Key account selling approaches tend to be initiated by sales, they tend to work on a shorter planning horizon, to measure success primarily on incremental, perhaps quarter-to-quarter, revenue, and they tend to sell mostly existing products to a small number of people within a large number of accounts.
In many cases, these programs require a great deal of internal selling because sales, while usually not customizing offerings, may come up with creative discount, financing, delivery, or service options. Their creativity puts pressure on other departments to do things differently for large customers. This pressure can leave those other functional departments seeing key accounts as key irritations.
We know a manufacturer whose sales group decided to develop a key account selling approach. The firm kicked off the program by announcing to its 15 largest customers how great the new effort would be, and started coming up with innovative ways to serve those customers. But after they made creative commitments to the customers, internal functions continually blocked their way. Those departments saw no particular reason to do things differently. Sales spent so much time marketing internally that one sales representative joked that he needed to carry cushions around for his knees because he was begging so much. The results were not as humorous when the supplier's responsiveness and reliability—as well as account satisfaction numbers—declined markedly. At the end of the year, the key accounts program was serving only a few of the original customers—and those were not being served very effectively.
Key account selling approaches tend to work on a shorter planning horizon, to measure success primarily on incremental, perhaps quarter-to-quarter, revenue, and tend to sell mostly existing products ... within a large number of accounts.
When the manufacturer tried to determine how to improve the situation, those in manufacturing said, "You have to understand: sales' dream deal is our worst nightmare." They said that when the sales teams promise a dramatically reduced delivery time for a small custom order, that lowers the entire manufacturing operation's line utilization and slows other critical production runs (both of which were major components in manufacturing's compensation). The sales team must realize that departments may have solid reasons for resisting a sales mandate—even if the initiative proposed would generate significant short-term revenue. If the program is going to succeed, the entire organization must understand and align around the account selling program's goals—particularly if the firm ultimately wants to move to a true strategic account management process. It is, at best, an uphill battle for sales to develop a strategic account management program by itself.
The benefits from a strong strategic account management program can be huge. At its best, strategic account management can offer a competitive advantage, the key to greater loyalty, and the road to higher profitability.
Strategic account management can offer a competitive advantage, the key to greater loyalty, and the road to higher profitability.
One of the more dramatic examples of what strategic account management programs can achieve financially comes from Boise Office Solutions. Until 1992, Boise Office Solutions (BOS) was a dual distributor with one channel selling directly to business and a wholesale channel selling to office products dealers. This dual-distribution business model deepened channel conflicts during a time when BOS's largest customers were becoming much more sophisticated—and much more demanding. In 1992, BOS reinvented its business model by selling its wholesale-distribution business and establishing a national account management program. The incremental revenue generated by the BOS national account program—even allowing for revenue growth by acquisition—is dramatic:
We will hear more about Boise Office Solutions later in the book and provide other successes of customer management, such as Honeywell Automation and Control Solutions, which serves a dozen of the world's largest oil companies. In two years it grew business 61 percent in a flat-to-declining market and cut selling costs 40 percent, while moving to a systematic account management program. We will also see how Reynolds & Reynolds' Enterprise Solutions Group generated a 55 percent compounded growth rate on sales to its largest single customer, Southeast Toyota.
The payoffs from an effective strategic account management program can be significant—and they are usually much more than dollars. A well-designed and well-executed strategic account management program can minimize, or in some cases, eliminate competition. The more quickly you get that program up and running, the more quickly you can realize those payoffs. This book will guide readers through the implementation pitfalls and to those payoffs.
Even the most successful directors emphasize the challenges at the beginning and stress how much less costly it is to do it right the first time.
We have asked directors of successful account management programs what it took to create that success. Few directors have said, "Piece of cake. We got it right the first time." At the same time, these directors tend to agree that they received tremendous personal and professional benefits from systematically managing critical customer relationships: the approach has usually made account relationships significantly more fulfilling and more profitable than the more typical transactional relationships. After success and clear returns, it's much easier to support strategic account management. But even the most successful directors emphasize the challenges at the beginning and stress how much less costly it is to do it right the first time.
Strategic account management programs falter when firms underestimate the time, resource requirements, and complexity of rolling out the program. We have worked with very successful business leaders who started out believing they could delegate the entire implementation of the program to a middle manager and completely roll it out in three to six months of that manager's free time. These firms are very profitable and run by very intelligent businesspeople. But having never implemented strategic account management—and lacking any real-world guidebooks on the subject—it's not that surprising when their strategic account initiatives do not succeed the first time. Decision makers understandably rely on what they know, which may be sales or operational models. These models are unfortunately inappropriate for implementing strategic account management. They tend to create unintended consequences in implementation—as we'll see throughout this book. It's much like playing ice hockey with a tennis racket. You may work very hard, but the chances are low that you will score, and you will almost certainly get beaten up some. This book provides appropriate models, thereby limiting the number of your implementation bruises—and wasted resources.
Creating a systematic way to manage strategic accounts is a little like putting down the road as you're driving on it ...
Creating a systematic way to manage strategic accounts is a little like putting down the road as you're driving on it: You must maintain your firm's financial performance while reinventing the way it serves its most critical customers. That is perhaps the greatest challenge in implementing strategic account management.
Thanks to the experience of cartoon character Dilbert and others, most workers are now highly suspicious of new organizational change initiatives. This means that strategic account management—or almost any major change initiative—fails if it is perceived as a program du jour. Employees have seen far too many programs started and then stopped. One secret of successful strategic account management programs is that they start small, as a critical part of the business strategy, and then migrate to become standard operating procedure as soon as they have demonstrated their success.
Reinventing the way you serve critical customers usually requires an organizational shift from internal efficiencies to external effectiveness. This shift is particularly challenging because in many companies, most employees have inward-focused performance measures and, on average, only 30 to 40 percent of employees ever interact with customers. To achieve this kind of shift, the entire firm needs to understand viscerally how critical these strategic customers are, and start to own them. Here is a communication, educational, and performance opportunity worth the challenge.
Unless the supplier removes its internal cross-functional barriers, the strategic account—and the strategic account manager—will be forced to try to jump over them.
For the shift to take root, you must include all relevant departments in the planning, goal setting, and process redesign for account management. Having their say will make it easier to lower any walls that may have risen between them. Unless the supplier removes its internal cross-functional barriers, the strategic account—and the strategic account manager—will be forced to try to jump over them.
The most sophisticated account management programs we know live in organizations committed to co-creating value for customers whose destiny is intertwined with their own. That's simply a way of life for firms such as Marriott International, Boise Office Solutions, and IBM, all of which earned cases in this book.
The game of business has changed dramatically in the last decade. Ten years ago, companies could often function more as a golf team—a group of talented individuals, each bent on winning his own way. That approach won't work very well in the global economy, rife with consolidation, mergers, and wildly varied expectations. Many companies instead must respond to markets and customers more like a basketball or hockey team, with everyone working together to win the game. To extend the metaphor: in straight golf, there are no assists. The new business model, however, is all about continuing assists: working together more effectively.
The new business model is all about continuing assists: working together more effectively.
To respond as rapidly as market and customer conditions change usually requires much greater interdependence—both within the organization and between the firm and its strategic accounts. Firms usually should align around and work toward the goals and strategies driving customer management. Firms that can reinvent their business models while maintaining financial performance, firms that can remove departmental barriers and gain commitments from all functions to play the same customer-centered game, tend to enjoy the rewards of long-term financial success. As one example, let us turn to the Reynolds & Reynolds—Southeast Toyota story to see the value a strategic alliance can create.
 S4 Consulting, Inc.