How can you manage your key accounts, when they think they are managing you? Beth Rogers Athens...

How can you manage your key accounts, when they think they

are managing you?

Beth Rogers

Athens Sales Management Forum

September 21st 2007

How important is selling?

• “Everyone lives by selling something.”» Robert Louis Stevenson

• “Nothing happens until something is sold.”» Senior executive, telecoms industry

• The key purpose of selling is to “create build and sustain mutually beneficial and profitable relationships through personal and organisational contact.”

» UK National Sales Board

The history of sales

Go out and get the

numbers!!!!!!!!!

The sales function today

• Understanding business strategy• • Understanding purchasing strategy

• Using analytical tools specific to sales strategy

Management of “top line” strategy

“We believe that a 20% gainin profits can be realized by

companies that improve a poorly working

marketing/sales relationshipInto a better one.”

Where does this leave marketing?

Kotler, Rackham et al, 2006

Integrated sales and marketing

• Joint vision, values and goals

• Teamwork

• Mutual understanding

• Shared information

• Shared process management

Managing business relationships

strategic

co-operative tactical

prospective

Our value to the customer

strategic

co-operative tactical

prospective

High

Low

LowHigh

Customer valueto us

Rogers B, 2007

Sales takes thelead

Marketing takes thelead

Examples of strategic relationships

• Parts manufacturers in automotive• Medical supplies company/ logistics• Steel company + top 17 customers• Oil company/tyre manufacturer• Ceramics supplier/steelworks• Logistics provider/mail order company• Facilities management company/laboratory

services• IT supplier/bank

Key account management is….

An approach which includes

developing long term relationships

with strategic customers

whose needs you understand in depth,

and for whom you develop a specific offer with a differential advantage over the

offers of competitors...

McDonald, Millman, Rogers, 1996

It should work….

• In a survey of 200 Fortune 1000 companies in 2005, most were able to raise revenues and profits by more than 20% on average through collaborative initiatives with customers (McKinsey).

The trouble is….

• What sort of customer justifies this level of investment?– “best” customers place 40% of unprofitable

orders (SCEB)– suppliers who are not able to collaborate

effectively lose money trying (McKinsey)– Supposedly “key” relationships do breakdown

Managing risk in business relationships

strategic

co-operative tactical

prospective

Our value to the customer

strategic

co-operative tactical

prospective

High

Low

LowHigh

Customer valueto us

Rogers B, 2007

The role of purchasing

“Professionalism in purchasing, with its ongoing external trading relationships, is key to supporting and/or enhancing the brand; sometimes this can be the only differentiatingfactor between companies.”

CIPS – Chartered Institute of Purchasing and Supply

Strategic contribution of purchasing

• Focus on the capability of a supplier is associated with improving value of purchasing function

• 62% of companies procure most of their business needs from their top ten suppliers

• However, diminishing returns set in if organizations try to set up strategic relationships with more than 5% of their supplier base.

Source: Performance Benchmarks: Procurement, 2006,

American Productivity and Quality Center

Purchasing strategy

Kraljic1984

Leverage

Bottleneck

Strategic

Non-critical

Importance of purchase

(profit impact)

Complexity/risk in supply market

Which means that….

• You can only have a strategic business relationship with a customer if you, as a supplier, are in that strategic box

• If you are in any of the other boxes, your choices are:– Reduce all overheads associated with the

relationship and focus on streamlining processes so you are “easy to do business with”

– Selectively invest to improve your position

Cost control

• The best-known brand in industrial chemicals set up a sub-branded e-commerce division to deal with price-driven customers. It concerned industry analysts at the time, but delivered good overall results, even in the short-term.

Selective investment

• As early as 1989, a French stationery company set out to help its largest customers to automate purchasing stationery

• An oil company offered stable prices, stock control and just in time delivery in return for single sourcing

• But where next?

The nature of KAM

• The development of value, such as joint new product development and/or process integration between the supplier and customer

• The business management skills of the account manager

• Long-term planning• Special organizational focus, including key

account teams

But….

• Be sure your key account thinks you are strategic too!

• Beware risks – Concentrating resources on small number of

customers might increase market exposure – hence the need for portfolio management

• Monitor closely – things change over time

• Be distinct between “key” and “keep”

Remember how business relationships break down:

• Communication breakdown• Critical incidents• Change of contacts• Confidence fails• Complacency• Core product problems• Change in strategy• Contingency building• Cost issues• Collapse of status quo

Strategic relationship momentum:

• Mutual value and mutual problem-solving– Innovation/differentiation (product/process)– Cost reduction

• Deliver it

• Sustain it

• Renew it