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It is a well-accepted axiom that, for most companies, 80 percent of their profitability comes from 20 percent of their customers. Unfortunately, most leaders are not clear on who these customers are, they do not allocate resources appropriately to these accounts, and they do not encourage their sales people to actively pursue similar accounts.
Any organization can dramatically improve its profitability by managing its key accounts with these 5 steps:
The mistake most sales teams make when embarking on a key account management program is not having an objective way of selecting which accounts should be included in the program and which should be excluded. As a result, accounts are selected based on transaction volume or force of personality, or a combination of the two. Large volume accounts are not necessarily strategic. While the sales team may be closest to the customer, it is not their place to determine whether or not an account is strategic.
An account is deemed “strategic” because it propels your organization forward in its strategic path. It is, therefore, senior management’s role to determine whether or not an account is strategic. This is done by deciding up front the criteria that must be satisfied and the relative weighting of each criterion. I recommend somewhere between 5 and 8 criteria for this exercise and a distribution of 100 points across these criteria to reflect their relative importance. The sales team can then submit accounts for consideration by rating the accounts across these criteria. This exercise eliminates the influence of force of personality or political pressure in trying to get an account selected for special treatment.
Once an account is selected, a strategy needs to be developed for mutual growth. Rather than look at the account through the lens of transaction flow in the next 3-12 months, a strategic plan looks at how you can impact the growth of your client in the next 1-3 years. Fundamentally, it looks at the strategic objectives of the account, the external pressures as well as the internal obstacles that are interfering with their ability to achieve their strategic objectives and how you can help. This is the path to truly becoming a strategic partner that becomes embedded in how your account creates value for its customers.
Key accounts demand a lot of attention and resources. This is why there is often tremendous internal tension when it comes to getting the appropriate level of attention applied. One of the fundamental reasons for this conflict is the last minute nature of the demands for resources. An account plan that has been carefully and collaboratively developed by a cross-functional team and validated with the customer, enables an organization to be proactive in how it assigns its scarce resources to the competing accounts.
A fatal flaw for most sales teams is shelving their plan once they have gone through the rigorous exercise of developing it. I think this is because of the formats of the plans. They are usually developed in MS Word, Excel or PowerPoint. While they look pretty on completion, they do not lend themselves to accountability. To be successful you must hold your sales people accountable to the plans they develop. Cadence reporting should be set up to review the progress of the plans’ execution. While the plan should be a path to a 3-year outcome, the team should be kept focused on what they need to execute in the next 90 days and the plan should be adjusted as the landscape changes in order to ensure that you arrive at the 3-year destination.
While it’s important to ensure that your team is fulfilling the obligations it has made to your key account, it is equally important to monitor how well the key account fulfills its obligations to you. Singling out an account for special treatment is indeed a privilege, there are also a responsibilities that come with it. Sometimes, despite the best intentions, things change and the account no longer performs at an acceptable level. When this happens, corrective action or an exit review is required.
As customers seek to improve their efficiency, there is a growing trend toward vendor consolidation. Customers that were happy to have 20 or 30 vendors in a particular category are now realizing the enormous economic advantage to reducing this list to 2 or 3. As this trend continues, there will be many losers. Follow these 5 steps, in a disciplined manner, and you’ll be counted among the winners!
Adrian Davis, the author of Human-to-Human Selling: How to Sell Real and Lasting Value in an Increasingly Digital and Fast-Paced World, is a Certified Speaking Professional (CSP) and an expert in strategic selling and account management. He is frequently called upon to advise senior management teams and sales groups on the optimization of sales performance and the development of strategic client relationships. To book Adrian for your sales or leadership conference, or for a complimentary consultation, you can reach him via Twitter (@TheSalesOracle) or LinkedIn. Find out more at www.whetstoneinc.ca or www.adriandavis.com/blog.
