Grow Your Key Accounts
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It takes 8 to 10 times more expense, energy, effort, and heartache to bring in new customers than to keep and grow existing customers. In the case of growing existing clients vs. landing new ones, the old 80–20 rule applies—approximately 80 percent of your revenue comes from 20 percent of your customers. While you may be focused on growing your business and finding new and exciting customers, how can you nurture the customers you have who generate most of your revenues and profits? Many entrepreneurial companies are so focused on finding new converts to their ideas that they miss those key customers who are already using their products or services.
Consider a key account program that helps you actively care for this critical segment of your customer portfolio— the few that you can’t afford to lose. Who would qualify for the program? Ask yourself the question: “How many new, average-size sales would you have to close to make up for losing one of your biggest accounts?”
1. First, select which are truly the key customers. Often they are those who provide the biggest revenue, but there are many other parameters worth considering, such as profit, or ease of doing business, or importance of having this customer in a specific industry.
Use any parameters that match with your company culture, but in the end, it really comes to what value you take from the customer, and what value the customer takes from you (ie, why they buy from you). Once you have defined a portfolio of a few key accounts, you will be ready to build plans and start. Depending on the size of your company, that can be as few as three to as many as twenty. It’s important to be selective; you can’t manage too many accounts at the level of a key account.
2. The next element is relationships. You probably have a good relationship with the person who signs your contracts or P.O. Now, you need to meet this person’s peers and the executives above them; these are major influencers who can affect your relationship with the buyer. Don’t stop there. Make sure your employees develop a trusting relationship with their counterparts in the account; it’s as basic as being sure that your accounts receivable clerk has a good working relationship with the customer’s accounts payable department.
Your employees will have a natural link with their counterparts at the customer that they can nurture, because they have regular interactions with them. On the other hand, developing relationships with the major influencers may take a bit more tact. As most sales execs will tell us, some customer managers think that they need to either “protect” their management from vendors, or are so territorial that they will not want to share their supplier relationships. Though the sales trainers and consultants have developed many ways around this obstacle, I like the approach of asking a simple question:
“This project is important to you and your colleagues, shouldn’t we get their input and support?” A variation of this works wonders.
Once you have built your key account portfolio, and have a set of parameters for adding new accounts, you will want to appoint key account managers. If your business is large enough, you could hire or assign one or more people to manage these key accounts. If your company is still in the early stages of growth, you can still manage your key accounts program by assigning one or more people from your team to focus a percentage of time each week on caring for and growing key accounts.
Here is a small example of a partial account plan for a company that does not yet have the resources to add a separate key account manager. This would be customized to each of the accounts.
- The firm’s senior executives should develop contacts with the customer’s senior executive team. In addition to listening to the customer’s needs, they look to bring value with every contact. Value could be a phone call telling them that you just heard from one of your vendors that their biggest competitor just won a big job and will not be able to compete for new customers until they deliver to the new contract. The senior team should take their customer counterparts to a social event at least once a year, anything from a sporting event or concert to just a nice dinner or lunch.
- Your management team should also build relationships with their counterparts at the customer. This will give them the opportunity to evaluate the quality of the products or services your company provides, but also find new opportunities to sell new offerings to the customer. For example, your IT manager should meet several times a year with the customer’s IT manager to discuss his issues and how your company can help them with information exchange and reporting.
- Your financial manager will develop a relationship with his counterpart in the account to understand his or her processes and listen for problems.
- You should have relationships across the account. Your shipping clerk should develop a relationship with their receiving clerk. A well-managed account has multiple contact points that allow for quick issue resolution and deep insights about the customer’s needs and buying habits.
3. The third element is delivery. No matter the depth and breadth of your relationships with your customers, if you don’t meet your commitments, the customer will be forced to search for an alternative to your company. Your great relationships will get you a pass and an opportunity to repair a mistake, but not very often. Delivery refers to bringing value at all levels and is the responsibility of everyone in the firm. Does the order processing team recognize unique components of the customer’s standard order? Will the project management leader ensure that the right solution is delivered, on time? Does the accounts receivable clerk remember that one of the key accounts gets an eight percent discount for early payment, and not to call them questioning why the payment is short? Does the customer service team know to direct one of the key account’s calls to a Spanish-speaking agent?
4. The fourth element is communication. It’s no surprise that an important business program would be grounded in good communication, but here, the focus is important. With key accounts, it is important to communicate the good and the bad. Take the time to call her to be sure that she is happy with your last delivery (be it a product or service). It allows you to confirm that there were no problems, and also puts a data point in her mind that you met your commitment. As important, don’t hide problems. Keep in mind the old adage that bad news does not get better with time! Don’t surprise your key customers with a problem that has been festering and now is even more serious than when you discovered it.
Next, build your account plans. What will your company do for the key account, what do you expect them to buy from you this year, and so on?
5. Finally, you will want to evaluate the program regularly. At least semi-annually, gather the facts about the program:
- Have sales to these customers improved?
- Are the profits holding for these accounts?
- What are the customers telling you about the program?
- What are your employees saying?
- Do you have a good plan for each account?
- What needs to be improved?
- Are there any issues that need to be addressed?
If you decide that changes to the program are necessary, be sure to communicate that to the customers and your team.
Based on your business, you may segment based on any number of parameters. Most think that revenue is a good determination for selecting key accounts. Yet as we have seen, high revenue at a low profit may suggest that the account is really transactional, and not interested in investing in being a key account. If you are in start-up mode, you may want to identify a Fortune 50 or an industry leader as a key account for the marquee factor, even if you do not take significant revenue from them yet. For example, if you sell to the fashion industry, you may want to make Calvin Klein a key account, if you are developing a relationship with them.
One note: don’t forget fit! If you are into high tech and try to communicate, invoice, and transact business electronically, you probably don’t want to have key accounts that still work on paper invoices and snail mail. Also, if your culture is fast and focused, having a key account that takes three months and 10 approvals to make a decision will drive you crazy.
Ted Ehling’s firm Balanced Performance focuses on making both sides of the customer-supplier relationship model work effectively. His contact information can be found at bp27.com.