Don’t just retain your key accounts – Grow your revenue and profit as well!

Google

By Peter Browne

One critical aspect of managing accounts more strategically is to retain them by increasing barriers to entry against competitors. However, what companies’ often overlook and misunderstand is the potential to grow revenue and profit.

Typically when companies begin a Strategic Account Management program, their objective is retaining their most important accounts. This includes defending share against aggressive competitors, reducing margin erosion, and creating a compelling value proposition that differentiates them from the market. However managing accounts more strategically also helps grow share of wallet and grow margins.

This is supported by the Strategic Account Management Association's (SAMA) 2012 Report on Current Trends & Practices in Strategic Account Management.  SAMA surveyed 700+ global respondents across 30 industries. In the report, SAMA  noted that “the average revenue growth in the strategic accounts surveyed in 2011 was 14%, up 2% from 2009”. Even with low growth in the economy, these accounts are beating the economic trend. SAMA reported improved profitability – showing growing revenue was not caused by discounting prices. If improved profitability was not enough, customer satisfaction scores also increased.

These findings make sense. Companies who manage accounts strategically understand their customers more deeply. So, they can identify problems that need solving for their accounts. Then they can solve the problems with their products and services, or find other ways to help their account solve the problem. Solving problems creates new revenue opportunities that would otherwise not have been obvious. Opportunities identified in this way are also unlikely to be offered to the market. So typically companies achieve better than average margins.

Also, companies that segment their customers using best practice segmentation tools can identify the small accounts most likely to grow. Small but fast-growing accounts get less focus from competitors, so you benefit from revenue growth and good profitability. In addition, you can position your organisation as a critical business partner. As a partner, you can provide fast-growing companies external expertise and insights to manage the challenges they encounter during their growth.  

So when you consider a Strategic Account Management program, don’t just view the initiative as a way to defend key accounts. Also consider the potential to grow revenue and grow profit from the accounts that are most critical to the future of your company.

We have work with many companies in many industries and many geographies to help retain key accounts and grow revenue and profit. If you would like to discuss how we can help, please contact us on +61 2 9450 1040 or www.gordianbusiness.com.au.

What is your innovation appetite?

Google

By Peter Browne

If you want to achieve breakthrough change to grow revenue and profits, why not try innovation? However, Innovation has become an overused buzz word, and there are many assumptions made when the term is used.

Before undertaking any strategic planning with innovation in mind, it is critical to be clear on your organisation’s innovation appetite. At a minimum the innovation appetite must be agreed between the board and CEO.

The Innovation Spectrum

At one end of the spectrum innovation simply means doing what we currently do better or differently. In many industries incremental improvement can be enough to keep current customers satisfied, and maintain an edge over competitors. This approach is very low risk, easy to implement but has lower upside potential.

The other end of the innovation spectrum is developing new products and services that solve unmet needs of the marketplace, for example; products such as the iPhone/iTunes/App Store or low cost airlines. New products for unmet needs are typically much higher risk and higher return if they meet the needs of the market, but equally pose the risk of being abject failures.

So your organisation’s innovation appetites and risk appetites are closely correlated. It is almost impossible to introduce a more risky kind of innovation into a traditional, risk averse organisation, without some burning platform for change (and by then it is usually too late).

Developing Strategy

Understanding what innovation means to your organisation and your industry is essential. Being clear on this makes the process for developing strategy far smoother, as the boundaries can be set at the outset providing a framework for developing strategy.

For example, before undertaking strategy work we ask organisations to consider these questions:

• Will our focus be limited to existing products and services, or are you open to identifying new products and services?
• Are you focusing on the currently geographies served, or potential new geographies, even global?
• If new products and services are to be scoped what it the minimum potential market for them to be worth pursuing?
• What funding is available to fully evaluate and commercialise a new product or service?

Answering these questions up front provides clear boundaries for the strategy development team, and prevents wasted investment in time and money pursuing strategies that ultimately don’t get past the first hurdle.

Whether working with a customer on a Blue Ocean Strategy or change that is more incremental, we apply our expertise to set the foundations for developing strategy successfully. Contact us on +61 2 9450 1040 to discuss how adopting a different approach can help your company achieve a breakthrough change to grow revenues and profit.

Only 15% of companies manage their accounts strategically - how does your company measure up?

Google

by Peter Browne

“Where we are at now – that’s not for me to worry about. Where we are going – that’s what I care about. And our suppliers better care about that too if they want to be our suppliers”

- President, EMEA – Industrial Products Manufacturer

Based on a 2010 study of senior managers from manufacturers, retailers and distributors in Europe and North America, only 15% of organisations measure up when it comes to managing their key accounts in a truly strategic manner. Alarmingly, 65% of companies believe they are managing their key accounts strategically, so there is a whopping disconnect between what organisations think is strategic account management and global best-practice.

In addition, the study identified that organisations with an effective strategic account management program had continued to improve their approach. This means that not only were the competitors falling behind, the gap between them was increasing. They had differentiated themselves and successfully increased the barriers to entry against their competition.

Companies that fail to address their key accounts strategically typically find that:

• They are increasingly reliant on price as the primary negotiation lever
• They are incurring costs with accounts that deliver little or no value
• Margins are declining
• They are not growing

The same study identified a number of common shortcomings in strategic account management practices.

Sales led

Many organisations think that if they have some large accounts, a dedicated account management team and some form of account planning system, then they are strategically managing their accounts.  This is simply a better than average way to allocate and sell to large accounts.

To build a strategic relationship there must be broad and deep connections between all levels of the relationship. Senior level engagement is the most critical. The growth of your company is inextricably linked with your key accounts so senior managers must be intimately aware of and involved in strategies with key accounts.

Revenue focussed

The primary focus of most account management programs is short-term revenue growth and account retention. The account plan and objectives of the account manager all relate to revenue opportunities and what the organisation can win from the key account.

The primary objective of strategic account management is to build a strategic relationship with the key account, which will achieve sustainable long-term revenue growth, increase organisational differentiation and create significant barriers to entry and exit.

Failure to identify and create value

Sales teams too often focus on what they want from the account. Not enough time is focussed on understanding what the critical success factors are with a key account, and what “value” means from the account’s perspective.

Strategic Account Management requires the account team to ask a lot of questions across the key account, and make conscious observations of what they are seeing and hearing. This information needs to be distilled into insights that provide clarity on what real value is for the key account. Only then can a focussed and actionable account plan be developed and executed.

Summary

Whilst there a many more success factors for your strategic account management program, these are some of the most critical. The fact is that companies that have effective strategic account management programs achieve better growth and financial returns than companies that do not.

We have worked with many organisations to develop and implement strategic account programs, and identify ways to deliver more value to your largest accounts, so if you need help to make this shift please contact us at Gordian Business on +61 2 9450 1040 or www.gordianbusiness.com.au.

Growth customers - Identify the hidden gems in your account base

By Peter Browne
To determine which accounts to manage strategically, companies typically use revenue as their main criteria. On one level this makes sense. Managing accounts strategically requires a large investment in time and resources, so receiving adequate revenue to justify this investment is valid.

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What Strategic Account Management and Social Media have in common: The Law of Reciprocity

By Peter Browne
When we start to work with Account Teams, one of the areas we focus on is creating value. With major accounts this means “beyond products and services” and “beyond this financial year”. In an environment where there is laser focus on achieving revenue targets and maximising returns from our customers this is often a difficult change in thinking for teams and their managers to make.

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