Key Account Selling

The key to long-term sales success

(I) 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

What is Key Account Selling?

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.
What is Key Account Selling?

ACCOUNTS
20%

PROFITS

80%

80%
20%
What is Key Account Selling?

80/20 principle

For all corporations, some form of 80/20 rule operates. e.g. 80% of the firms revenues is supplied by 20% of its customers. If this rule, or a close variant (90/10; 75/25), operates in the firms customer environment, the critical business implication is that these 20% (or 10% or 25%) of customers have an importance to the firms long-run future that exceeds that of the average customer
What is Key Account Selling?

A Customers Sales

$188K $50K
Undeveloped Potential

$138K 20% 20% $110K

$160K $110K

80%

$28K

80%

$28K
What is Key Account Selling?

Definition of Key Account Selling

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

What is Key Account Selling?

In other words
Key Account Selling Its 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
What is Key Account Selling?

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

What is Key Account Selling?

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

What is Key Account Selling?

Pressures on Distributors current system for interfacing with customers

Increased competition

The traditional distributors sales force system Pressure from customers

Increase in selling costs

Increasing account concentration higher bargaining power

Affirmative reductions in number of suppliers

Rising importance of procurement

Changes in the procurement process

What is Key Account Selling?

The Changing Nature of Sales Force Activity

Critical internal & customer pressures

Sales Force
Key account management Customers New approaches for small customers
What is Key Account Selling?

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

VENDOR Commodity Relationship QUALITY SUPPLIER Deliver Superior Value Products and Services PARTNERSHIP Add Organizational Value

Increased competitive pressure

Deeper distributor / customer relationship

What is Key Account Selling?

What are the long-term benefits of running Key Account program?

Economies of scale in selling

Improved understanding of key accounts goals, and requirements Enhanced ability to manage complex relationships Increased key account switching costs

Sustainability of sales

Credible reference for greater market penetration Constant feedback to research and development for product and service improvements
What is Key Account Selling?

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 is Key Account Selling?

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

What is Key Account Selling?

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

What is Key Account Selling?

How about the small customers?

20% of your firms revenues are derived from 80% of its customers. Stop serving small customers? Identify less expensive methods for the firm to deal with these accounts

What is Key Account Selling?

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
What is Key Account Selling?

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
What is Key Account Selling?

Selecting Key Accounts Criteria

Organizational Interrelationships

Coherence with firm strategy

Key account selection is a strategy implementation decision Customer believes, or can be persuaded, that distributor can meet its needs over the long run

Supplier valued by the customer

Cultural Fit
What is Key Account Selling?

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 ICICIs key accounts is Infosys, Indias 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.
What is Key Account Selling?

Compensatory Approach for Calculating Key Account Attractiveness

1. Attractiveness Criteria for Key Accounts We like key accounts that a. Are a good cultural fit with our firm b. Provide us high volume c. Provide us high gross margins d. Offer good potential for future growth e. Are technologically sophisticated f. Act as opinion leaders in their industry Total 25 20 15 15 15 10 100 4 5 7 8 3 4 100 100 105 120 45 40 510 2. Importance Weights for Criteria 3. Customer Xs Score on This Criterion 4. Col.2 X Col.3

What is Key Account Selling?

Key Account Managers Time Allocation (%)

Task Within Distributor Company Reps and other sales channels Marketing department Production and operations Other internal departments Time Allocation (%) 15 9 5 6 35 11 5 5 4 25 21 19 40

Subtotal

Customers

Upper-level decision makers Purchasing department Production and operations Customers sales channels and marketing departments

Subtotal

Other

Other / administrative Travel

Subtotal

What is Key Account Selling?

(II) KEY ACCOUNT MANAGEMENT MODEL

Situation Analysis & Strategy
COMING SOON!