Fix Key Account Sales Problems: Define What a Key Account is Before you Develop Key Account Management Plans

How does your team define “Key Accounts” and or “Strategic Accounts”? This sounds like such an easy question and yet many of the teams I was asked to help over the years lacked a clear definition of what a Key Strategic Account means to their organization. In this post we will discuss another piece of the account development plan puzzle: how defining what your organization considers is a strategic key account is critical to achieve your future profit objectives.

We have already determined why it is beneficial to have Account Development Plans.

We also discussed how to determine if account matches your companies’ ideal customer profile.

The next step in solving this puzzle is defining what a key strategic account is for your organization.

I like to ask questions, lots of  questions to business leaders when I am asked to help a team fix sales problems.

Who are your companies’ Key Strategic Accounts?

Often, very quickly the senior management team will list the top 20% of their accounts that represent 80% of revenues.

Someone in the room always seems to add a few accounts based on the time your company has served that particular customer, although they are no longer in the top 20% of revenue generating accounts.

Then I meet with the next level of management from all the different departments and ask the same question…

Who are your companies’ Key Strategic Accounts?

They will quickly mention the same large accounts, the accounts that have been with their company for some time and even more accounts. Often accounts they consider  noisy to their particular part of the business. They require something above and beyond the standard service offering.

After all “if they were not strategic we would not be doing all we do for them right? “

One of my favorite places to ask questions is in the market on four legged sales calls with sales people.

I have found we gather the best actionable insights from unfiltered data directly from salespeople interacting with customers on a daily basis.

Who are your companies’ Key Strategic Accounts?

The field salespeople are aware of the large accounts they have heard mentioned in weekly meetings and then they add more accounts in their market they define as Key Strategic Accounts.

I hear some of the National Sales Managers and VP’s of Sales I have worked with saying: “Yes, so what? what’s your point? Naturally everyone will have accounts they consider strategic based on their location and role in our company?”

Here’s the sales problem: when a company does not have a clear definition of what a Key Strategic Account is, your team will fill in the blanks and it impacts your service, resource allocation, focus, profitability, and strategic future profitable growth.

You have probably heard people say: “If everything is a priority, nothing is a priority.” And they would be right.

The same holds true for how your team defines Key Strategic Accounts and key account management expectations.

Some of the account considerations I have used in the past to determine Key Strategic Accounts include:

Sales Profit Potential – what is our potential sales and profits if we worked with this customer and developed a strategic account development plan? For many of the teams I have served, some of the accounts we focused on were not in their top 20%-40% of sales revenues when we first identified them as key strategic accounts. We prioritized them based on future profit contribution potential and often within 18 to 36 months they became large sales and profit accounts.

Actual Sales Today – clearly define and share who the accounts are that are producing 80% of your revenue today. In addition we want to know what % of this customers total buying dollars do we represent today. If we have 90% of their buying dollars our account plan will be much different than if we currently have 25%.

Market Leading Accounts – What are your companies’ top markets served and who are the leaders in each of these markets. I suggest we give them focus because of the sales and profit contribution opportunity but also to be aware of new needs that could result in new proprietary products we can design and introduce.

Global Market and Sales Position – Review customers and possible new customers based on their global market and sales position. It’s not unusual a Key Strategic Account may be headquartered in Japan and has a small presence in the United States. If your company has determined they are a key strategic account you must insure you give them the same focus and service in the US as you would in other regions where their sales are large.

Key Market Presence – We are always looking for new markets that can drive profitable growth. Often we will identify a key market and many of our current accounts, which have not been defined as key strategic accounts already serve those markets. When we identify key new markets new key strategic account targets will emerge. Nothing will launch your sales in a new target market like winning a couple of large market leaders who act as champions to help you understand and grow this market.

Profit contribution and a % of total Profits– In addition to reviewing sales and what accounts represents 80% of your sales I ask we run a similar report based on profit contribution to our bottom line in total dollars. This report may surprise some members of your team, even those in senior leadership positions. One outcome of this report is finding those large sales dollar accounts that require custom packaging, service, special shipping pallets, a dedicated service team, proprietary EDI software, monthly quality conference calls and so on are actually not contributing as much to your bottom line as many may think. You also often discover those diamond in the rough accounts. “Wow…I knew XYZ Corp has been with us for a long time and had good sales, but I never new they represented 7% of our total profits!”

The above are some considerations I have helped teams use but what’s critical is you clearly define what a Key Strategic Account is and communicate it throughout your team.

How does your organization define Key Strategic Accounts?

Do you have Strategic Account Development Plans for each Account?

Do you have a different service structure and team for Key Strategic Accounts?

What % of your companies’ profits came from key account sales last year?

Does your team measure and track customer profit contribution % to your total profits?

It is critical if you plan to leverage strategic key account management plans to clearly define what it takes to be a Key Strategic Account in your organization. Once you do you have completed one more key step in fixing your key account sales development problems.

In the next post we will discuss how to assign key accounts and what those teams need to look like to drive the maximum profitable impact to your bottom line.