Not all customers are created equal … in the volume that they buy from you or the profitability that they bring to you. Some of your customers have key significance to your business. They may be your largest customer, or your highest profit customer, or your must significant national (or international) account.
Do you practice key account management strategies in your business? If you don’t, you probably should. Key account management is used in business to business sales relationships. Do you know what key account strategies are; and why and how you should you manage them?
Key account management focuses your business on those accounts that represent a large percentage of a significant business measure: be it overall sales volume; specific product sales; national account status; profitability; and more. For example, if you sell to a customer who annually buys 18 per cent of your overall volume, that account is likely a key account to your business. If a customer only buys one per cent, or less, of your overall volume, they are still important to your business but that customer is not a key account.
Key accounts have a good deal of power in any relationship with their suppliers. It is up to you to manage that power, and build a relationship that is a balanced partnership.
When you build your sales plan, you will need to block management companies st albans add key account strategies. Make sure that the plan includes a worst case scenario; losing one or more of your key accounts and how you will handle that loss. Your business survival depends on your readiness to respond and pro-act, rather than react. Develop a scenario plan and analysis that will help you address a survival outcome.
It is challenging to replace a key account on short, or no, notice (I say this from personal experience). But it is possible. However, rather than losing a key account and having to deal with the consequences, focus your sales strategies and planning on building strong key account programs with strong exit barriers (customers will stay with you for a long time if you build the right program). Let me be painfully clear: it is better to keep your key accounts and grow them, than it is to lose one or more key accounts.
Key account management builds a focus on the overall value the customer or account brings. It is important to recognize it is not only sales volume and profit that is important, but the geographical closeness (if your customer is your next door neighbor it is easier to build a strong relationship); the long-term volume and relationship growth potential; the simplicity, or complexity, of providing a service; are all equally important (and in some circumstances, one value will be more important than another).
7 Key Account Tactics To Build Into Your Sales Program:
- Set up a single point of contact for the key account: the key account manager. Dedicate internal staff to support the key account; e.g. the customer service representative; or shipper, or scheduler; or inventory manager; or whatever is required and have that staff report to the key account manager.
- Volume discounts or rebates, or other price incentives: this is the standard – everyone does it; everyone expects it.
- Build a priority ordering program for your key account(s), such as restricted access to your online order system.
- Customize your product or service for the key account (for example, private labeling, or actual features of the product or service changed/customized for the key account).
- Match your sales relationship with key account. For example, if the key account sells by the piece, carton, or whatever, your system should allow the same units of sale (multiplied if necessary).
- Set up cross-business teams and initiatives to improve service, such as product development teams, quality improvement teams, branding efforts, etc.
- Provide integrated delivery, fulfillment, re-order points, inventory, and invoicing.
Other than the tangible price value, the benefits your customer will receive from a key account program are less tangible: a highly customized, service-supported product or service.
Key account programs can also improve organizational efficiency; for example, improved sales efficiency, streamlined processes, focused communications, optimized order scheduling and inventory management, and a targeted sales plan (that might even include a global account management program) – there are efficiencies to be gained in this relationship. Business owners are challenged not to ‘give back’ those efficiencies in price reductions. The goal of key account management must be to not only keep the account but also to earn a reasonable profit from the account.
Key account management strategies are used in a business-to-business-selling environment rather than in a more-individual business-to-consumer-selling environment. Meeting your key customers’ needs must be a driving force of your business. Build strong exit barriers (such as integrated inventory and re-ordering systems) so that your key accounts find it hard to leave.