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Key Account Selling
The key to long-term sales success
KEY ACCOUNT SELLING
An introduction
What is Key Account Selling?
Definitions Why bother? What are the long-term benefits? What has it to do with 80/20
principle? Cautions
What is Key Account Selling?
Definition of Key Account
What is a Key Account? Key Accounts are the 20% of customers
who provide 80% of your profits Key Accounts are defined as the prospects
or existing customers who have the potential or now fall in the 80/20 category.
Any customer that is of strategic importance to your company – loss of it of inability to secure potential future revenue would cause a significant impact.
What is Key Account Selling?
ACCOUNTS
20%
80%
PROFITS
80%
20%
What is Key Account Selling?
80/20 principle For all corporations, some form of 80/20
rule operates. e.g. 80% of the firm’s revenues is supplied
by 20% of its customers. If this rule, or a close variant (90/10; 75/25),
operates in the firm’s customer environment, the critical business implication is that these 20% (or 10% or 25%) of customers have an importance to the firm’s long-run future that exceeds that of the “average” customer
What is Key Account Selling?
80% $28
20% $110
$138
A Customer’s Sales
$2880%
20%
$110
Q.R50Undeveloped
Potential
$188
$160
What is Key Account Selling?
Definition of Key Account Selling
A systematic set of processes in identification & profiling of key accounts, design and adaptation of information-based & value-added selling strategies, profiling own market positioning for high sustainability of growth in sales.
What is Key Account Selling?
In other words
Key Account SellingIt’s not just calling higher in an organization, but... when we finally get to top management, we better have something new to tell them about their business that will positively impact their profits and ... we better have the data to prove it and the support of his / her staff to back us up
What is Key Account Selling?
Without Key Account Selling
If we cannot demonstrate our value to our top 20% Key Accounts - in terms of increased profits (for them) - we will be classified as a commodity supplier and run the risk of losing our business to a cut rate competitor
What is Key Account Selling?
Why bother?
Market saturation Mere relationship selling is a relic of
the past Bygone is the Single-Point-Contact
and good old days in sales
What is Key Account Selling?
Where Have We Been?
Relationship Based Selling• Good old boy network• Friendships with key people• Take them out to lunch• Entertainment• Based on personal relationships• We’ve got the best products, service and
people
What is Key Account Selling?
Where Have We Been?
Problems• No one has time to be entertained any more• Our “old” friends are retiring• New, young blood coming in• They want to make a name for themselves• Management is forced to look at “value” • Credibility of what a sales rep says is fading• Lots of competitors have good products and
services and all are less expensive• Mergers and acquisitions
What is Key Account Selling?
Where Are We Today?
Problems• Our value doesn’t make up the difference
between competitor’s price and ours• Competitor’s are now offering some of the
same services as we do• Competitors ask to be just a second source for
a percent of the business• Our customers “must cut costs in all areas”• Our past strengths are becoming “minimum
requirements”• Our customers are also 80/20 ing, and are
reducing their number of vendors
What is Key Account Selling?
Pressures on Distributor’s current system for interfacing with customers
The traditional
distributor’s sales force
system
Increase in selling costs
Increased competition
Pressure from
customers
Affirmative reductions in
number of suppliers
Changes in the procurement
process
Rising importance of procurement
Increasing account
concentration – higher
bargaining power
What is Key Account Selling?
The Changing Nature of Sales Force Activity
Critical internal & customer pressures
Sales Force
CustomersKey account
management
New approaches
for small customers
What is Key Account Selling?
The Distributor (Supplier-Firm) / Customer (Key-Account) Relationship
Deliver Superior
Value Products and
Services
Add Organizational Value
Commodity Relationshi
p
VENDORVENDOR QUALITY SUPPLIERQUALITY SUPPLIER PARTNERSHIPARTNERSHIPP
Increased competitive pressure
Deeper distributor / customer relationship
What is Key Account Selling?
What are the long-term benefits of running Key Account program for Omega distributors? Economies of scale in selling
Improved understanding of key account’s goals, and requirements
Enhanced ability to manage complex relationships Sustainability of sales
Increased key account switching costs Credible reference for greater market
penetration Constant feedback to research and
development for product and service improvements
What is Key Account Selling?
What is the value of a Key Account program for the individual key account customer?
A single point of contact Lower overall costs Enhanced value with prioritized attention
from distributor and Omega Division Guaranteed delivery when capacity is short Long-term relationship
Joint identification of opportunities and solutions to problems in win-win partnership
What is Key Account Selling?
What has it to do with 80/20 principle? Understand who are your 80/20 customers,
their needs and profile Redeployment of sales efforts and
resources Understand your own ranking, positioning,
growth potential or 80/20 status in your key customers suppliers profile – seek improvement – adopt aggressive growth strategy
What is Key Account Selling?
Redeployment of sales efforts and resources
High value customers should be treated differently from the “average” customers
They should receive a disproportionate share of resources and are worthy of greater managerial attention
What is Key Account Selling?
How about the small customers?
20% of your firm’s revenues are derived from 80% of its customers.
Stop serving small customers? Identify less expensive methods for
the firm to deal with these accounts
What is Key Account Selling?
Cautions for Key Account Management
Too many eggs in one basket Insufficient benefits to the distributor Insufficient benefits to the potential
key account Limitation of opportunities Cost and Bureaucracy Significant organizational change
What is Key Account Selling?
Selecting Key Accounts - Criteria
Direct Sales Revenue and Profit Current Sales Revenue Current Profits Future Sales Volume and Profit Financial Security Acquisition Potential
Key account effort on firms likely to be acquired may be wasted if the acquiring organization is given the dominant procurement responsibility
Selecting potential acquirers as key accounts may bring long-run benefits
What is Key Account Selling?
Selecting Key Accounts - Criteria
Organizational Interrelationships Coherence with firm strategy
Key account selection is a strategy implementation decision
Supplier valued by the customer Customer believes, or can be persuaded,
that distributor can meet its needs over the long run
Cultural Fit
What is Key Account Selling?
Selecting Key Accounts - Criteria Indirect Potential Volume & Profits…
Strategic Key Account Opinion Leadership Example: Leading financial services group ICICI
was the 1st Indian company listed on NYSE. One of ICICI’s key accounts is Infosys, India’s fastest growing software company, well-known for its commercial success, product quality, and high ethical standards, and the first Indian company listed on NASDAQ. Although ICICI transacts little business with Infosys, it regards as a key account because of its exemplary reputation.
What is Key Account Selling?
Compensatory Approach for Calculating Key Account Attractiveness
1. Attractiveness Criteria for Key Accounts
2. Importance Weights for
Criteria
3. Customer X’s Score on This Criterion
4. Col.2 X Col.3
“We like key accounts that …”
a. Are a good cultural fit with our firm
25 4 100
b. Provide us high volume 20 5 100
c. Provide us high gross margins 15 7 105
d. Offer good potential for future growth
15 8 120
e. Are technologically sophisticated 15 3 45
f. Act as opinion leaders in their industry
10 4 40
Total 100 510
What is Key Account Selling?
Key Account Manager’s Time Allocation (%)
Task Time Allocation (%)
Within Distributor Company
Reps and other sales channels Marketing department Production and operations Other internal departments Subtotal
15 9 5 6 35
Customers Upper-level decision makers Purchasing department Production and operations Customer’s sales channels and marketing departments Subtotal
11 5 5 4 25
Other Other / administrative Travel Subtotal
21 19 40
What is Key Account Selling?
(II) KEY ACCOUNT MANAGEMENT MODEL
Situation Analysis & Strategy
COMING SOON!