12 steps to key account management portfolio analysis: Part twoby
- Exploratory (you do not currently do business with this account).
- Basic (you have some transactional business with this account).
- Cooperative (you have regular business with this account and may well be a preferred supplier, but you are only one of many suppliers and pricing is still important).
- Interdependent (you have multifunctional, multilevel relationships, but the customer could still exit if necessary).
- Integrated (you have multifunctional, multilevel relationships, your systems are interlinked and exit for both parties would be difficult).
- your current sales and
- the total available sales over three years (to any competitor).
Figure one - portfolio analysis matrix
Figure two - the key account portfolio
Figure two is a completed key account portfolio and figure three is a real example from an insurance company, with the figures disguised to protect anonymity.
Very important customers, but the relationship has developed still further, to the level of partnership. The relationship is ‘win-win’, both sides have recognised the benefits they gain from working together.
Customers buy not on price but on the added value derived from being in partnership with the supplier.
The range of contacts is very broad and joint plans for the future are in place.Products and services are developed side-by-side with the customer. Because of their large size and the level of resource which they absorb, only a few customers fall into this category.
Very important customers (in terms of value).
Commit to security of supply and offer products and services which are tailored to the customer’s particular needs.
Price is less important in the customer’s choice of supplier.
Both parties have some goals in common.The two organisations have made some form of commitment to each other.Invest as necessary in these customers in order to continue the business relationship for mutual advantage, but do not over invest.
Price is still a major factor in the decision to buy but security of supply is very important and so is service.Spend more time with some of these customers and aim to develop a deeper relationship with them in time.
These customers usually want a standard product, ‘off the shelf’.
Price is the key factor in their decision to buy.
The relationship is helpful and professional, but transactional.Do not invest large amounts of time in the business relationship at this stage.
Step 12: Check the financial outcomes from the strategies
Figure two is repeated here. Please pay particular attention to large key account circle in the bottom right had box. The following is a true story about a global paper company for whom the authors were doing some KAM consultancy.
A main board director was bemoaning the fact that one of the world’s biggest media companies – hence a massive user of paper – was putting its paper order out to tender and was determined to accept the two lowest price bids. It was then to drop all other suppliers. The authors quickly established that to lose such a big customer would be a blow to profitability, as all its mill fixed costs would remain the same, ……without this customer. So the author advised the paper company to bid the lowest rice in order to win the contract, then to withdraw all support other than that specified in the contract. In this case, clearly, sending a key account manager on regular visits and offering other services would have been a waste of resources, as it was clear that this particular customer didn’t want a close relationship with any supplier and was obsessed with lowest price, so making it virtually impossible for any supplier to make much profit.
- Definition and categorisation of key accounts.
- Porter’s Industry Driving Forces (or some such similar process) so that Key Account Managers fully understand the vertical markets in question.
- the customer’s objectives, strategies and financial constraints.
- their value chain and how the supplier can help.
- their buying processes.
- their criteria for choosing between competing suppliers.