Yuval D. Bar-Or

April 17, 2008

A strategic client is a client who has special importance to a vendor, distinguishing it from other clients. A strategic client often has an especially close relationship with a vendor, a relationship which may include joint product development and special marketing arrangements (among others).  From the vendor’s perspective, a strategic client is one whose existence significantly and positively impacts: development of new products, development of new features for existing products, enhancement of sales and marketing, entry into new markets, or thwarting of competitors. Securing a strategic client is viewed as a “game changer” for the vendor. In some cases, a strategic client may contribute by subsidizing development of products the vendor would not initiate on its own. More generally, a vendor benefits significantly from being able to point to its strategic partners, establishing credibility by association.  

Entities often targeted as strategic clients: 

• Leaders in their industry (from a corporate success perspective).

• Thought leaders in their industry (sophisticated firms).

• The first few clients for a new vendor.

• The first client in a new industry or market.

• Development partners.

• Government agencies, regulators.

• Clients willing to serve as references.

• Clients willing to have their experiences documented in the media, as in case studies and feature articles.

Strategic clients often make a big investment in a strategic relationship. Their investment may include financial capital as well as prestige. So what’s in it for them?

• They often receive products at lower prices.

• They have an ability to influence the direction of product development and the incorporation of features they find especially desirable.

• They gain early involvement in creation of new tool(s) which may change the competitive landscape in their favor.

• Their staff can benefit enormously in terms of human capital from collaboration with vendors who employ best practices.

The downside of being a strategic client:

• Project failure can be a disappointment internally and externally. When a large project fails, the fact usually becomes known to the general marketplace.

• Project failure can be very costly, depending on the direct expenditures involved and the opportunity cost of not having gone down a different path originally.

• The project sponsors may suffer career setbacks, especially if they have employed political capital in arranging the collaboration.

As in all relationships, success depends on the commitment of the parties, and on their ability to realize tangible gains. This calls for mutual understanding. Each party must recognize and respect the other’s needs and aspirations. The client is entitled to products and services that help it achieve corporate goals. The vendor is entitled to appropriate compensation, taking into account other benefits it may realize from the association.

Each party benefits directly from the other’s success. A successful client will prosper and in turn will sing the praises of the vendor’s offerings, while a successful vendor will be in a position to continue to innovate and provide excellent products and services to clients.

An imbalanced relationship between vendor and client is not sustainable. Eventually one of the parties will feel compelled to terminate the relationship. In such cases both parties stand to lose, and often more than just their financial investment. The vendor will lose face in the marketplace, which will often be very damaging to its reputation and ability to sell additional products and services. A client who has invested financial and political capital in a solution may find itself having to expend significant resources on re-starting the search for a highly specialized solution.

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