Key Account Selling

The key to long-term

sales success
(I) KEY ACCOUNT SELLING

An introduction
What is Key Account Selling?
 Definitions
 Why bother?
 What are the long-term benefits?
 What has it to do with 80/20 principle?
 Cautions

What is Key Account Selling?

Definition of Key Account
What is a Key Account?
 Key Accounts are the 20% of customers who

provide 80% of your profits

 Key Accounts are defined as the prospects or

existing customers who have the potential or

now fall in the 80/20 category.
 Any customer that is of strategic importance to

your company – loss of it of inability to secure

potential future revenue would cause a
significant impact.

What is Key Account Selling?

ACCOUNTS PROFITS
20%

80%
80%

20%
What is Key Account Selling?
80/20 principle
 For all corporations, some form of 80/20 rule
operates.
 e.g. 80% of the firm’s revenues is supplied by
20% of its customers.
 If this rule, or a close variant (90/10; 75/25),
operates in the firm’s customer environment,
the critical business implication is that these
20% (or 10% or 25%) of customers have an
importance to the firm’s long-run future that
exceeds that of the “average” customer

What is Key Account Selling?

A Customer’s $188K
Sales
$50K
Undeveloped
$138K Potential

20% $160K

20% $110K $110K

80% $28K 80% $28K

What is Key Account Selling?
Definition of
Key Account Selling
A systematic set of processes in
identification & profiling of key
accounts, design and adaptation of
information-based & value-added selling
strategies, profiling own market
positioning for high sustainability of
growth in sales.

What is Key Account Selling?

In other words
Key Account Selling
It’s not just calling higher in an
organization, but... when we finally get to
top management, we better have
something new to tell them about their
business that will positively impact their
profits and ... we better have the data to
prove it and the support of his / her staff
to back us up

What is Key Account Selling?

Without Key Account Selling
If we cannot demonstrate our value to
our top 20% Key Accounts - in terms of
increased profits (for them) - we will be
classified as a commodity supplier and
run the risk of losing our business to a
cut rate competitor

What is Key Account Selling?

Why bother?
 Market saturation
 Mere relationship selling is a relic of the
past
 Bygone is the Single-Point-Contact and
good old days in sales

What is Key Account Selling?

Where Have We Been?
Relationship Based Selling
• Good old boy network

• Friendships with key people

• Take them out to lunch

• Entertainment

• Based on personal relationships

• We’ve got the best products, service and

people

What is Key Account Selling?

Where Have We Been?
Problems
• No one has time to be entertained any more
• Our “old” friends are retiring
• New, young blood coming in
• They want to make a name for themselves
• Management is forced to look at “value”
• Credibility of what a sales rep says is fading
• Lots of competitors have good products and
services and all are less expensive
• Mergers and acquisitions
What is Key Account Selling?
Where Are We Today?
Problems
• Our value doesn’t make up the difference
between competitor’s price and ours
• Competitor’s are now offering some of the
same services as we do
• Competitors ask to be just a second source for
a percent of the business
• Our customers “must cut costs in all areas”
• Our past strengths are becoming “minimum
requirements”
• Our customers are also 80/20 ing, and are
reducing their number of vendors
What is Key Account Selling?
 Pressures on Distributor’s current
system for interfacing with customers
Increased Increase in
competition selling costs
The
traditional
distributor’s
sales force
Increasing account system Affirmative
concentration – Pressure from reductions in
higher bargaining
power
customers number of suppliers

Rising importance Changes in the

of procurement procurement process

What is Key Account Selling?

 The Changing Nature of Sales
Force Activity
Critical internal &
customer pressures

Sales Force

Key account Customers New

management approaches
for small
customers

What is Key Account Selling?

 The Distributor (Supplier-Firm) /
Customer (Key-Account) Relationship

VENDOR QUALITY SUPPLIER PARTNERSHIP

Commodity Deliver Add

Relationship Superior Value Organizational
Products and Value
Services

Increased competitive pressure Deeper distributor /

customer relationship

What is Key Account Selling?

What are the long-term benefits of
running Key Account program for
Omega distributors?
 Economies of scale in selling
 Improved understanding of key account’s goals, and
requirements
 Enhanced ability to manage complex relationships
 Sustainability of sales
 Increased key account switching costs
 Credible reference for greater market
penetration
 Constant feedback to research and development
for product and service improvements

What is Key Account Selling?

What is the value of a Key Account
program for the individual key
account customer?
 A single point of contact
 Lower overall costs
 Enhanced value with prioritized attention
from distributor and Omega Division
 Guaranteed delivery when capacity is short
 Long-term relationship
 Joint identification of opportunities and solutions
to problems in win-win partnership

What is Key Account Selling?

What has it to do with 80/20
principle?
 Understand who are your 80/20 customers,
their needs and profile
 Redeployment of sales efforts and resources
 Understand your own ranking, positioning,
growth potential or 80/20 status in your key
customers suppliers profile – seek
improvement – adopt aggressive growth
strategy

What is Key Account Selling?

Redeployment of sales efforts
and resources
 High value customers should be treated
differently from the “average”
customers
 They should receive a disproportionate
share of resources and are worthy of
greater managerial attention

What is Key Account Selling?

How about the small
customers?
 20% of your firm’s revenues are
derived from 80% of its customers.
 Stop serving small customers?
 Identify less expensive methods for the
firm to deal with these accounts

What is Key Account Selling?

Cautions for Key Account
Management
 Too many eggs in one basket
 Insufficient benefits to the distributor
 Insufficient benefits to the potential key
account
 Limitation of opportunities
 Cost and Bureaucracy
 Significant organizational change

What is Key Account Selling?

 Selecting Key Accounts -
Criteria
 Direct Sales Revenue and Profit
 Current Sales Revenue
   Current Profits    

 Future Sales Volume and Profit

 Financial Security
 Acquisition Potential
 Key account effort on firms likely to be acquired may be
wasted if the acquiring organization is given the
dominant procurement responsibility
 Selecting potential acquirers as key accounts may bring
long-run benefits
What is Key Account Selling?
Selecting Key Accounts -
Criteria
 Organizational Interrelationships
 Coherence with firm strategy
 Key account selection is a strategy
implementation decision
 Supplier valued by the customer
 Customer believes, or can be persuaded, that
distributor can meet its needs over the long run
 Cultural Fit

What is Key Account Selling?

Selecting Key Accounts -
Criteria
 Indirect Potential Volume & Profits…
Strategic Key Account
 Opinion Leadership
 Example: Leading financial services group ICICI was
the 1st Indian company listed on NYSE. One of ICICI’s
key accounts is Infosys, India’s fastest growing
software company, well-known for its commercial
success, product quality, and high ethical standards,
and the first Indian company listed on NASDAQ.
Although ICICI transacts little business with Infosys, it
regards as a key account because of its exemplary
reputation.

What is Key Account Selling?

 Compensatory Approach for Calculating
Key Account Attractiveness
1. Attractiveness Criteria for Key 2. Importance 3. Customer 4. Col.2 X Col.3
Accounts Weights for X’s Score on
Criteria This Criterion
“We like key accounts that …”

a. Are a good cultural fit with our 25 4 100

firm
b. Provide us high volume 20 5 100
c. Provide us high gross margins 15 7 105
d. Offer good potential for future 15 8 120
growth
e. Are technologically sophisticated 15 3 45
f. Act as opinion leaders in their 10 4 40
industry

Total 100 510

What is Key Account Selling?

 Key Account Manager’s Time Allocation
(%)
Task Time Allocation
(%)
Within Reps and other sales channels 15
Distributor Marketing department 9
Company Production and operations 5
Other internal departments 6
Subtotal 35

Customers Upper-level decision makers 11

Purchasing department 5
Production and operations 5
Customer’s sales channels and marketing departments 4
Subtotal 25

Other Other / administrative 21

Travel 19
Subtotal 40

What is Key Account Selling?

(II) KEY ACCOUNT
MANAGEMENT MODEL

Situation Analysis & Strategy

COMING SOON!