Five major key account management mistakes
(and what to do about them) by
Andrew Horder and Richard J White
Executive Summary
In today’s world of globalization and consolidation, most companies in business-to-business markets are finding that they have larger but fewer customers. One effect of this is an increase in the power of the buyers, so the old ways of dealing with major accounts are no longer as effective as they were. Many businesses are underutilizing their opportunities to significantly grow and defend key accounts without realizing it.
The following are 5 important mistakes that are commonly found when doing a KAMpro™ account management review:
1. Defining key accounts by current sales turnover
2. Managing key accounts through a single point of contact
3. Being complacent about key account relationships
4. Over-reliance on the account manager to find opportunities
5. Managing all key accounts in the same way
Please read on to discover more about each mistake and what to do about them
1. Defining key accounts by current sales turnover
Bottom Line: if you don’t take a strategic approach to key account management then you may be missing out on significant opportunities.
“Key Accounts are the ones with the biggest turnover”
It may be true that in the majority of cases, the customers with the biggest turnover will also be Key Accounts. But it is dangerous to rate customers just on the turnover they bring you. It is not unusual for the “number one account” to rank somewhere around third (or even below that) when it comes to profit, and towards the bottom of the pack when it comes to ease of dealing with them. So what is needed is a balanced scorecard approach that takes a number of criteria into account to assess how attractive a customer really is to your business.
If you accept the definition of a Key Account as one that is important in helping you to take your business where you want it to go, then there are an array of other criteria you could measure them against. Depending on the type of business these might include: frequency of repeat business, size of orders, delivery requirements, ease of dealing with them, access to a particular market, openness to innovation, gross margins, payment performance, etc etc.
It is important to look at your overall company strategy – particularly what gives you your competitive edge – and work out from there where each Key Account fits into it. By deriving your Key Account criteria from your overall strategy, you can make sure you emphasise those accounts that support it.
Turnover is important, of course, and it would be very dangerous to relegate your biggest account from Key Account status. But we’ve all got customers we treat better than is justified by their turnover alone. The trick is to know why you regard them as special – in other words what other criteria are you using to include them as “Key Accounts”.
Recommendations:
• Look at your company strategy and understand how your Key Accounts relate to it
• Review your reasons for dealing with each Key Account
• Define and weight a set of criteria to get an objective measure of how attractive each Key Account is to your business
2. Managing key accounts through a single point of contact
Bottom Line: A single point of contact can restrict the development of relationships within a key account and leave the account at risk following changes in personnel.
“So long as we keep the buyer happy, we’ll be OK”
It is surprising how many companies – particularly medium-sized companies – believe this. So all the effort is concentrated on providing the main contact with what they ask for. Their job title may not be “Buyer” - it might be the project manager, product manager, vendor manager, or any number of others, but they are the one with primary responsibility for the relationship with you as a supplier. There are two problems with this approach.
The first is that, in many companies, contacts – particularly buyers - get moved around very frequently, and each new main contact has a different slant on what is important. So having moved heaven and earth to give the main contact what they asked for last month, you now find that it’s no longer a priority. Of course, you may see yourself as being fortunate in having a contact who has been in place for a very long time, so your Key Account Manager has been able to develop a stable relationship with them. In fact, your situation is possibly even more precarious in this case – when the contact eventually moves on (which has been known to happen at very short notice!) the change in emphasis is often more pronounced.
The best way to protect against this is to make sure that you have contact with as many different people within the account as possible, and to use what they tell you to balance what any particular buyer is stressing as the most important issues at any given time.
The second problem is that concentrating on just one relationship means you only get one perspective from the account. Often, support departments know as much as the main contact – sometimes more – about changes that could affect your business. So it is important to work at developing contacts throughout the account.
Recommendations:
• Identify contacts in the Key Account other than the main buyer
• Be prepared for changes in focus if the buyer changes
• Gather information from all your contacts in the Key Account
3. Being complacent about key account relationships
Bottom Line: Customer expectations vary significantly between key accounts and also change over time. Being clear of them helps to identify opportunities. Neglecting them can ultimately leave key accounts at risk.
“We know exactly what is important to the account, and what they measure us against”
Major companies frequently have as many as a hundred performance measures for their suppliers, many of which never get published by the department concerned. But they can still cause problems for you if you are not meeting them. It can be as simple as the main decision-maker constantly hearing of little niggly problems – so although they’re generally happy with your business, what sticks in their mind is the problems.
On a more formal level, it is not unusual for all departments to be canvassed when a piece of business comes up for review, so even an unpublished bad score has the potential to trip you up. Conversely, it has been known for a buyer to be prompted to think again about changing suppliers because one or other department has expressed particular satisfaction with a supplier, and therefore concern about changing.
The best way to reduce the risk is to make sure you get regular feedback from the account about how they see your company – preferably through an unbiased third party, with whom the account will probably be more frank. If nothing else, using a third party to allow the account to be completely open will stress to them how serious you are about their satisfaction.
In section 2 we talked about the importance of establishing connections throughout the account. When checking your standing with the account, it is essential to maintain contacts and relationships as widely as possible, so that the feedback you get is balanced, and you can hear of – and deal with - issues as quickly as possible.
Recommendations:
• Get regular feedback from the Key Account about how they see your performance
• Surveys carried out by 3rd parties can provide more accurate feedback
• Establish relationships throughout the Key Account to provide feedback on as many measures as possible
4. Over-reliance on the account manager to find opportunities
Bottom Line: If the key account manager is the only person seeking opportunities within an account then many potential leads may be overlooked.
“Our Key Account Manager has networked deep into the account, so we’re fully aware of what’s going on.”
There are three issues with this belief. First, just because the Account Manager has contacts throughout the account, it doesn’t mean they’ll get to hear everything useful. They will probably still be viewed as a “salesperson”, and contacts may be reserved around them. It is usually better for each department to be speaking to their counterpart in the account; peer-to-peer relationships can be much more revealing. This is particularly important at senior levels; it is usually very effective to arrange for regular meetings between peers right up to Main Board level.
Secondly, if the Account Manager is the only one in contact with the departments in the account, they will inevitably filter and distort all that they hear or are told, before passing it on to the relevant department in your business. That way, important detail can be omitted, that could provide a way to improve lock-in with the account, or even reveal an opportunity for mutual increased profit.
A clear procedure for sharing knowledge about the account will need to be set up. Otherwise it could remain as unconnected pockets of information spread about your business. It could be as simple as a regular meeting of all those in contact with the account, or you might use some kind of online or intranet collaboration.
A caveat with creating peer-to-peer relationships is that your team must be at least as well-briefed as the account’s – otherwise it could be your people revealing more than you’d like. And that applies even more so to senior and board-level contacts – they have a lot of potentially dangerous information!
The third – and killer – reason why you cannot rely on your Key Account Manager for contacts within the account is that they might leave. If the Account Manager is the only person with good contacts in the account, your business will at best flounder in continuing to meet the account’s requirements. At worst, the Account Manager may have left to join a competitor.
In that case, if they are the only ones with contacts, there will be precious little you can do to prevent them taking the account from you. Unscrupulous Account Managers have even been known to set their employers up to fail right after their departure to a competitor. If you and others in your business have contacts within the account, it will be much easier to provide continuity and reassurance, and to maintain service levels to the account.
An example of this was a hardware importer, where the directors were merrily coasting towards retirement, with a healthy profit showing on the P&L for the last few years, and therefore a decent value on their equity in the business. Then their Key Account Manager left, to join the competition; then the orders from the account were bigger than expected, so their service level fell; then the account defected to where the Account Manager had gone. In the space of six months the directors went from looking forward to a comfortable retirement, to struggling to stay afloat.
Recommendations:
• Make sure more than just the Key Account Manager is in regular contact with the account.
• Establish a process for departments to share their knowledge about the Key Account, so that all the information gets connected together.
• Brief the team fully on plans and objectives for each Key Account, setting clear guidelines for what information can be shared with the account.
5. Managing all Key Accounts in the same way
Bottom Line: Account management skills are not generic. Strategically important Key Accounts require a different type of manager depending on certain criteria. Key Accounts can be lost or under developed if managed in the wrong way.
“All Key Account Managers should have the same skills”
We identified earlier that Key Accounts are not all equally attractive to your business, and that your business will be better at meeting the requirements of some accounts than others. It follows that the way you deal with each Key Account will need to be different.
If you are not scoring well against the account’s criteria, you will need an Account Manager who can identify what changes are needed, and how they can be implemented. In other words, someone with good internal change management skills.
On the other hand, if you score well, you might want to create a close multi-functional relationship between the two businesses, in which case you will need an Account Manager with strong team-building and influencing skills.
With some accounts, the potential for growth might be limited, in which case you will need an Account Manager who is good at maintaining a steady state, and who can resist price pressure, but won’t get bored with the lack of novelty and excitement.
Recommendations:
• Analyze your Key Accounts to understand what style of dealing with them is most appropriate
• Understand the particular skills that each style of dealing requires
• Allocate each Key Account to an account handler who is comfortable with the skills needed for that particular style of account relationship.
KAMpro™ Account Management Review
The Key Account Management Process Review & Optimisation is an approach that has been developed over a number of years, drawing on the research of the best in the field.
It is made up of three sections, covering:
Module 1: Strategy
This module starts with a review of your competitive position in the market, and then walks you through your company strategy, as it applies to your Key Accounts. It provides a useful review of your strategy, and helps to identify the right criteria for you to use to categorise your Key Accounts.
A structured series of questions guide you through the process, making it simple for you to arrive at a meaningful result.
Module 2: Account Category Evaluation (ACE)
Using the criteria identified in Module 1, the ACE grid allows you to place each Key Account in one of four categories, each with its own relationship style and resource requirement.
Armed with this knowledge, you can apply the right resources and build the right team to get the most from each Key Account.
Module 3: Account Plan
Starting from the account category identified in the ACE grid, we then take you through the process of identifying your targets for the account, who in your company needs to maintain contact with whom in the account, what products or special offers you want to sell to or through the account and what specific actions need to be taken by whom and by when.
In most cases it should be possible to have created two detailed account plans by the end of this part, and to have the knowledge required to create plans for the remainder of your Key Accounts.
KAMpro™ helps companies to get the most from their best customers.
www.kampro.co.uk
Example 1: (see image)
Company A is an importer of hardware products. The strategy review highlighted that there were two major reasons for dealing with the larger accounts: to generate physical volume to fill more frequent containers from the Far East, and to generate cash profit for overhead recovery. Percentage margin was less important. These and other factors were fed into the Account Category Evaluation grid.
The analysis revealed that for two large accounts which could help to satisfy those needs (blue and mauve on the diagram) the company was a little weak in terms of satisfying the account’s requirements for becoming a key supplier. Armed with this information, we were able to devise account plans to improve the company’s ability to meet their demands, and improve the relationship with each, the end-game being more business from them.
Example 2: (see image 2)
Company B sold a range of electronic products through major retailers. The strategy review showed that three things were of critical importance: gross margin, volume, and willingness to try innovative products. Overall, the company was well-regarded by its major customers, so in this case there was no “quick win” to be had simply by improving its capabilities.
The ACE analysis showed that its largest account was in fact less attractive to it than its next three. The largest account had a dedicated account manager, while the next three were ALL being handled by the other account manager. The analysis identified these accounts as the best ones to with whom to develop partnerships for strategic growth.
Given the turnover and workload of the number one account, it was not practical to reallocate one of the strategic accounts to the first account manager, so resources were drawn in from other departments to support the number two account manager. This had the knock-on benefit of improved connections throughout these three “partnership” accounts, which led to additional promotion opportunities that may otherwise have been missed.
Andrew Horder
Andrew is Lead Consultant for Business Strategy Solutions Ltd, a consultancy specializing in helping Sales Directors and business owners to retain and grow their Key Accounts. He has been involved in developing Key Accounts since 1989, and has worked for and with companies ranging from Multinationals to owner-managed SME’s. Andrew completed his MBA with the Open University Business School in 2002.
His main experience has been in the field of consumer durables, where he has won major contract reviews and has a record of helping companies of varying sizes to increase sales and profits from their Key Accounts. Companies and brands Andrew has worked for include: Philips, Beiersdorf, CK Tools, Response Electronics, Friedland, MK Electric
Richard White
Richard is Business Development Director of Pro Excellence Ltd, a consultancy specializing in sales improvement. He is a Certified Master Practitioner of Neuro Linguistic Programming (NLP) and a Certified NLP Coach. He has an MBA from Cranfield School of Management (1989) and is a member of the Institute of Sales and Marketing Management. For the 5 years prior to founding Pro Excellence, Richard combined consulting with developing major accounts for SECOR Consulting, the UK’s leading independent Customer Management Consultancy. Earlier in his sales career Richard struggled with and overcame sales reluctance and now uses this knowledge to help sales people and business developers to do the same. Richard is passionate about accelerated learning and the mental game of selling. He is a regular writer and speaker on the use of storytelling and metaphor in business development. Richard divides his time between developing Pro Excellence, coaching and mentoring sales managers, and acting as a part-time sales manager for smaller businesses.
For more information
To find out how a KAMpro™ Account Management Review could benefit your organisation, please contact us today on 01293 424240 or email info@key-accounts.net
www.key-accounts.net
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Contributor's Note
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