I’ll get into the detail but the common selection mistakes are: “they provide the most revenue in my portfolio therefore they must be a Key Account”. “I’ll just pick my top 50 accounts and they’ll be my Key Accounts”. “They’re the biggest fish in my market, so I’ll pursue them as a Key Account” (no current revenue).
3 critical steps in selecting Key Accounts:
- Conduct a Portfolio Analysis
- Tie your company’s overall strategy to the selection analysis
- Start with a pilot (2-3 accounts) then expand
Portfolio Analysis: One of the Sales Techniques utilized by Sales Consulting Firms is the Customer Value Matrix job aid (Example #1). Utilizing this job aid or approach; plot the existing customers accordingly. The portfolio analysis process involves:
- Review the last 3 years of actual volume or revenue in addition to the actual cost to support these clients (In many cases this reveals you’re actually losing money on those accounts you thought were Key Accounts)
- Determine the cost and growth potential for these accounts for the next 3 years
- Define the type of buyer either strategic or transactional. Remember just because you want them to be a Key Account doesn’t mean they should, it’s a two way street
Company Strategy to Portfolio Analysis: Tie your company’s strategy to the Key Account Management selection criteria. The common mistake here is to select too many criteria (we want it all), limit the Key Account selection criteria to between three and five. The following are just a few examples of the possibilities:
- Revenue potential (avoid weighting this too heavily)
- Centralized purchasing
- Product fit
- Growth potential
- Existing relationships
- Possible Channel Management partner
- Cultural fit
- Geographical alignment
Key Account or Strategic Account Implementation: Start with no more than 2 or 3 Key or Strategic Accounts. Selecting more accounts is a recipe for disaster. The reason behind a pilot is obvious; work out the kinks early and set yourself up for success by being extremely focused. The critical success factor during implementation is promise nothing you cannot deliver. I’m sure none of your Sales reps have ever done that, keep in mind Talent Management is always a key success metric.
The question we most often hear is: How long will the Key Account Management program take to be implemented? Unfortunately the answer is; it depends. A typical program implementation takes between 12 and 24 months prior to expanding the program.
We’ve selected our key accounts utilizing our defined selection criteria and determined our measurements of success. In my next post, I’ll discuss the Key Account Management execution or implementation phase in more depth.