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This article originally appeared in Vol. 27, No. 12, June 25, 1997 issue of MDM Premium. This article provides a framework for managing key accounts. It gives a definition of a key account, examines the structure of key accounts, and discusses tactics for managing key account opportunities, including how to work with the different types of people that make up a key account. For this article, winning a key account is defined as follows: Of all the products and services the account could purchase from you, they are now purchasing 74% or more from your company.
The fastest way to achieve this winning position is to do it one business result produced at a time (the account's results-not yours). To produce improved business results you must sell products and services. However, the key to winning the account over time is to measure the results produced and be seen by the account as working very hard to produce those business results for the account quickly.
If you only measure your company's progress in a key account by sales to that account, you will not learn if the account is actually producing improved business results. This inevitably puts your company at risk of losing some sales to lower-priced competitors over time.
So the answer to winning a key account is one business result produced at a time. The next question: how do you maintain your74%+ position once you've achieved it? You must be seen by the account as continuously helping them improve in their most important business results. Your company better know and be talking with those people who are directly measured on producing the business results you helped improve.
Your company needs answers to all of the following questions on a regular basis to keep your winning position in key accounts:
The company that can answer these questions will not be displaced by any competitor. These answers are not the only learning required, but it is this learning that will cause sales to increase to the account faster than any other knowledge about the account. In my experience, no more than one salesperson in a hundred knows the numerical value of even one business result from even one key account.
What Is A Key Account?
A key account is any account that is vital to meeting the growth goals of your business. These can be accounts you have already won and need to maintain as well as those that must be grown. Generally, for a salesperson, the number of key accounts will vary from between one and I 0. For a company, it will vary from between five and 20.
The 74%+ account share mentioned in the key account definition above comes from the Lanchester Strategic Model (see October 1996 issues of MDM for discussion of market growth strategy using the Lanchester model), which says that an account will generate increasing profit for your company in direct proportion to account share from between 10% and
74%. Until you reach a 10% account share your business with that account will not be profitable. It may look profitable on your books, but that's only because you haven' l considered in your analysis the cost of the resources required to win and service those first few sales.
On the other end, efforts to increase account share beyond 74% will not necessarily correlate with more profit for your company either. Winning 100% of an account's business often means you have made some price concessions to Purchasing to get there. Also, you have taken away Engineering's choices. This can be irritating to some of the engineers, especially those who were loyal to other competitors before you won all the business.