Key Account Management

What is a key Account?

 Any Organization that
is of strategic
importance to the Firm
is a Key Account
Increase
Increase in
d the Selling
Competiti Costs
on The traditional
sales force of
suppliers

Pressure from
customers
Affirmative
Reductions in
Increasing Number of
Account Suppliers
Concentration
Changes in the
Rising importance
Procurement
of Procurement
Process
 Changes in the
Approach

Key Small
Accounts Customers
 Customer Distribution

Largest 10% of the Smallest 10% of

Customers the Customers

1 2 3 4 5 6 7 8 9 10
Yea 15% 17% 16% 13% 12% 10% 7% 6% 4% 1%
r1
Yea ? ? ? ? ? ? ? ? ? ?
r2
Yea ? ? ? ? ? ? ? ? ? ?
r3
 Customer Distribution
Largest 10% Smallest 10%
of the of the
Customers Customers
1 2 3 4 5 6 7 8 9 10
Yea 15% 17% 16% 13% 12% 10% 7% 6% 4% 1%
r1
Yea ? ? ? ? ? ? ? ? ? ?
r2
Yea ? ? ? ? ? ? ? ? ? ?
r3

% Absolute
Margin
Cost of Serving
Customers
What are the benefits for
Supplier Firms?
 What are the benefits for
Supplier Firms?
Improved understanding of the key accounts
goals and requirements
Increased key account switching costs
Better understanding and Management of the Key
Accounts
Enhanced ability to manage complex relationships
Presentation of a company perspective
Second-order market benefits
Human Resource benefit
What are the benefits for Key
Accounts?
What are the benefits for Key
Accounts?
Single point of contact
 Caution !!
Too many eggs in one basket

Visibility disadvantage

Comfort level with individualsHR

issue
Restrictions to enter other accounts

Additional cost in building process or

system
Significant Organizational change
Congruence
Degree of Closeness
 Degree of Closeness

Deliver
Superior
Value:
Products and
Services
Vendor Quality Partners
Supplier hip

Commodity Add
Relationshi Organizati
onal Value
What are the Criteria
for selecting Key
Accounts?
What are the Criteria for selecting Key
Accounts?
Current Sales Revenue and
Profits
Future Sales Volume and
Profits
Financial Security
Acquisition Potential
Coherence with Firms
Strategy
Supplier Valued by the
Using the Criteria for
selecting Key
Accounts.
Using the Criteria for selecting
Key Accounts.

Step 1.
We like key accounts
that
 Using the Criteria for selecting
Key Accounts.
Step 1.
We like key accounts
that
Step 2.
What importance
weights do you assign for
each criterion from Step
1 such that total sums to
100
 Using the Criteria for selecting
Key Accounts.
Step 1.
We like key accounts that
Step 2.
What importance weights do you assign
for each criterion from Step 1 such that
total sums to 100
Step 3.
Account Opportunity Rating:
Considering customer X what rating
best represents its position on each
criterion (1=Low and 10=High)
 Using the Criteria for selecting
Key Accounts.
Step 1.
We like key accounts that
Step 2.
What importance weights do you assign for each
criterion from Step 1 such that total sums to 100
Step 3.
Account Opportunity Rating: Considering customer
X what rating best represents its position on each
criterion (1=Low and 10=High)

Step 4.
Develop Factor Scores. Multiply
numerical of 2 and 3
 Using the Criteria for selecting
Key Accounts.
Step 1.
We like key accounts that
Step 2.
What importance weights do you assign for each
criterion from Step 1 such that total sums to 100
Step 3.
Account Opportunity Rating: Considering customer
X what rating best represents its position on each
criterion (1=Low and 10=High)
Step 4.
Develop Factor Scores. Multiply numerical of 2 and
Step3 5.

Develop the Account Attractiveness

Score. Sum the figures of step
1.Attractiveness 2.Importn 3.Customer 4.Col 2 X
Criteria ace Xs Score on Col.3
Weights This Criterion
for
criteria
We like key accounts that
a. Are a good 25 4 100
cultural fit with our
firm
b. Provide us high 20 5 100
volume
c. Provide us high 15 7 105
gross margins
d. Offer good 15 8 120
potential for future
growth
e. Are 15 3 45
technologically
sophisticated
1.Business 2.Importa Supplier 4.Col.2 X
Strengths nce Firms Rating Col.3
Criteria Weights on This
for Criterion
Business
Strengths
Criteria
What business strengths must any supplier possess to be
successful with this KA?
a.Good R & D 25 7 175
b.Well trained 15 9 135
local sales Force
c.Low Cost 10 4 40
operations
d.High Quality 15 6 90
service
e.Deep Pockets 10 9 90
f.In-place 20 5 100
distributions
g.Fast moving 5 3 15
 Roles and
Responsibility of
Key Account
Manager
 Roles and Responsibility of Key
Account Manager
Secure Supplier Firm objectives at the Key
Account
Develop Strategy and Action programs
Ensure implementation of strategy and
action programs
Develop and Manage relationships with
the key account
Build and Manage key account team
Manage Relationship with the Sales force
Manage the Key Account Information
System
Draw appropriate support from the
Time Allocation-
Benchmarking
 Area Task Time
Allocation
Reps & their sales 15
channels

Within Marketing
Department
9

Supplier Production an
Operation
5

Firm Other Internal 6

Departments
Subtotal 35
Upper-level decision 11
makers
Purchasing 5
department
Production operation 5
Customers Customers sales 4
channels and
marketing
departments
5 Critical Factors for Key Account
Managers
5 Critical Factors for Key Account
Managers
1.Managingcommitment
2.Understanding
3.Ensuring
4.Involving
5.Ensuring action
others
Key Account
the
and
with
Accounts
responsiveness
the
to
Relationships
the
account
key
Business
account
to customers
program
Managing the Key
Account
Managing the Key Account
Situation
Key Account Analysis
Planning Key Account
Strategy

Plan
Implementati
on

Coordination
and Control
 The Situation Analysis
Analysis of the Key
Account

Analysis Analysis of
of the
Competiti Supplier
on Firm
Planning
Assumptions

Opportunities and
 Lets discus the
procurement process
of some of your Key
Accounts
Buying Influences
Chart
Influencers Perceived Main Criteria for Deciding Comments
Influence Between Beta and
in Gamma
Purchase
Process
Mr.A, 5% 1. Tendency to stick with 1.Mainly a rubber stamp
Group VP, Staff the status quo
Operations
Mr.B, 40% 1. Opportunity to show 1. Give formal approval
Information major for purchasing decisions
Systems Division telecommunications 2. History of upsetting
supplier, Beta, that it established procurement
should treat Alpha more relationships
like a valued customer 3.Very aggressive;
moving upward in the
firm

Mr.C, 20% 1. Neutral to Beta; will 1.Reports to

Communications select best solution for Baker
Division firm 2.Major influencer
upgrading voice
networks
Influencers Perceived Main Criteria for Comments
Influence Deciding Between Beta
in and Gamma
Purchase
Process
Mr.D 20% 1. Seeks best way 1. Neutral to Beta; likely
Communication to solve to switch if convinced
Manager telecommunicatios 2.Aggressive risk taker
problem resulting from
divisions fast growth
2. Demonstrates his
innovativeness to senior
management

Mr.E 5% 1. Technology oriented; 1. Mainly a bystander but

Procurement likely to advocate critically interested
Manager supplier with because of his
technological edge upcoming RFP for a new
2. Aware of how all telecommunications
business units system
functions; interested in
full systems integration
Competitive Structure
Analysis
 Competitive Structure
Analysis

Curre
nt
Timing
of
Competit
ion
Potent
ial
Direct Indirect
Type of Competitor
 Supplier Supplier Competiti
Firm Firm ve Parity
Superior inferior to
to Competit
Competit or
or
Competitor A: Value Analysis
Technology
Product
Design
Raw
Materials
Manufacturin
g Operations
Marketing
 Supplier Supplier Competiti
Firm Firm ve Parity
Superior inferior to
to Competit
Competit or
or
Competitor A: Cost Analysis
Technology
Product
Design
Raw
Materials
Manufacturin
g Operations
Marketing
Competition Mapping

Cost Value

U Advantag
e
Advantag
e
The
Cost Value m
s Disadvant
age
Disadvant
age
Competition Mapping

Competition
Strategy
Prese
Past Future
nt
Key Account
Strategy
 O-T Matrix
Trend in Business At the Key
Account

High

Supplier
s Mediu
Competi m
tive
Strength

Low

Declining Steady Growing

Contextua Vision
l Focus

Mission

Performance
Objectives

Key Account
Strate
gic Position

Strategy
Focus Action ing
Programs

Agreements on
Resources
Commitments

Budgets and
Forecasts
Contextua Vision
l Focus

Mission

Performance
Objectives

Key Account
Strate
gic Position

Strategy
Focus Action ing
Comple Programs

te Key Agreements on
Account Resources
Commitments
Strateg Budgets and
Forecasts
 Strategic Focus
Improve Profits
Maintain and Increase Sales Volume
 Formulating Positioning
Statements
Competitor
Competitor 1 Competitor 2
Custom 3
Relative
er Bene Rank Bene Rank Bene Ran
importa
Benefit fit fit fit k
nce
s

A 1 A 1 A 2 A 3
B 2 B 1
C 3 C 1 C 2
D 4 D 2 D 1
Budgets and
Forecast
 Q1 Q2 Q3 Q4 FY-

I.Sales
Revenue
Plan
Actual
Variance
II.Direct
Expenses
Plan
Actual
Variance
III.Profit
Contribut
ion
Plan
Actual