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