The need for strategic plans for key accounts

Managing powerful customers profitably is perhaps the biggest issue facing suppliers today, as markets, particularly in Western Europe and America mature and as inexpensive versions of goods which were hither to only supplied by the West flood into their markets from lower cost countries such as China. One major response from most organisations it to put pressure on their suppliers, because, the easiest and quickest way to increase margins which are under pressure is to cut the price paid for external goods and services.

The problem with the approach, however, is that price cutting is finite (how many pence can be cut from a pound, cents from a euro or a dollar? etc.), whereas value creation is infinite and is limited only by our creativity and imagination. So increasingly, purchasing directors are beginning to take account of the potential benefits of fostering a small number of truly strategic relationships with a privileged group of suppliers.

Such relationships however, are few and far between, because no organisation has the time or the resources to align their R and D, purchasing, manufacturing, logistics, IT, finance, service and other functions with the equivalent functions in their customers' businesses in anything other than a few, special cases.

When it happens, however, our research at Cranfield has shown that such relationships are the well spring of profitability for both parties and totally justify the effort.

Key Account Management (KAM), then, is without doubt the major challenge facing business today and is fraught with difficulties in conceiving, planning and implementing it, involving, as it does, organisational change.

With over ten years' experience at Cranfield of researching buyer/seller global best practice, we know what the
requirements are for successful KAM. Without doubt, one of the biggest barriers is the type of people who are asked to implement KAM programmes, for KAM is as different from selling and sales management as chalk is to cheese.

Our experience over the years has shown us that Key Account Managers must be experienced senior executives, fully trained in analytical techniques, financial analysis, strategic planning, political and
interpersonal skills, indeed, the very skills required by a successful general manager or chief executive officer.
The point we are making is that it is most definitely not a SALES role and people who are trained to sell and who are rewarded accordingly rarely make good Key Account Managers.

The purpose of our book ('Key Customers: how to manage them profitably') is to set out in a no-nonsense way what a top-notch Key Account Manager needs to know and do in order to build profitable relationships with powerful customers. This inevitably means spending time on analysing the customers' business and DNA prior to producing a strategic plan guaranteed to build profitable relationships for both parties.

The book focuses on putting together strategic plans for key accounts prior to implementing the first year's plan, for, as John Perton of Boston College said: 'The good thing about not having a strategy is that failure comes as a complete surprise and is not preceded by a long period of worry and depression.'

It is amazing to us how many major accounts are lost because the supplying company has little more than sales forecasts and budgets for one year only, and how surprised they are when they are dropped in favour of another supplier who has taken the trouble to work out a longer term strategy for working together.

Read on . . .

If you want to know more then you may wish to read Malcolm McDonald’s latest book ’Key Customers: how to manage them profitably'. Published by Butterworth-Heinemann it is available through leading high street and online bookstores.

About Malcolm McDonald

Emeritus Professor Malcolm H.B. McDonald MA(Oxon), MSc, PhD, D.Litt. FCIM FRSA
Malcolm, until recently, Professor of Marketing and Deputy Director Cranfield School of Management with special responsibility for E-Business, is a graduate in English Language and Literature from Oxford University, in Business Studies from Bradford University Management Centre, and has a PhD from Cranfield University. He also has an honorary Doctorate from Bradford University. He has extensive industrial experience,
including a number of years as Marketing Director of Canada Dry.

He is Chairman of six companies and spends much of his time working with the operating boards of the world’s biggest multinational companies, such as IBM, Xerox, BP and the like, in most countries in the world, including Japan, USA, Europe, South America, ASEAN and Australasia.

He has written 40 books, including the best seller ’ Marketing Plans; how to prepare them; how to use them’ and many of his papers have been published.

His current interests centre around the use of information technology in advanced marketing processes and global best practice in Key Account Management.

© Malcolm McDonald 2006