STRATEGIC ACCOUNTS: GETTING THE BALANCE RIGHT
Last month’s SalesPulse had the title Strategic Accounts – are they important? As no one has said anything to the contrary let’s assume they are. But aren’t all customers important? Well the answer to that has to be yes as well, because if they are not they will walk. Let me give you an example and I apologise if you read the article in The Daily Telegraph on July 2nd.
Speedy Hire, the FTSE 350 equipment hire and services company issued a profits warning. In the note that accompanied the bad news the board revealed in its review of operations “…that there was a lack of equipment, poor customer service and a focus on strategic accounts at the expense of small business customers”. A pretty damning condemnation really. To not have the product when the customer required it together with poor service is a toxic cocktail. However it is the bit about not treating their smaller customers properly which is the point I want to pursue.
Once one has identified and qualified strategic (also known as key, major, or national) accounts the next question is what do you call the other customers? They may not be strategic today but they can hardly be called Non-Strategic Accounts. Many of these customers will be very profitable – perhaps more profitable than some of their strategic ones – and ones that a company would not want to lose; they are valued so why not call them that. It creates a mind-set. If they ae not profitable and the resources are not available to make them so an alternative strategy is required.
A strategic accounts approach is an organisational strategy, not a sales strategy and it is all about alignment; i.e. deploying the best, and often most of a company’s people and resources to understand, service and sell to its top customers. In our model below it is about moving them from Tier 4 towards Tier 1 creating better value relationships and to derive maximum mutual benefit from them.
In real life this just about always means that the “valued” customers are scarce resourced, as was clearly the case at Speedy Hire. So what is the answer? How can a company maintain the steady profitable income from its valued customers and at the same time invest in a Strategic Accounts strategy? I don’t believe there is a simple answer and if I had one few would believe it. However, there are a few guidelines that can be used.
In my experience people get very excited when they decide to adopt a Strategic Accounts strategy. The number of nominated accounts are always too many, so be ruthless in selection. Generally speaking a mix of established customers, fast growing companies and ones who will have a significant market impact if they are won are a good target to have. Remember though, being, or having the ability to be a strategic supplier is a key qualification criteria.
It is crucial that everyone understands why a company is taking such an approach; is it for differentiation through customer intimacy? Is it part of a transformation strategy? Or are the top customers demanding it?
Approach the implementation incrementally so that the contribution made by valued customers is not lost while a viable long term strategy is developed to support them in the most cost effective manner.
As is the case with most things in business and life in general, it is about getting the balance right which is important. Errors can be costly and not easily rectified.