Strategic account management (also known as key account management) is a proactive approach, deployed by suppliers, to the management of relationships with their most valuable customers. It’s often mistaken for a sales technique, but selling is only one aspect of what represents a joined-up and organisation-wide approach to developing vital customers; one that can involve change management and coordination across many areas of the supplier’s business.
In this guide to strategic account management, we’re going to explore some core concepts of the discipline. Let’s begin by discussing why it’s important to prioritise vital customers.
Prioritising Vital Customers
All organisations know that their customers vary. Some may have a high level of demand for the products you provide and are prepared to pay for the value they receive. These customers are generally easy to deal with and represent strong prospects for the business. Others, however, demand more service for lower prices, are willing to switch supplier readily and over time reduce their level of spend.
Although these examples may be at opposite ends of the spectrum, they do highlight the importance of quantifying value. There will always be the opportunity to build and sustain healthy profit margins with some of your customers, whilst with others you can continue to work really hard and yet still make losses. More often than not, these difficult customers will often be your largest.
So, customers should not be treated equally. For suppliers, decisions are required about where to focus their investment, leadership time, innovation and most talented people. It is in the supplier’s commercial interests therefore, to reduce its efforts behind some customers in order to expend more effort on higher potential opportunities.
What are Strategic Accounts?
Judging potential over both the short and long term, strategic accounts are those few vital customers with whom it is imperative supplier’s build progressive and productive relationships with. In other words, they are those accounts that are commercially and strategically critical to the future success of the company.
Such accounts are generally large (or have the potential become so) and are prepared to pay good prices for more customised solutions. When appropriately nurtured they will invest their time and resources with a preferred supplier to co-create value adding product and service solutions.
On the whole, most organisations find they have somewhere between five and thirty truly strategic accounts. We’ll discuss what makes the perfect account shortly, but first I want to take a look at one of the most common misinterpretations of strategic account management and examine why it is not just a sales technique.
Strategic Account Management is more than a Sales Technique
Strategic account management is associated with gaining high value and generally complex business. Winning such business requires buy-in from a large number of decision makers and influencers in the customer’s company.
The business for example might cover production systems, important medical devices, challenging consultancy projects or the global supply of critical sub-systems. For such business, the customer needs full confidence that its supplier has the technical capabilities, supply chain and knowledge to best meet its requirements. The customer will also want to see that its supplier has excellent cross functional alignment across its organisation.
This is not an easy thing to achieve. It’s not just about winning a one-off piece of business, but requires an ongoing campaign of building trust, loyalty, capability and improving performance. All this requires dedicated investment and discipline.
So, whilst sales leadership is a critical part of strategic account management, without which suppliers would not be able to create opportunities and penetrate new buying centres, it’s just one piece of the pie. A coordinated organisational focus on strategic accounts is what really produces the step change in the value created and captured.
What makes the Perfect Strategic Account?
As we’ve already discussed, size and spend aren’t guarantees of a strategic account; many of your biggest accounts may over time actually become the most difficult to deal with, least loyal and least profitable.
What makes the perfect strategic account then? Well there is no simple answer to this as it depends to on how you do business and how your customers do business. There are some general rules of thumb however.
Both supplier and customer should be looking to create meaningful, collaborative and mutually beneficial relationships that favour long term strategic benefits over short term financial gains. Important judgements are therefore required to gauge genuine commitment to achieving this goal.
Strategic accounts need to be loyal and willing to stick with you as a preferred supplier and invest resources into building the relationship. As such, your most strategic customers will often be those that share the same company values as you.
Of course, even successful suppliers will find their strategic accounts far from perfect at times, but the discipline of prioritising activities behind these best prospects and acting to develop them to become closer to ‘perfect’ customers over time, is vital to their continuing performance gains.