Market-proven strategies to generate competitive advantage by identifying and always taking care of your best customers
The Seven Keys to Managing Strategic Accounts provides decision makers with a proactive program for profitably managing their largest, most critical customers--their strategic accounts. Drawing on the expertise of S4 Consulting, Inc., a leading-edge provider of strategic account consulting, and Miller Heiman, a global sales training leader serving many Fortune 500companies, this how-to book shows how many of today's market leaders have learned to focus on their most profitable customers, avoiding or overcoming common errors before they become relationship-crippling disasters.
Placing its total focus on the design and implementation of cost-effective strategic account management programs, this hands on book provides:
- A world-class competency model for strategic account managers
- Techniques for developing a program to manage and grow "co-destiny" relationships
- Examples and cases from Honeywell, 3M,and other leading corporations
|Publisher:||McGraw-Hill Professional Publishing|
|Product dimensions:||6.40(w) x 9.30(h) x 0.85(d)|
About the Author
Sallie Sherman, Ph.D. is the president of S4 Consulting.
Joseph Sperry, Ph.D. is a partner with S4 Consulting.
Samuel Reese is president and CEO of Miller Heiman.
Read an Excerpt
THE SEVEN KEYS TO MANAGING STRATEGIC ACCOUNTS
By SALLIE SHERMAN, JOSEPH SPERRY, SAM REESE
The McGraw-Hill Companies, Inc.Copyright © 2003The McGraw-Hill Companies, Inc.
All rights reserved.
Introduction: What Is Strategic Account Management?
Let's begin by considering:
1. What is strategic account management?
2. How does strategic account management differ from key account selling?
3. What are the benefits of strategic account management?
4. What are the challenges of strategic account management?
WHAT IS STRATEGIC ACCOUNT MANAGEMENT?
Strategic account management is a systematic process for managing key interactions and relationships with critical accounts. Writers sometimes quote the Pareto Principle to describe strategic accounts: 20 percent of the customers generate 80 percent of the revenue/profit. It's usually an apt comparison, although the numbers can vary dramatically if the firm's strategy has targeted emerging or medium-sized accounts. Still, strategic accounts tend to provide a disproportionate share of a firm's revenue/profit. We call such customers co-destiny accounts.
The supplier's future tends to be intertwined with these accounts' success. With clients whose contribution is that critical, strategic account management can play a crucial role in a firm's marketing strategy. That's why successful strategic account management tends to be a firmwide initiative, systematically and proactively delivering strategic solutions to multiple contacts at targeted accounts—to capture a dominant share over time.
Strategic account managers are salespersons who must generate profitable revenue, quarter-to-quarter and over the long term. At the same time, they are general managers, over-seeing assigned relationships as separate assets in the customer portfolio. Businesspeople sometimes distinguish between salespeople who are hunters and those who are gatherers—those who get the business and those who manage the business afterwards. True strategic account managers (SAMs) are both and neither of these classifications: they are hunters but within their assigned accounts, continually working to increase account share. They also must manage those account relationships, and be accountable for ongoing and long-term financial growth.
HOW DOES STRATEGIC ACCOUNT MANAGEMENT DIFFER FROM KEY ACCOUNT SELLING?
Most of the time, the sales team initiates strategic account programs. Sales may see an opportunity to generate more revenue by focusing its efforts on the larger accounts. Sales often begins these initiatives with what we call a key account selling approach. Key account selling is a part of strategic account management but it is not the same thing. The distinction between the two is important for our discussion. The following chart distinguishes between these two (of many) approaches in managing an important account. Figure 1-1 isolates the behaviors of a key account selling approach and a strategic account management program. The chart concentrates on behaviors because of the ever-present problem of program names: a supplier may have a key account selling program called a strategic account management program (common) or a strategic account management program called a key account selling program (also common). Our primary interest is in what these firms do with their crucial customers.
KEY ACCOUNT SELLING PROGRAMS AND STRATEGIC ACCOUNT MANAGEMENT PROGRAMS: A COMPARISON
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.
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.
What Are the Benefits of Strategic Account Management?
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.
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 t
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Table of Contents
Chapter 1 Introduction: What Is Strategic Account Management?
PART 1 GETTING EVERYONE HEADED IN ROUGHLY THE SAME DIRECTION: WHAT DIDN'T
Chapter 2 Key 1: Define Strategic Account Management as a Business Rather
Than a Sales Initiative
Chapter 3 Key 2: Create Firm Alignment and Commitment to Meet Strategic
Accounts' Needs and Expectations
Chapter 4 Key 3: Start with the Right Number of the Right Strategic
PART 2 TACTICAL ISSUES IN STRATEGIC ACCOUNT MANAGEMENT ... IRONBOLT STEEL
AND EXECUTIVE VISITS: WHAT DIDN'T WORK
Chapter 5 Key 4: Create Human Resources Support for Strategic Account
Chapter 6 Key 5: Create Firmwide Relationships at Multiple Levels of
Relationships between the Firm and Its Most Critical Accounts
Chapter 7 Key 6: Regularly Quantify and Communicate the Value Received
from and Delivered to Strategic Accounts
Chapter 8 Key 7: Use Technology Judiciously
PART 3 FROM ANALYSIS TO ACTION ... TICONDEROGA CHEMICAL AND STRATEGIC
ACCOUNT MANAGEMENT: THE PAYOFF
Chapter 9 Conclusion: From Analysis to Action: Moving the Game Forward
Avoiding the Pitfalls of Strategic Account Management
We wrote this book in response to what our firms saw in the field and repeatedly heard at keynote presentations: the notion that implementing strategic account management requires only a plug-and-play sales model, hiring people and setting them loose. More than once we have met someone who, while still on sales quota, was asked by their firm to implement strategic account management in his/her copious free time. This is a good way to lose an effective salesperson and gain an ineffective strategic account management program. All I can say is that if we had a simple account management implementation model, we would all have retired years ago. Over the years we've learned that each firm has to approach strategic account management uniquely, within its own strategic situation, its own values, and its own personnel. And such implementation usually takes several years to really work out. Taking shortcuts almost always guarantees an even longer implementation, as we demonstrate throughout this book.
The original working title for this book was Pitfalls for Practitioners. It listed the major mistakes firms make when setting up strategic account management programs -- as well as discussing how to avoid those mistakes. Some people felt that title was too negative, so it is now The Seven Keys to Managing Strategic Accounts. But the book holds true to our original intent: All the keys came to us in the process of helping firms who had fallen into strategic account management pitfalls. Everyone we know in successful strategic account management programs (including some of the best in the world) agrees that doing strategic account management right the first time costs far less, both in terms of dollars and employee cynicism. There are very few firms that get strategic account management right the first time. We wanted to help change that. We wanted to tell stories in which actual firms did it right, along with the disguised but just as specific examples of firms who stepped into pitfalls. And judging by the number of people who ask if we were using their firm in the negative examples, those pitfalls are as widespread as ever.
The book's audience consists of executives. We wanted a book that the chief sales officer might read and/or pass on to other functional executives who might not understand the need for a new approach to strategic customers. Without these other functions on board, strategic account managers can spend a huge amount of time (we've seen it top 70 percent) selling internally and the remaining time selling to strategic accounts. The amount of internal selling required (what some call "moving through friendly fire") is the No. 1 complaint we receive from strategic account managers. Which is why we devoted the first two chapters to methods of creating organizational alignment.
Should you read this book? It's particularly helpful if you are grappling with any of the following questions:
- Is strategic account management right for our firm?
- What is the difference between key account selling and strategic account management?
- How can I get all functions on board with a strategic account management program?
- What is a realistic number of accounts to start a SAM program?
- How should I select my accounts for such a program?
- What is the best way to select and compensate a strategic account manager?
- How many relationships (not accounts) should a strategic account manager manage?
Sallie Sherman, President, S4 Consulting
Joe Sperry, Partner, S4 Consulting
Sam Reese, President and CEO, Miller Heiman
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