How can you manage your key accounts, when they think they are managing you? Beth Rogers Athens Sales Management Forum September 21 st 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% gain in profits can be realized by companies that improve a poorly working marketing/sales relationship Into 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-operativetactical prospective Our value to the customer strategic co-operativetactical prospective High Low High Customer value to us Rogers B, 2007 Sales takes the lead Marketing takes the lead

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-operativetactical prospective Our value to the customer strategic co-operativetactical prospective High Low High Customer value to 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 differentiating factor 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 Kraljic 1984 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