kam - key account management
DESCRIPTION
Presenation on how to manage 'key' clients/accountsTRANSCRIPT
How to Manage Big, Powerful Clients - How to Manage Big, Powerful Clients - ProfitablyProfitably
Agenda
Challenges Their expectations and demands
– Why price is important to clients– The impact of price on profits– How powerful clients classify their suppliers– The expectations and demands of powerful clients
How to respond as a supplier– How world-class suppliers classify powerful clients– How to develop profitable strategies for powerful clients
Challenges
Market Maturity
Globalisation
Customer/Client power
Challenges
Market maturity
Technology
Production
Sales
Accountancy
Fads
Marketing
© Professor Malcolm McDonald
Challenges
Globalisation
Embrionic markets Growing markets
Guerrillas
2nd tier
Leaders
Mature markets
New guerrillas
?
New global leaders
Challenges
Client power
Double your money: cut spend on purchases
Profit (6%)
Other costs(44%)
Profit (11%)
Purchases
(50%)
Purchases(44%)
‘Purchasing: adding value to your purchasing through effective supply management’ Institute of Directors, September 2003
Other costs(44%)
Client power
Big clients are getting bigger
clients are rationalising their supplier base
clients have become more sophisticated
clients want tailor-made solutions
The cost of serving clients is increasing
Suppliers and clients are developing new ways of working together
BiscuitManufacturer
Board/Packaging
SpecialityAdhesives
Metal Bearings
24
76
16
64
14
39
18
44
BiscuitManufacturer
Board/Packaging
SpecialityAdhesives
Metal Bearings
t-25 t.o
% of totalsupplier
sales
From: Profitable Customers, Charles Wilson
Sales to the top 5 clients as a % of total supplier sales over 25 years.
Increasing client concentration...
Client power
Big clients are getting bigger
clients are rationalising their supplier base
clients have become more sophisticated
clients want tailor-made solutions
The cost of serving clients is increasing
Suppliers and clients are developing new ways of working together
Increasing costs of interfacing with clients
Supplier to the print industry (turnover £200M)
Interface costs £'000 per client
(adj. for inflation)
t-15 t.0
Top 10% of clients
60
140
t.-15 t.0
Bottom 10% of clients
15 9
Costs of the frontline (Sales, service, trade promotions etc. over 15 years
Source: Profitable clients, by Charles Wilson
What is a Key Client?
Percentage of our business
Turnover
“Added Value”
Potential
From ‘Key Account Management’ Cranfield University School of Management, 1996
% of Criteria for partnership respondents
Desirable factors in suppliers
Ease of doing business 100
Quality (product) 100
Quality (people factors) 100
Volume related 64
Added value/value for money 64
Company culture 36
From ‘Key Account Management’ Cranfield University School of Management, 1996
Suppliers are still interested principally in volume
Whilst they are interested in the potential for ‘added value’, most still do not measure account profitability
The widening rift between profitable and unprofitable clients:
t-15
1 2 3 4 5 6 7 8 9 10
15
1716
1312
10
76
4
1
1 2 3 4 5 6 7 8 9 10
% of total companyprofits
Largest 10%of clients
Smallest 10%of clients
client decile groups
1 2 3 4 5 6 7 8 9 10
-3
26
29
2220
8
4
-3 -3
1 2 3 4 5 6 7 8 9 10
% of total company
profits
Largest 10%of clients
Smallest 10%of clients
client decile groups
t.o
% of company profit by client decile (each decile = 10% of client base)
Adapted from: ‘Profitable clients’ by Charles Wilson
LOVE
Low
High
HATE
SalesPotential
How well do you know the real profitability of thetop ten accounts?
27
23
13
10
15
56
1
38
19
15
6
8
3
65
1
21
19 19
9 9
6
11
6
19
22
18
13
10
6 6
1
3
32
20
12
4
16
2
10
4
1 2 3 4 5 6 7 8 9
20012002200320042005
TotallyNotat all
%
Creating closer relationships with supply chain partners
Marketing
Operations
InformationSystems Sales Purchasing
Marketing
Operations
InformationSystems
FromFrom
Supplier client
DIRECTORS
DIRECTORS
Creating closer relationships with supply chain partners
InformationSystems
Operations
Marketing
Operations
InformationSystems
Marketing
Key-AccountCo-ordination
Supplier
To
SupplierDevelopment
client
Directorsselling company
Directorsbuying company
Strategic Purchasing
Nurture ClientExpand BusinessSeek New Opportunities
Core
NuisanceGive Low AttentionLose Without Pain
ExploitableDrive Premium PriceSeek Short Term Adv.Risk Losing client
SUPPLIER PREFERENCE
VALUE OF BUSINESS
ATTRACTIVENESS
Source: PMMS Consulting Group
Development Cosset Client
Defend VigorouslyHigh Level of ServiceHigh Responsiveness
Business Contribution
CriteriaBusiness Process
Criteria
StrategicSuppliers
PreferredSuppliers
CommoditySuppliers
• “First mover” advantage• Channels to market• Reverse revenue generation
• VP lead• Business strategy driven• “A team” on both sides
• Point-to-point solution• Technology access• Operational advantage
• Cost improvement• Superior service levels• Ease of transaction
• Relationship manager• Strategy from CatMan• SLA scorecard
• Managed locally• Performance monitored• E-enabled
10
20
600
1, 350
3,000
10
< 1% ofsuppliers
c. 20% of all suppliers
c. 80% of all suppliers
Type
Supplier Relationships as a Source of Business Advantage
Business ProcessCriteria
Type
• Maximum economic and strategic leverage, i.e. product / market differentiation.• Attainment of time to market, quality & productivity objectives.• Shareholder value creation.• Blending core competencies, leadership capabilities & complementary strengths (allowing outsourcing of non-core capability).• Adding real productivity & value (significant cost savings & revenue potential).• Globally focused, linkages to new business opportunities & capable of complementing the business focus.• Attainment of high performance, low cost & strategic objectives (producing unique design, integration & marketing capabilities).
1.Vision
2.Culture
3.Impact
4.Intimacy
5.Balance
• Sharing of long-term vision and orientation.• Global focus and commitment with service & support capability.• Defined but yet flexible boundaries.
• Similar or complementary values.• Understanding of the process to deal with differences.• Flexibility in approach since circumstances may change over time. An exit route needs to exist.
• Readiness to share ideas & information.• Not overly locked into a competitor.
• An element of demonstrated commitment from both sides.• Readiness for risk taking and sharing of costs.• Building trust and, thereby, moving to intimacy.
“Must Have’ Criteria Drive Hard and Soft Measures
Preliminary selection of key accounts
Key account preliminary categorisation
Top 15 (in volume/revenue generated)
Next 30
Next 55
A
B
C
Preliminary Selection of Key Accounts
Large
Medium
Small
Strategic Star
Status Streamline
HighHigh
Low
Supplier BusinessStrength with client
AccountAttractiveness
Exploratory
Basic
Cooperative
Interdependent
Integrated
Strategic intent of seller
Strategic intent of buyer
Adapted from a model developed by Millman, A.F. and Wilson, K.J.“From Key Account Selling to Key Account Management” (1994)
The relational development model
Supervisors
Clerks
Operators
Managers
Directors
PurchasingManager
Supervisors
Clerks
Operators
Managers Key AccountManager
SellingSellingCompanyCompany
BuyingBuyingCompanyCompany
Directors
Selling Company Buying CompanyMgrs Mgrs
Operations
Administration
Board
Operations
Administration
Board
Key AcctMgr
Maincontact
Selling CompanySelling Company Buying CompanyBuying CompanyOperationsFocus team
FinanceFocus team
EnvironmentFocus team Market research
Focus team
Key AcctMgr
Maincontact
R&DFocus team
JointBoard Meetings
Directors
Accounts
Marketing Marketing
Service Service
Directors
Accounts
Selling company Buying company
ProductionProduction
Purchasing Manager &Key Account Manager
Inbound logistics &Order processing/
client service?
Integrated
Exploratory Basic
Co-operative
Interdependent
Selling company Buying company
Boa
rd
Adm
in OpsK
AM
gr
Selling company Buying company
Boa
rd
Adm
in OpsK
AM
gr
Relationships and the client profitability trap
-20
0
20
40
60
80
100
120
140
160
Basic Co-operative Interdependent Integrated
Sales
Cost of saleAttributable overheads
Total costs
Contribution
£m
Operations Focus Team
Finance Focus Team
R&D Focus Team
EnvironmentFocus Team
Market Research Focus Team
MarketingFocus Team
Buying company
KeyAccount
Mgr
Selling company
Buyer
Cranfield University School of Management 1996
Integrated KAM
Many activities cross the boundaries - especially information based activities such as:Sales Forecasting, Capacity Planning, Resource Scheduling, Pricing, etc
Support ActivitiesInfrastructure
Human ResourceManagement
Product & TechnologyDevelopment
Procurement Value Added - Cost= Profit
- Legal, Accounting, Financial Management
- Personnel, Pay, Recruitment, Training, Manpower Planning, etc
- Product and Process Design, Production Engineering, Market Testing, R&D, etc
- Supplier Management, Funding, Subcontracting, Specification
INBOUNDLOGISTICS
OPERATIONS OUTBOUNDLOGISTICS
SALES &MARKETING
SERVICING
eg.Quality ControlReceivingRaw Material Controletc
eg.ManufacturingPackagingProduction ControlQuality ControlMaintenanceetc
eg.Finishing GoodsOrder HandlingDespatchDeliveryInvoicingetc
eg.client mgmtOrder TakingPromotionSales AnalysisMarket Researchetc
eg.WarrantyMaintenanceEducation / TrainingUpgradeetc
Primary Activities
High LowHigh
Low
Key accountattractiveness
Supplier business strength with client
Selectiveinvestment
Management for cash
Strategicinvestment
Pro-activemaintenance
The key client portfolio
K.A. AttractivenessFactors
10-7 6-4 3-0 X weight
Volume/value 15
Growth/potential % 30
Profit potential% 40
‘soft’ factors 15
100
High
Low
Relative client SatisfactionLowHigh
XKey Account Selection Matrix Tool - KA Selection Matrix
ChartDisplay Spend:Display Group: National
Spend with Us
client: College Group Relative client Satisfaction: 0.80 Account Attractiveness: 4.40 Spend
Show GroupsRedraw
Acco
unt A
ttrac
tiven
ess
2
4 127 10
3
86
5
1
SupplementaryService Elements
1 Alexander Smith $14,000,0002 Ash & Williams $13,000,0003 College Group $12,000,0004 F T Group $9,900,0005 Harpers $7,600,0006 Parker $9,400,0007 Quality Insurers $16,200,0008 Randsome $14,500,0009 Royal & Co $6,400,00010 Thompson Group $32,000,00011 Tudor Rose $8,000,00012 Woods $11,500,000
clients on Chart XID Name Maximum Spend
SupplementaryService Elements
Relationship Stage X
Co-operative
Basic
Exploratory Integrated
Interdependent
11
9
http://www.TheMarketingProcessCo.com
_______________
Selecting and categorising clients by potential
High LowHigh
Low
Accountattractiveness
Supplier business strength with client
Selective investment
Management for cash
Strategicinvestment
Pro-activemaintenance
Strategic Star
Status Streamline
Page 37
Key measurements in KAM evaluation
Costreduction
Growth
Profitability
KAM
Page 38
Setting expectations of account performance
P
GC
P
GC
P
GC
P
GCHigh Low
High
Low
Accountattractiveness
Supplier business strength with customer
KAMhigh
KAMhigh/medium
KAMmedium
KAMlow
StreamlinecustomersManage for
cash
StreamlinecustomersManage for
cash
Strategic customersStrategic
investment
Strategic customersStrategic
investment Status
customersPro-active
maintenance
StatuscustomersPro-active
maintenance
StarcustomersSelective
investment
StarcustomersSelective
investment
CategoryStrategic clients
Status clients
Star clients
Streamline clients
Description Very important clients, 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.clients buy not on price but on the added value derived fro 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 client. Because of their large size and the level of resource which they absorb, only a few clients fall into this category.
Very important clients (in terms of value).Commit to security of supply and offer products and services which are tailored to the client’s particular needs.Price is less important in the client’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 clients 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 clients and aim to develop a deeper relationship with them in time.
These clients 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.
Exploratory
Basic
Cooperative
Interdependent
Integrated
Strategic intent of seller
Strategic intent of buyer
Adapted from a model developed by Millman, A.F. and Wilson, K.J.“From Key Account Selling to Key Account Management” (1994)
Key Client AnalysisKey Client Analysis
Business Partnership Process
11
22
33
44
55
66
77
88
Market / segmentselection criteria
Defining and selectingtarget key accounts
Industry driving forcesanalysis
Client’s annual reportsummary and financialanalysis
Client’s internal valuechain analysis
Client’s buying process and information needsanalysis
Our sales history withthe client
Competitive analysis
Client’s objectivesanalysis
99
For each key account
Client’s
Basic
CSF
Analysis
Process
Ourobjectives,strategiesand planfor T + 3
The ApplicationsPortfolio Analysis
Strategic High Potential
Key Operational Support
GainingAdvantage
AvoidingDisadvantage
Applications whichare critical to
achieving futurebusiness strategy
Strategic
Applications whichmay be critical inachieving future
business strategy
High Potential
Applications uponwhich the
organisationcurrently depends
for success
Key Operational
Applications whichare valuable but
not criticalto success
Support
Creating Advantage
Avoiding Disadvantage
The application portfolio
Adapted from Professor Chris Edwards, Cranfield School of Management
The market understanding process
KA A
KA B
KA C
KA D
Etc.
Marketing Sales Mfg. IT R & DEtc.
Finance &Accounting
HR Logistics
The
“M
arke
ting”
D
irect
or
Blake and Mouton
1/9The clients
friend
9/9The problem
solver
1/1The order
taker
9/1The pressure
salesman
5/5Compromise
“Method” approachConcern for
client
Concern for making the sale
9
191
Significant differences
Buying companies valued...
– integrity
– Trust
Selling companies valued…
– Selling skills
– Negotiating skills
Developing key account professionals
Commercial awareness
Interpreting business performance
Advanced marketing techniques
Business planning/strategy
Finance
Project management
Interpersonal skills
Some key findings from KAM research
Key account management is a strategic activity
KAM is fashionable, but difficult
KAM can develop beyond partnership to synergy
There are mismatches between suppliers and clients
KAM does reduce costs and improve quality but these are rarely measured
A key account manager needs far more skills than a sales person
KAM needs a client-focused organisation
AppendixAppendix
KA Planning Process
The output of the key account planning process ie. The contents of the KA Strategic plan
Diagnostic tools/techniques
Mission statement
Financial summary
Critical success factors analysis
Downside risk assessment
ForecastingBudgeting
Porter matrixBCG matrixDirectional policy matrixAnsoff matrix
SWOT analysesPorter’s value chain analysis
Key Account Overview
Key AccountStrategies
Key account portfolio Summary
Key account opportunities/threats
Resource Requirements/budgets
Key account strengths &weaknesses
Issues to beaddressed
Supplier’s trading historyBuying processDefinition of businessSTEEP analysis summary
Market researchMarket segmentationGap analysisProduct life cycle analysisDiffusion of innovationAnsoff matrixSTEEP analysisMarket mapping
ProductPricePromotionPlace
by productby marketoverall
by productby marketoverall
Key AccountPlanningProcess
Phase 1
Goal setting
Phase 2
Situation review(i) For the customer
Phase 3StrategyFormulation
Phase 4ResourceAllocation
Mission statements
Market structure summary
Key AccountCompetitorAnalysis
Key account objectives & strategies
by productby marketoverall
Key accountassumptions
Directional policy matrixResponse elacitiesThe marketing mix
Supplier objectives
Supplier strategies