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
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
ACCOUNTS PROFITS
20%
80%
80%
20%
What is Key Account
80/20 principle
For all corporations, some form of 80/20 rule
operates.
e.g. 80% of the firm’s revenues is supplied
by 20% of its customers.
If this rule, or a close variant (90/10; 75/25),
operates in the firm’s customer
environment, the critical business
implication is that these 20% (or 10% or
25%) of customers have an importance to
the firm’s long-run future that exceeds that
of the “average” customer
What is Key Account
A Customer’s $188K
Sales
$50K
Undeveloped
$138K Potential
20% $160K
20% $110K $110K
80% $28K 80% $28K
What is Key Account
Definition of
Key Account Selling
A systematic set of processes in
identification & profiling of key
accounts, design and adaptation of
information-based & value-added
selling strategies, profiling own
market positioning for high
sustainability of growth in sales.
What is Key Account
In other words
Key Account Selling
It’s 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
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
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
Where Have We Been?
Relationship Based Selling
• Good old boy network
• Friendships with key people
• Take them out to lunch
• Entertainment
• Based on personal relationships
• We’ve got the best products, service
and people
What is Key Account
Where Have We Been?
Problems
• No one has time to be entertained any more
• Our “old” friends are retiring
• New, young blood coming in
• They want to make a name for themselves
• Management is forced to look at “value”
• Credibility of what a sales rep says is fading
• Lots of competitors have good products and services and
all are less expensive
• Mergers and acquisitions
What is Key Account
Where Are We Today?
Problems
• Our value doesn’t make up the difference
between competitor’s price and ours
• Competitor’s are now offering some of the
same services as we do
• Competitors ask to be just a second
source for a percent of the business
• Our customers “must cut costs in all
areas”
• Our past strengths are becoming
“minimum requirements”
• Our customers are also 80/20 ing, and are
reducing their number of vendors
What is Key Account
Pressures on Distributor’s
current system for interfacing
with customers
Increased Increase in
competition selling costs
The
traditional
distributor’s
sales force
Increasing system Affirmative
account Pressure reductions in
concentration –
from number of
higher suppliers
bargaining customers
power
Rising Changes in the
importance of procurement
procurement process
What is Key Account
The Changing Nature of
Sales Force Activity
Critical internal
& customer
pressures
Sales Force
Key Customers New
account approaches
manageme for small
nt customers
What is Key Account
The Distributor (Supplier-Firm) /
Customer (Key-Account)
Relationship
VENDOR QUALITY SUPPLIER PARTNERSHI
P
Commodity Deliver Add
Relationshi Superior Organizatio
p Value nal Value
Products and
Services
Increased competitive Deeper distributor /
pressure customer relationship
What is Key Account
What are the long-term benefits
of running Key Account program
for Omega distributors?
Economies of scale in selling
Improved understanding of key account’s goals, and
requirements
Enhanced ability to manage complex relationships
Sustainability of sales
Increased key account switching costs
Credible reference for greater market
penetration
Constant feedback to research and development
for product and service improvements
What is Key Account
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
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
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
How about the small
customers?
20% of your firm’s 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
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
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
Selecting Key Accounts -
Criteria
Organizational Interrelationships
Coherence with firm strategy
Key account selection is a strategy
implementation decision
Supplier valued by the customer
Customer believes, or can be persuaded,
that distributor can meet its needs over
the long run
Cultural Fit
What is Key Account
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 ICICI’s key
accounts is Infosys, India’s 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
Compensatory Approach for
Calculating Key Account
Attractiveness
1. Attractiveness Criteria for Key 2. Importance 3. Customer 4. Col.2 X Col.3
Accounts Weights for X’s Score on
Criteria This Criterion
“We like key accounts that …”
a. Are a good cultural fit with our 25 4 100
firm
b. Provide us high volume 20 5 100
c. Provide us high gross margins 15 7 105
d. Offer good potential for future 15 8 120
growth
e. Are technologically sophisticated 15 3 45
f. Act as opinion leaders in their 10 4 40
industry
Total 100 510
What is Key Account
Key Account Manager’s Time
Allocation (%)
Task Time Allocation
(%)
Within Reps and other sales channels 15
Distributor Marketing department 9
Company Production and operations 5
Other internal departments 6
Subtotal 35
Customers Upper-level decision makers 11
Purchasing department 5
Production and operations 5
Customer’s sales channels and marketing departments 4
Subtotal 25
Other Other / administrative 21
Travel 19
Subtotal 40
What is Key Account
(II) KEY ACCOUNT
MANAGEMENT MODEL
Situation Analysis & Strategy
COMING SOON!
