waht is key account

Key Account Selling

The key to long-term sales success

KEY ACCOUNT SELLING

An introduction

What is Key Account Selling?

Definitions Why bother? What are the long-term benefits? What has it to do with 80/20

principle? Cautions


Definition of Key Account

What is a Key Account? Key Accounts are the 20% of customers

who provide 80% of your profits Key Accounts are defined as the prospects

or existing customers who have the potential or now fall in the 80/20 category.

Any customer that is of strategic importance to your company – loss of it of inability to secure potential future revenue would cause a significant impact.


ACCOUNTS

20%

80%

PROFITS

80%

20%


80/20 principle For all corporations, some form of 80/20

rule operates. e.g. 80% of the firm’s revenues is supplied

by 20% of its customers. If this rule, or a close variant (90/10; 75/25),

operates in the firm’s customer environment, the critical business implication is that these 20% (or 10% or 25%) of customers have an importance to the firm’s long-run future that exceeds that of the “average” customer


80% $28

20% $110

$138

A Customer’s Sales

$2880%

20%

$110

Q.R50Undeveloped

Potential

$188

$160


Definition of Key Account Selling

A systematic set of processes in identification & profiling of key accounts, design and adaptation of information-based & value-added selling strategies, profiling own market positioning for high sustainability of growth in sales.


In other words

Key Account SellingIt’s not just calling higher in an organization, but... when we finally get to top management, we better have something new to tell them about their business that will positively impact their profits and ... we better have the data to prove it and the support of his / her staff to back us up


Without Key Account Selling

If we cannot demonstrate our value to our top 20% Key Accounts - in terms of increased profits (for them) - we will be classified as a commodity supplier and run the risk of losing our business to a cut rate competitor


Why bother?

Market saturation Mere relationship selling is a relic of

the past Bygone is the Single-Point-Contact

and good old days in sales


Where Have We Been?

Relationship Based Selling• Good old boy network• Friendships with key people• Take them out to lunch• Entertainment• Based on personal relationships• We’ve got the best products, service and

people


Where Have We Been?

Problems• No one has time to be entertained any more• Our “old” friends are retiring• New, young blood coming in• They want to make a name for themselves• Management is forced to look at “value” • Credibility of what a sales rep says is fading• Lots of competitors have good products and

services and all are less expensive• Mergers and acquisitions


Where Are We Today?

Problems• Our value doesn’t make up the difference

between competitor’s price and ours• Competitor’s are now offering some of the

same services as we do• Competitors ask to be just a second source for

a percent of the business• Our customers “must cut costs in all areas”• Our past strengths are becoming “minimum

requirements”• Our customers are also 80/20 ing, and are

reducing their number of vendors


Pressures on Distributor’s current system for interfacing with customers

The traditional

distributor’s sales force

system

Increase in selling costs

Increased competition

Pressure from

customers

Affirmative reductions in

number of suppliers

Changes in the procurement

process

Rising importance of procurement

Increasing account

concentration – higher

bargaining power


The Changing Nature of Sales Force Activity

Critical internal & customer pressures

Sales Force

CustomersKey account

management

New approaches

for small customers


The Distributor (Supplier-Firm) / Customer (Key-Account) Relationship

Deliver Superior

Value Products and

Services

Add Organizational Value

Commodity Relationshi

p

VENDORVENDOR QUALITY SUPPLIERQUALITY SUPPLIER PARTNERSHIPARTNERSHIPP

Increased competitive pressure

Deeper distributor / customer relationship


What are the long-term benefits of running Key Account program for Omega distributors? Economies of scale in selling

Improved understanding of key account’s goals, and requirements

Enhanced ability to manage complex relationships Sustainability of sales

Increased key account switching costs Credible reference for greater market

penetration Constant feedback to research and

development for product and service improvements


What is the value of a Key Account program for the individual key account customer?

A single point of contact Lower overall costs Enhanced value with prioritized attention

from distributor and Omega Division Guaranteed delivery when capacity is short Long-term relationship

Joint identification of opportunities and solutions to problems in win-win partnership


What has it to do with 80/20 principle? Understand who are your 80/20 customers,

their needs and profile Redeployment of sales efforts and

resources Understand your own ranking, positioning,

growth potential or 80/20 status in your key customers suppliers profile – seek improvement – adopt aggressive growth strategy


Redeployment of sales efforts and resources

High value customers should be treated differently from the “average” customers

They should receive a disproportionate share of resources and are worthy of greater managerial attention


How about the small customers?

20% of your firm’s revenues are derived from 80% of its customers.

Stop serving small customers? Identify less expensive methods for

the firm to deal with these accounts


Cautions for Key Account Management

Too many eggs in one basket Insufficient benefits to the distributor Insufficient benefits to the potential

key account Limitation of opportunities Cost and Bureaucracy Significant organizational change


Selecting Key Accounts - Criteria

Direct Sales Revenue and Profit Current Sales Revenue Current Profits Future Sales Volume and Profit Financial Security Acquisition Potential

Key account effort on firms likely to be acquired may be wasted if the acquiring organization is given the dominant procurement responsibility

Selecting potential acquirers as key accounts may bring long-run benefits


Selecting Key Accounts - Criteria

Organizational Interrelationships Coherence with firm strategy

Key account selection is a strategy implementation decision

Supplier valued by the customer Customer believes, or can be persuaded,

that distributor can meet its needs over the long run

Cultural Fit


Selecting Key Accounts - Criteria Indirect Potential Volume & Profits…

Strategic Key Account Opinion Leadership Example: Leading financial services group ICICI

was the 1st Indian company listed on NYSE. One of ICICI’s key accounts is Infosys, India’s fastest growing software company, well-known for its commercial success, product quality, and high ethical standards, and the first Indian company listed on NASDAQ. Although ICICI transacts little business with Infosys, it regards as a key account because of its exemplary reputation.


Compensatory Approach for Calculating Key Account Attractiveness

1. Attractiveness Criteria for Key Accounts

2. Importance Weights for

Criteria

3. Customer X’s Score on This Criterion

4. Col.2 X Col.3

“We like key accounts that …”

a. Are a good cultural fit with our firm

25 4 100

b. Provide us high volume 20 5 100

c. Provide us high gross margins 15 7 105

d. Offer good potential for future growth

15 8 120

e. Are technologically sophisticated 15 3 45

f. Act as opinion leaders in their industry

10 4 40

Total 100 510


Key Account Manager’s Time Allocation (%)

Task Time Allocation (%)

Within Distributor Company

Reps and other sales channels Marketing department Production and operations Other internal departments Subtotal

15 9 5 6 35

Customers Upper-level decision makers Purchasing department Production and operations Customer’s sales channels and marketing departments Subtotal

11 5 5 4 25

Other Other / administrative Travel Subtotal

21 19 40


(II) KEY ACCOUNT MANAGEMENT MODEL

Situation Analysis & Strategy

COMING SOON!

waht is key account

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