Competitive pressure on companies has never been greater. Globalization, mergers and acquisition, eroding margins, outsourcing, the technological revolution, shrinking customer bases; these and other developments are creating unprecedented challenges for business manager, especially for those who manage strategic accounts.
More than ever, maintaining and building relationship with these key customers has become essential for sustaining the P&L profile that you need to survive and grow.
In the book “The New Successful Large Account Management” by Robert Miller and Stephen Heiman they write: There are two approaches to maintaining a healthy P&L. Cut costs or improve revenue (ideally, you do both). By now the first approach, which dominated corporate strategies for at least the last decade, is approaching the stage of limited returns, as organizations realize that there’s only so much excess any company can cut out.
As a result the second approach, revenue improvement, is fast becoming a universal imperative. Recognizing that revenue is the lifeblood of their organization, managers increasingly following the mantra “back to growth”.
There are two approaches for business intent on growing revenue. Expand into new markets and new customers bases, or optimize the business you have in your existing accounts. These approaches are meant to be complementary, but with global competition severely curtailing market expansion, leading firms are focusing on the second option, seeking to develop untapped potential in their existing customer bases.
Alert to the traditional benchmark that 50 percent (or the 80-20 rule) of a company’s revenue comes from 5 percent of its customers, they are concentrating on that critical 5 percent; the accounts that companies define variously as their key, strategic, or simply “large” accounts. Even small businesses are following this pattern, by focusing on those critical accounts that are large to them.
There are two approaches to improving business with your strategic accounts. The old-fashioned method is to try to sell them more and bill them accordingly. A more reliable method, as measured by enhanced revenue over the long term, is to work on building relationships that bring the accounts value. In fact the single “secret” to business success in the twenty-first century is to make contributions to your key accounts that ensure their success. That’s correct:
It’s not just about your business; you work with your key accounts to improve their business and ensure their success; rather then just trying to sell them something.
Whatever their size and whatever their markets, businesses everywhere need to protect their key account “assets”. They need to deliver real customer value or risk being de-positioned as commodity suppliers. They need to invest appropriately in the strategic relationships, which is the only safeguard against account erosion.
“Change alone is unchanging”—Heraclitus
In their book Miller & Heiman write: If you are competing for major account revenue today, you’ve got to rely on something other than your latest generation products or services. To achieve competitive advantage today, especially in targeting large or strategic accounts, the key differentiating factor is the ability to build relationships that bring your customers measurable value over time. In a sense there’s nothing new about this imperative; bringing ‘customers value’ has always been key to success. But the world in which we now must compete has in fact changed; and changed in ways that are only marginally related to your technology.
While good account management, like good selling, has always depended on effective information management, today’s hyper-connected, information-saturated, wireless environment, that requirement has been pushed to an entirely new level. Not only is there now infinitely more information out there than ever before, but that information is both instant and ubiquitously accessible.
Now, thanks to Google, Yahoo, Hoover’s, and a host of other unlikely-named data-banks and search engines, the newest market entrants can acquire, within minutes, the kind of rich customer data that used to take days, and that pre-Web sales and marketing teams could only dream about. Which means, with very little investment of either time or money, a potential competitor can acquire as much pubic information about your account as you have yourself.
However, here’s another hard truth: Your customers have access to this new information, too. They’re using it to research your capabilities, to compare them against those of your competitors, and to bring to the bargaining table a much higher degree of sophistication than businesses have ever had to contend with before. The accounts that you acquired fairly easily during the 1990s boom are both more resource-poor and data-rich than they were then; and fully capable of using that scenario to their competitive advantage.
In this highly competitive market, the central lesson is that your success is a function of your customers’ success. Not for this quarter alone, but for the long haul. Businesses are successful over time because they ‘add value’ to their customers’ business, while simultaneously realizing value themselves. Only this kind of mutual benefit justifies continued investment in a relationship.
To many senior-level people, who must answer to shareholders quarter-by-quarter, this is a difficult lesson to act on, especially when markets are volatile. Some of them frankly still see long-term account management as an investment that they’re making in their successors’ career. But it’s a valid lesson nonetheless. And the narrowing of the vendor base makes it an all the more urgent imperative.