In a recent report by Synogis on Key Account Management, the overriding sentiment expressed by key purchasers across Europe and the US was that - most suppliers equate key account management with selling to big customers and a two-day training course. Most suppliers are getting it wrong.
Richard Ilsley of Synogis looks further at the results of their survey to give sales professionals and sales management a better idea of the role of the key account manager and what organisations need to be doing to create better relationships with their key accounts.
A survey of senior managers from manufacturers, retailers and distributors In Europe and North America in 2009 considered their relationships with their major suppliers. Only around 15% of suppliers and their ‘key account managers’ seem to be getting it right.
What is going on?
The market place has changed. What worked well just a few years ago is no longer effective. But most of us don’t like change. We want to stick with what we know; what worked for us before. So for too many managers, key account management means selling to big customers.
In any case most of us do not see any need to change because we think we are doing just fine as it is; a study showed that 65% of senior managers believe they rank in the top 25% of best practice performance.
However, change is going on whether we want it or not.There are a number of drivers and most of us are familiar with most of them: technology means that information is ready available, real time communications around the world can be free, free trade areas encourage overseas competitors, consumers and users have more information, are better educated and more cynical and have more choice than ever before.
So what is a ‘Key Account’ and why should we care?
For most managers, a key account is just a big customer with a dedicated sales person who gets a new title and a training seminar, key accounts are just those big customers we happen to be selling to right now.
For the more enlightened, ‘key accounts’ are those customers who have a strategic role to play in our growth. So we might have key accounts to whom we sell nothing right now or key accounts that are small or in new markets, as well as the big ones whose loss would have a huge short term impact.
If you accept this view then you have to accept that corporate success and key account success are inextricably linked.
What are the implications?
Imagine you are the Country General Manager of a 100 million Euro business. You make 5 million Euros net profit. Your largest customer is worth 10 million Euros and delivers 2 million Euros of profit.
· Would you allow a factory manager to spend 2 million Euros without Board approval? Certainly not.
· Would you want an intimate understanding of the proposed spend and return? Of course.
· Would you allow a key account manager almost free reign with 40% of your company’s profit? Many do.
· Would you demand an intimate understanding of the customer and ensure that all departments have a strategic input? Few do.
This is what we see as the primary demands of effective key account management:
Key Account Management and Corporate Strategy
Key account management demands that the key account strategy is driven by the corporate strategy (and therefore the channel and brand strategy). You can’t have an effective corporate strategy without an effective key account strategy.
The key account strategy needs to reflect the vision you have for the company. The key account strategy needs to be clear about who you must be working with in the future rather than who you are selling to now. A three-year corporate vision is the start for the key account strategy.
Any growth you get beyond the general market growth is very likely to represent a loss to someone else. This means you also must have absolute clarity about where and who growth will be coming from, and why you will win it.
Key Account Management and Senior Management
If the first point is that your company growth strategy and your key account strategy are inextricably linked, then it follows that the most senior members of the management team must drive and be intimately acquainted with the key account strategy. Key account management is a board responsibility.
Key account management also demands a multi-disciplinary team approach - your key account business is so important to your business that it must drive your decisions – right across the business. Effective key account management is far more work and requires far more expertise that one person can ever handle.
To be properly effective you must have a truly integrated multi-disciplinary approach because the decisions you will take impact every department in the business.
Key Account Management is more than selling
To think that key account management is synonymous with ‘advanced’ selling and can therefore be effectively supported by a two day training session is hopelessly naive. You can’t hope to equip your managers with the processes, tools, skills and embed the necessary cultural shift in that time.
Key Account Managers should be more akin to General Managers and must have a generalist’s approach to the business. Therefore a Key Account Manager must be well versed in financial management, product development, supply chain and logistics as well as the more specific skills pertinent to the industry. They must be experts in negotiation and presentation.
Key Account Management and Added Value
Added value is one of those terrible cliques in the world of management, the situation today is that the environment is just too competitive to allow the luxury of doing things that do not deliver demonstrable value.
If we are doing something that adds value, then clearly it must be adding value to either us or the customer and ideally both. This means you can identify it and measure it. You can determine just how much value it is adding and if you can’t then you have to ask why you are doing it. Is it really adding value or is it just something which seems like a good idea or more usually something you have always done.
A further complication is that those things that delivered unique value for you yesterday are unlikely to be unique today. This is because either the competition has responded and replicated the offer or because the situation has changed.
Closely linked to the idea of a focus on added value is a focus on cost. This means you need an accurate P&L for each of your key accounts. It is only by drilling into the detail of the relationship that you can identify unnecessary cost and eliminate it.
Most key accounts have formal well established supplier measurement models – the problem is that too few key account managers and suppliers react to them – generally because they don’t fit with the supplier’s way of working.
Conclusions
Here is the response of the President of a European corporation;
“I guess it is a bad news – good news story. Bad news – right now we are not getting it right but good news – neither are most others so if we can fix it we should have a great advantage.”
The evidence supports the case that there are significant commercial advantages to be found by “getting it right”. These include reducing cost, adding more value, streamlining internal processes and communications as well as having more stable business with the most important customers.
Synogis Practice Group
Synogis Consultants have been working with corporations around the world since 1993. Much of the work of the Key Account Strategy & Management Practice Group is focused on the development and management of the relationship with major partners be they manufacturers, retailers, distributors or other strategic players.