The purpose of a key account program is to treat selected high-potential accounts differently, which hopefully will lead to different, better results. But what really works? To determine success factors in this area, Fortier & Associates, Inc. conducted interviews with a variety of industrial companies and large account purchasing managers. Coupled with our direct experience, here are our findings. What Really Makes a Difference? The principal elements that lead to superior performance, often accomplished through an explicit key account program, are:
- Superior relationships, developed through close attention and time, which can lead to:
- Information that helps you stay a step ahead of competitors
- Early shot at new opportunities
- Multiple sources of information and integration of this knowledge to continuously evaluate the emerging situation and your competitive position. This should lead to more effective proposals, smarter resource allocation and value pricing
- Preference in a tie, or guidance to come out ahead in the decision of how shares will be split
- Global, multi-business approach to contracts, leveraging a different product scope versus competition
- Could be one big deal or many separate ones
- Growth incentives (see comment on rebates below)
- Win-win technical and commercial programs
- Joint efforts to grow share or differentiate
- Continuously ask: What can we uniquely do that will help this account achieve their goals? Assign responsibility for this question and explicitly answer it, often
- Great account managers
- Driven to understand the total account potential and achieve goals
- Skills to lead the multifunctional, global team
- Strong relationship builder
- An aggressive, savvy key account program leader (typically a Vice President Sales or overall Program Head)
- To select, train and drive the account managers
- To pursue high-level relationships that will make a difference
- To bring negotiating savvy and tactical expertise
- A formal key account selection and planning process that:
- Identifies the true account potential and company share
- Establishes specific goals for share and margin by area or product, including 3-6 month milestones
- Institutes a closed-loop review process that involves all needed functions
- Showing the key purchasing decision-makers that you really want their business through all of the above.
Rebates
Many large accounts expect and are offered a rebate on total purchases. These are typically 2-4% of sales, payable at year-end, and sometimes contingent on achieving threshold volume levels. We have found these to be a relatively weak incentive for what they ostensibly try to do, which is incentivize incremental spending to go your way. If deals are negotiated centrally and orders executed locally, then the rebate incentive is even weaker. Rebates are often no more than a transfer of value simply to avoid upsetting or to gain favor with a purchasing manager.
If you have or are considering using rebates, make sure the incentive is working, or change/end it. More effective alternatives for incentivizing incremental volume are price-volume curves and “bundled” price incentives (favorable pricing or terms for commitment to buy multiple products at agreed to volume levels).