key account management quarterly research 2011

Key Account Management2011 Quarterly Research:Key Account Management

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www.salesbenchmarkindex.com [email protected] 1-888-556-7338

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Key Account Management:

Research Introduction

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Hypothesis

Does the benefit of a Key Account Program exceed the effort to implement one?

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Most Common Objectives of Key Account Programs:

• Defend key accounts against competitive threats

• Grow revenues received from key accounts via cross sell

• Grow revenue received from key accounts via up sell

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Research Methodology

1. SMART – Identify KAM implementations whereby success/failure of the three objectives can be Specific, Measurable, Attainable, Realistic and Timely

2. Break down objectives into 4 levels• Inputs (key action steps)• Outputs (deliverables)• Purpose (program impact)• Goals (strategic intent)

3. Data Collection - Interviews, Rep ride alongs, Data reviews, Surveys, Documentation reviews, Observation

4. Use of contrast method – Success vs. Failure

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Case Study #1

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Case Study #1Firmographics

• Industry: Software• Revenue: $337 million • Size: 960 employees• Region: North America• GTM: Multi-Channel

Age of Key Account Program: 27 months

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Results

• Reduce churn by 50%– Result: Key customer churn reduced from 9% to 4.3%

in 27 months• Grow key account client revenues– Result: Average account revenue up 6.1%

• Increase penetration of software modules in use– Result: Average number of modules in use went from

1.4 to 2.3• Increase new module revenues– Result: Revenue generated from new module

introduction within key accounts increased 13%

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InputsKey Actions Taken

1. Committed 19 Key Account Managers to Program2. Key Account Manager to Key Account Support

Ratio 1:5• 1 Solutions Architect• 2 Solution Engineers• 2 Customer Service Reps

3. Defined Key Account Selection Criteria4. Focused Account Plans

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OutputsKey Account Team Structure

Customer

Key Account Manager

Solution Architect

Solution Engineers

Customer Service

Reps

Corporate Functions – Professional Services, Product Development, Marketing, Legal,

Finance, Etc

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OutputsAccount Attractiveness Score

Rating CriteriaAcct Attract

ScoreAcct Opp

RatingScore

1. Future revenue 16.7 0 0.02. Executive Sponsorship 12.7 0 0.03. Current profits 10.8 5 54.24. Customer perception of Company's value 9.0 0 0.05. Coherence with product strategy 8.8 10 88.36. Openness to new techonolgy 7.5 8 60.07. Future profits 6.8 10 68.38. Willingness to Promote Company 6.5 5 32.59. Current revenue 6.3 7 44.310. Resume value 5.2 0 0.011. Willingness to be a Referral for Company 4.8 5 24.212. Cultural fit 4.8 8 38.7

100 410.5

Account Attractiveness Score

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OutputsTotal Account Value

Product/ModuleEstimated Deal

SizeProbab Value Cost of Effort Estimated Profit Pursue?

Product/Module #1 $250,000 75% $187,500 $150,000 $100,000 YES

Product/Module #2 $75,000 0% $0 $25,000 $50,000 MAYBE

Product/Module #3 $75,000 10% $7,500 $100,000 ($25,000) NO


Product/Module #5 $174,000 20% $34,800 $128,000 $46,000 MAYBE



Product/Module #8 $75,000 10% $7,500 $112,000 ($37,000) NO

Product/Module #9 $75,000 0% $0 $100,000 ($25,000) NO


$1,624,000 $332,300 $479,000

Total Account Value (TAV)

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OutputsQuarterly Account Progress

Acme

Quarterly Performance ProgressAcme

Q1 2008Q2 2008Q3 2008

Q4 2008

Q1 2009

Q2 2009Q3 2009

Q4 2009

$0

$500,000

$1,000,000

$1,500,000

0 500 1000

Tota

l Acc

ount

Val

ue (T

AV)

Account Attractiveness Score

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OutputsMcKay 49

Health? GoodDrinker? yes

Offended by drinkers?

No

Smoker? NoOffended by

smokers?No

Lunch favorites Indian, Thai, J apaneseDinner favorites FrenchFavorite Foods Steak, artichoke, curry

Meal Buying OK to buy for themHobbies Reading

Vacationsbeach, mountains,

overseasSpectator Sports Football

Car Lincoln MKXConversational

Intereststheology

Anxious to Impress?

too humble for that

How want to be viewed?

fair, kind, and loved by all!

Greatest accomplishment

7 kids

Long Range Objective

Heaven

Immediate Personal Goal

$10 million in revenue

Lifestyle

Name J ane Doe

EducationBS - Nursing, Marymount,

1987Interests Homeschooling

Anniversay 14-May# 7

Names (birth year)

Nick (1989), J on (1990), Dan (1992), Marie (1996),

Ana (1999), Christian (2003), Amy (2006)

Interests, issues, Problems

Football, college, etc.

Current Role Dates 2007- Position CEO

Dates 2006-2007Name ABC

Position OwnerDates 2003-2006

Trade or Professional

None

Status Symbols NoneHonors or Offices None

Clubs Stamp CollectingPolitical Party Republican

Politics is Important

Yes

Community ActivitiesReligion CatholicActive? yes

Any Confidential Items

yes…but I don't know what they are!

Subjects of strong interest

cosmology, philosophy, and bio-ethics

Previous Employer

Various

Special Interests

Spouse

Children

Previous Role

Name Contact1Role CEO

Nickname StudStreet 100 Peachtree Rd

City AtlantaState GA

Zip 30324Date 7-JunPlace Washington, DC

Hometown Vienna, VAHeight 6' 1"Weight 205Name J ames Madison

Year Grad 1981Name UVA

Year Grad 1985Degree BA - EconomicsHonors None!

Fraternity Pi Kappa PhiSports Rugby

Extramural Activities

None!

Name None!Year Grad

Service NavyYears in 1987 - 1999

Discharge Rank O-4Attitude Ho-ahh!!!

Home Address

Post-Grad

Military

Birth Info

Personal Stats

High School

College Info

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OutputsStrategic Actions

Strategy Option Response StatusSequentialTwist SalesUpgradesExpansion

Maintain current useExpand current useDisplace competitor

productsOpen new applications

Raise PricesProduct MixReduce Costs

Reduce Financing Costs (Hour Inventory)

Reduce Financing Costs (Receivables)

Influence CriteriaMatch Criteria

Influence Scoping/ TimingInfluence the Person

Profit

Positioning

Land and Expand

Revenue

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PurposeProject Impact

• Specific: Reduce churn, Increase revenue per key account, Improve cross sell ratio, Up-sell new product offerings

• Measurable: Churn reduced by 4.7%, revenue per account up by 6.1%, cross sell ration up to 2.3 vs. 1.4, and up-sell up 13%

• Attainable: Deliverables/tools were simple enough that KAM’s adoption was not an issue

• Realistic: Objectives of modest reduction in churn, revenue per account, number of products in use, and rate of consumption for new products introduced, were all set below industry benchmarks

• Timely: Project duration is 27 months and counting; victories along the way; demonstrated organization patience

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GoalsStrategic Intent

1. Improved company revenue performance

2. Key customer receives differentiated attention

3. Account managers obtain success with less heavy lifting

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Case Study #2

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Case Study #2Firmographics

• Industry: Media• Revenue: $440 million • Size: 7,100 employees• Region: Global• GTM: Direct

Age of Key Account Program: 16 months

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Results

1. Drive key account win rates north of 90%Result: Win rate declined by 21%

2. Retain key clientsResult: Renewal rate dipped below 80%

3. Renew at stable price pointsResult: Annual Contract Value is down 6%

4. Increase Customer Lifetime ValueResult: Portfolio turnover is up to 27%

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InputsKey Actions Taken

1. Poorly constructed Key Account Recruitment Package– Impact: increased client leverage, forced price pressure, led to

client shopping the offering

2. Account Planning Process all internal – Impact: increased bureaucracy and admin ‘cost’ to reps

3. Account decision makers decentralized– Impact: required rep-to-rep cooperation, which did not happen

4. Tried to automate in SFA first – Impact: Without running in ‘manual’ mode first the process was

not tested and automation investment was wasted

5. Tried to go from launch to full roll out in 6 months– Impact: organizational burnout and turnover of key staff

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PurposeProject Impact

• Specific: Win rates went down but no win/loss reviews are occurring to understand root cause

• Measurable: Program was measurable

• Attainable: Deliverables/tools were poorly designed, internally focused, difficult to use, and misplaced in their application. Result was poor account and rep adoption

• Realistic: Objectives were not clear (examples: “own the account”, “get 100% wallet share”, “increase prices”)

• Timely: Results were expected in an unrealistic 6 months

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GoalsStrategic Intent

1. Drive key account win rates north of 90%

2. Retain key clients

3. Renew at stable price points

4. Increase CLV

Result

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Takeaways

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Key Account Program MetricsLeading Indicators

1. Wallet Share 76.5%2. Program Recruitment Success 87.0%3. Portfolio Value Improvement rate (quarterly) 13.3%4. Account Attractiveness Score Improvement Rate 17.9%

5. Qualified New Candidate Member Rate 14.6%

Metric name World-Class

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Key Account Program MetricsLagging Indicators

1. Accounts per Account Manager 3.42. Account Breakeven Rate 31.1%3. Account Lifetime Value Ratio 2.64. Program Churn Rate 3.9% 5. Program Revenue Contribution 81.1%

Metric name World-Class

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Top 10 Evidence-Based Best Practices

1. A Key Account Program should have all of these objectives: a. Defenseb. Cross-sellc. Up-sell

2. Program benefit for client must exceed program benefit for seller3. Low breadth/high depth is the best approach4. 5 phased adoption takes an average of 13 months start to finish 5. Best selection approach is:

a. Account Attractiveness Score b. Customer opt-in

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Top 10 Evidence-Based Best Practices

6. Build four-pronged risk mitigation approach into Account Plana. Executionb. Operationalc. Talent

7. Deploy streamlined, value-driven Account Plans 8. Institutionalize the relationship through many-to-many contacts9. Triangulate the review process to ensure continuous

improvementa. Client reviewb. Account Manager auditc. Peer review

10. Ensure the Program contains a process to exit accounts

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HypothesisDoes the benefit of a Key Account Program exceed the effort to implement one?

Answer: – Yes -- if revenue concentration exceeds 80/20 rule

(80% of revenue coming from 20% of accounts)– No -- if revenue is spread evenly across many

accounts

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Phone - 1-888-556-7338

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key account management quarterly research 2011

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