During the 1990's, companies competed successfully by developing better products and offering better service. Today, rapid technological advancement and ever-changing customer expectations make those types of advantages virtually impossible to sustain. The better mousetrap or the lowest price may no long help you compete for a shrinking universe of large, profitable customers -- the "key accounts."
These are the ones few organizations can afford to lose. Why? Because for most companies, as few a 5 percent of their accounts generate 50 percent or more of their revenue and profits. At the very least, the top 15 or 20 percent of a company's accounts is responsible for 75 to 80 percent of sales.
Most companies today face two critical challenges. First, keeping their profitable key customers, and second building a better business relationship to develop additional business. In our experience, successful companies that are addressing those challenges, spend more time planning and strategizing how to keep and how to build stronger business relationships with their most valuable customers. Specifically, those companies that are retaining and building their key accounts -1 • Focus on the right accounts • Understand the customer's business • Address the critical long term business priorities of the customer.
• Quantify total value contribution to the customer.
• Forge long-term relationships with key decision makers.
• Focusing on the right accounts
In a fiercely competitive environment, focus can mean growth and profitability, but it also can mean financial disaster. By focusing on the wrong customers or on the right customers in the wrong way, companies pose a significant threat to their own financial goals. America's top corporations don't depend on the salesperson's hunches or the customer's sales history to determine which accounts deserve "key account" focus. Instead they systematically evaluate key account potential and implement specific strategies designed to achieve well-defined goals.
Understanding the customer's business
If asked what they know about their best customer, many sales and marketing people respond, "Plenty! We call on them several times a month; I talk to them practically every day. I know them well." They probably do know a lot about their customers. However, do they realize what they don't know about them? The question to ask is, "How much do we really know about our customer's business?"
Looking at the customer's business from the customer's point of view gives many salespeople a totally different perspective. They often find that they don't know much about the customer's business goals, strategies and plans. Or they don't know enough about the customer's organization to identify all the decision makers, people who influence decisions, and the priorities or subtleties on which decisions are based. What they do know is who they deal with daily or weekly, and who they call on regularly.
The first step in building a sustainable competitive advantage is a disciplined review of what you already know about key customers. You must identify and record information about such factors like the customer's markets, how the company is organized, how decisions are made, current financial position/outlook, and business goals and strategies.
Many successful companies develop a key account plan. This plan becomes a road map for the account to keep the salesperson and account team on track. It helps top management see clearly what the team wants to achieve before it acts. When a key account plan is on target, it provides a benchmark for evaluating all account activity. The focus of the plan is to analyze how your company can help the customer achieve their business goals and objectives.
Positioning your company
After creating a key account plan, it's important to present the plan to the customer's executive team. In this meeting you must convince them that doing business with your company will have a positive impact on their bottom line. At this level, you must move beyond seeing your company as a supplier of products or services. You must show the executive team how a partnership with your company will build their business.
This step is often overlooked, but by doing so, you can determine the customer's commitment to the relationship and clarify the mutual benefits that would follow. You can also lessen the risk of investing resources without customer buy-in at the highest level. The customer's response to the plan can provide an immediate sign of how successfully the partnership will work. We find that most customers respond very positively. They are unaccustomed to such an approach, and are impressed with the supplier's knowledge about their business.
Quantify solutions, opportunities The sales team must then zero in on each of the customer's most compelling needs, which produce greater profitability for the customer, and profitability, visibility, and recognition for the supplier. The key is getting very clear on the difference between needs, products, and solutions. If you ask a salesperson what the customer needs, he will often express the need in terms of a product. "Oh, he needs a new terminal for his account department." What the customer really needs is a way to manage his accounting records to reduce expense.
Many successful companies have differentiated themselves from their competitors by showing their customer how their solutions impacts their bottom line by reducing their costs, increasing their income, or improving their cash-flow.
Too often in today's competitive environment there is parity at best between your solution and your competitor's. Therefore to position your company as the best partner, you must identify the best product or service solution, and then articulate how that solution will affect the customer's costs in comparison with your competitor's solution.
Decision Making Buying decisions are seldom made in isolation. It isn't uncommon for a salesperson to discover that their contact isn't the one who will make the final decisions. It's also likely that the final decision is based on entirely different criteria than you were led to believe. It's important to analyze the decision making process and the key roles of those who influence the decisions. The most successful companies profile each player in the customer's organization, both as an individual and by the decisions being made.
The Payoff The steps outlined require effort and time. In the race to find a point of differentiation, and in the struggle to grow accounts while managing internal costs, managing key accounts strategically has become critical to survive. The effectiveness of the key account planning process will prove to be the benchmark for measuring business success for years to come, proving the real differential between the winners and the losers in the competitive battleground today.
To succeed in this decade, we have to get closer to our customers, not in some theoretical sense, but as a business strategy. We must first become the partner of our customer needs. And that may mean changing the way we do business.
To learn more about this author, visit Robert VeVerka's Website.
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