. The request came more or less out of the blue and no real reason was communicated.

This is a moment of truth, since Anna’s reaction and TransTec’s decision will affect the future relationship with the client.

The Pitfalls

There are two important pitfalls that regular Account Managers normally tread into. The first one is reducing the rate and agreeing on a new daily rate based on a negotiation that only concentrates on price. The second one is to reject a rate reduction altogether. Both reactions are wrong!

Why?

If you enter into a negotiation about a rate decrease, you are conveying two things: first, you agree that the value of your work has decreased, too, and secondly you agree that the previous price was too high.

As a consequence, you will create expectations on lower rates for future negotiations. In addition, you are accepting an approach that quite simply is not sufficient: to discuss price only without taking into account the value that is being delivered.

Now, let’s come to the second pitfall: rejecting a price reduction altogether.

A strong reaction of that kind will always have negative consequences for the relationship with your client. The client feels rejected and nobody wants to be rejected.

The client might also believe that it is unfair not to negotiate given the fact that he has given you so much work in the past.

Thirdly, you might come across as someone who is ignorant about the client’s needs. Someone who is not willing to think about alternative solutions the client might accept, if his main interests are being met.

So, even if you are inclined to choose one of these two options, don’t!

The Options

Finding a constructive solution in this moment of truth is tough.

Before we explore a few of them, let’s talk about some important facts to be clarified up-front.

Fact no.1:- If – as in this case - there is a lot of potential for further business with this client, you should always come up with creative options for the client.

Fact no. 2:- You will not lose the client immediately since you are well established, there are switching costs (eg knowledge transfer) the client has to consider, and the client will think about other disadvantages of changing suppliers before taking action.

As a consequence, do not be forced into making premature decisions, but create options that support the strategic development of the business.

The first important information that you need to get across to the client is the value of your work. How much does the client save or how much more profit does he make? Set this in relation to the investment he has to make when working with you. Present the ratio to the client. This is a good ice breaker and an important message for your client: you support a no nonsense approach to problem solving.

Secondly, understand what the client’s real objectives and interest are. Is it really about the cost or does he maybe want to create an early success to impress his boss?

If the latter is the case, think about a way to help him create successes. You might for example find ways to finish tasks earlier or surprise him with unexpected functionalities of high value.

If your client really has to do something about the cost base, you can think about ways on how to increase your productivity. Maybe, there is a way to create the same results with 38 instead of 40 people by introducing smarter processes, new methods, or automation of repetitive tasks such as testing.

Another option is to offer packages that the client gets at a fixed price. This shows that you are willing to take over risk and produce a more attractive package.

It also has the advantage for you that you are not obliged to reduce your rates whilst at the same time being able to improve your profitability by being more productive in the creation of the agreed package.

You might also define basic modules that can be re-used in many situations so that the client only pays for the customisation and you make more money by using the same modules for other clients.

You see, there are many ways to help the client in such a situation. The main point is: don’t make compromises on your rates and don’t upset the client either.

You can do this by changing the battlefield in the way described above.

The Results

If you apply the techniques presented, you will most probably have a client who is satisfied since he is taken seriously and reaches his objectives, you will be respected by your client because you are being perceived as someone who is professional, flexible and keen to find solutions in both parties’ interests, and the relationship between your client and you will become deeper.

Even though reducing the rate or declining a rate decrease seem to be the easy options, both of them will have negative effects on your relationship with the client.

Did you experience a similar Moment of Truth before?

I am keen to know what you are thinking. Please leave a comment below.