Account Mining - Key Account Management

8/13/2019 Account Mining - Key Account Management

1/50

Account Mining - How to Manage Big,

Powerful Clients - Profitably

by

Professor Malcolm McDonald

Emeritus Professor,

Cranfield School of Management

27thOctober 2009


2/50

Agenda

Challenges

Their expectations and demands

Why price is important to clients

The impact of price on profits How powerful clients classify their suppliers

The expectations and demands of powerful clients

How to respond as a supplier

How world-class suppliers classify powerful clients How to develop profitable strategies for powerful clients


3/50


4/50

Challenges

Market maturity


5/50

Technology

Production

Sales

Accountancy

Fads

Marketing

Professor Malcolm McDonald


6/50

Challenges

Globalisation


7/50

Embrionic markets Growing markets

Guerrillas

2nd tier

Leaders

Mature markets

New guerrillas

?

New global leaders


8/50

Challenges

Client power


9/50

Double your money: cut spend on purchases

Profit (6%)

Other costs

(44%)

Profit (11%)

Purchases

(50%)

Purchases(44%)

Purchasing: adding value to your purchasing through effective supply management Institute of Directors, September 2003

Other costs

(44%)


10/50


11/50

BiscuitManufacturer

Board/Packaging

SpecialityAdhesives

MetalBearings

24

76

16

64

14

39

18

44

BiscuitManufacturer

Board/Packaging

SpecialityAdhesives

MetalBearings

t-25 t.o

% of totalsupplier

sales

From: Profitable Customers, Charles Wilson

Sales to the top 5 clients as a % of total supplier sales over 25 years.

Increasing client concentration...


12/50

Client power

Big clients are getting bigger

clients are rationalising their supplier base

clients have become more sophisticated

clients want tailor-made solutions

The cost of serving clients is increasing

Suppliers and clients are developing new ways of

working together


13/50

Increasing costs of interfacing

with clients

Supplier to the print industry (turnover 200M)

Interface costs '000

per client(adj. for inflation)

t-15 t.0

Top 10% of clients

60

140

t.-15 t.0

Bottom 10% of clients

159

Costs of the frontline(Sales, service, trade promotions etc. over 15 years

Source:Profitable clients, by Charles Wilson


14/50

What is a Key Client?

Percentage of our business

Turnover

Added Value

Potential


15/50

From Key Account Management Cranfield University School of Management, 1996

% ofCriteria for partnership respondents

Desirable factors in suppliers

Ease of doing business 100

Quality (product) 100Quality (people factors) 100

Volume related 64

Added value/value for money 64

Company culture 36


16/50

From Key Account Management

Cranfield University School of Management, 1996

Suppliers are still interested principally in volume

Whilst they are interested in the potential foradded value, most still do not measure account

profitability


17/50

The widening rift between profitable

and unprofitable clients:

t-15

1 2 3 4 5 6 7 8 9 10

15

1716

1312

10

76

4

1

1 2 3 4 5 6 7 8 9 10

% of totalcompanyprofits

Largest 10%of clients

Smallest 10%of clients

client decile groups

1 2 3 4 5 6 7 8 9 10

-3

26

29

22

20

8

4

-3 -3

1 2 3 4 5 6 7 8 9 10

% of totalcompanyprofits

Largest 10%of clients

Smallest 10%of clients

client decile groups

t.o

% of company profit by client decile(each decile = 10% of client base)

Adapted from:Profitable clientsby Charles Wilson


18/50

LOVE

Low

High

HATE

Sales

Potential


19/50

How well do you know the real profitability of the

top ten accounts?

27

23

13

10

15

56

1

38

19

15

68

3

65

1

21

19 19

9 9

6

11

6

19

22

18

13

10

6 6

1

3

32

20

12

4

16

2

10

4

1 2 3 4 5 6 7 8 9

2001

2002

2003

2004

2005

TotallyNotat all

%


20/50

Creating closer relationships

with supply chain partners

Marketing

Operations

Information

Systems Sales Purchasing

Marketing

Operations

Information

Systems

From

Supplier client

D

I

R

E

C

T

O

R

S

D

I

R

E

C

T

O

R

S


21/50

Creating closer relationships

with supply chain partners

InformationSystems

Operations

Marketing

Operations

InformationSystems

Marketing

Key-Account

Co-ordination

Supplier

To

Supplier

Development

client

Directors

selling company

Directors

buying company


22/50

Strategic Purchasing

Nurture Client

Expand Business

Seek NewOpportunities

Core

NuisanceGive Low Attention

Lose Without Pain

ExploitableDrive Premium Price

Seek Short Term Adv.

Risk Losing client

SUPPLIER PREFERENCE

VALUE OF BUSINESS

ATTRACTIVENESS

Source: PMMS Consulting Group

DevelopmentCosset Client

Defend Vigorously

High Level of ServiceHigh Responsiveness


23/50

Business ContributionCriteria

Business ProcessCriteria

StrategicSuppliers

PreferredSuppliers

CommoditySuppliers

First mover advantage Channels to market Reverse revenue generation

VP lead Business strategy driven team on both sides

Point-to-point solution Technology access Operational advantage

Cost improvement Superior service levels Ease of transaction

Relationship manager Strategy from CatMan SLA scorecard

Managed locally Performance monitored E-enabled

10

20

600

1, 350

3,000

10< 1 ofsuppliers

c. 20 of allsuppliers

c. 80 of all suppliers

Type

Supplier Relationships as a Source of

Business Advantage

Business ProcessCriteriaType


24/50

Maximum economic and strategic leverage, i.e. product / marketdifferentiation.

Attainment of time to market, quality & productivity objectives. Shareholder value creation. Blending core competencies, leadership capabilities & complementary

strengths (allowing outsourcing of non-core capability). Adding real productivity & value (significant cost savings & revenue

potential). Globally focused, linkages to new business opportunities & capable of

complementing the business focus. Attainment of high performance, low cost & strategic objectives (producing

unique design, integration & marketing capabilities).

1.Vision

2.Culture

3.Impact

4.Intimacy

5.Balance

Sharing of long-term vision and orientation. Global focus and commitment with service & support capability. Defined but yet flexible boundaries.

Similar or complementary values. Understanding of the process to deal with differences. Flexibility in approach since circumstances may change over time.

An exit route needs to exist.

Readiness to share ideas & information. Not overly locked into a competitor.

An element of demonstrated commitment from both sides. Readiness for risk taking and sharing of costs. Building trust and, thereby, moving to intimacy.

Must Have Criteria Drive Hard and Soft Measures


25/50

Preliminary selection of key accounts


26/50

Key account preliminary categorisation

Top 15 (in volume/revenue generated)

Next 30

Next 55

A

B

C


27/50

Preliminary Selection of Key Accounts

Large

Medium

Small

Strategic Star

Status Streamline

High

High

Low

Supplier Business

Strength with client

Account

Attractiveness


28/50

Exploratory

Basic

Cooperative

Interdependent

Integrated

Strategic

intent ofseller

Strategic intent of buyer

Adapted from a model developed by Millman, A.F. and Wilson, K.J.

From Key Account Selling to Key Account Management (1994)

The relational development model

Selling company Buying companySelling company Buying company


29/50

Sell ing Comp anySel ling Com pany Buy ing CompanyBuy ing CompanyOperationsFocus team

FinanceFocus team

EnvironmentFocus team Market research

Focus team

Key AcctMgr

Maincontact

R&DFocus team

JointBoard Meetings

Directors

Accounts

Marketing Marketing

Service Service

Directors

Accounts

Selling company Buying company

ProductionProduction

Purchasing Manager &Key Account Manager

Inbound logistics &Order processing/

client service?

Integrated

Exploratory Basic

Co-operative

Interdependent


Board

Board

Admin

AdminO

ps

Ops

KAMgr K

ey

Customer

Contact


Board

Board

Admin

AdminO

ps

Ops

KAMgr K

ey

Customer

Contact


30/50


31/50

Operations

Focus Team

Finance

Focus Team

R&D

Focus Team

Environment

Focus TeamMarket Research

Focus Team

Marketing

Focus Team

Buying company

Key

Account

Mgr

Selling company

Buyer

Cranfield University School of Management 1996

Integrated KAM


32/50


33/50

High Low

High

Low

Key accountattractiveness

Supplier business strengthwith client

Selectiveinvestment

Management

for cash

Strategicinvestment

Pro-active

maintenance

The key client portfolio


34/50

XK A t S l ti M t i T l KA S l ti M t i


35/50

High

Low

Relative client Satisfaction

LowHigh

XKey Account Selection Matrix Tool - KA Selection Matrix

Chart

Display Spend:

Display Group: National

Spend with Us

client: College Group Relative client Satisfaction: 0.80 Account Attractiveness: 4.40 Spend

Show Groups Redraw

AccountAttractive

ness

2

4 12

710

3

8

6

5

1

SupplementaryService Elements

1 Alexander Smith $14,000,0002 Ash & Williams $13,000,0003 College Group $12,000,0004 F T Group $9,900,0005 Harpers $7,600,0006 Parker $9,400,0007 Quality Insurers $16,200,0008 Randsome $14,500,0009 Royal & Co $6,400,000

10 Thompson Group $32,000,00011 Tudor Rose $8,000,00012 Woods $11,500,000

clients on Chart X

ID Name Maximum Spend

SupplementaryService Elements

Relationship Stage X

Co-operative

Basic

Exploratory Integrated

Interdependent

11

9

http://www.TheMarketingProcessCo.com

_____________


36/50

Selecting and categorising clients by

potential

High Low

High

Low

Accountattractiveness

Supplier business strength with client

Selective

investment

Management

for cash

Strategic

investment

Pro-active

maintenance

Strategic Star

Status Streamline


37/50

Page 37

Key measurements in KAM evaluation

Cost

reductionGrowth

Profitability

KAM


38/50

Page 38

Setting expectations of account

performance

P

GC

P

GC

P

GC

P

GC

High Low

High

Low

Accountattractiveness

Supplier business

strength with customer

KAMhigh

KAMhigh/medium

KAMmedium

KAMlow

Streamline

customersManage for

cash

Streamline

customersManage for

cash

Strategiccustomers

Strategicinvestment

Strategiccustomers

Strategicinvestment

Status

customersPro-active

maintenance

Status

customersPro-active

maintenance

Starcustomers

Selectiveinvestment

Starcustomers

Selectiveinvestment


39/50

CategoryStrategic clients

Status clients

Star clients

Streamline clients

Description Very important clients, but the relationship has developed still further,

to the level of partnership.

The relationship is win-win; both sides have recognised the benefitsthey gain from working together.

clients buy not on price but on the added value derived fro being inpartnership with the supplier.

The range of contacts is very broad and joint plans for the future arein place.

Products and services are developed side-by-side with the client.Because of their large size and the level of resource which theyabsorb, only a few clients fall into this category.

Very important clients (in terms of value).

Commit to security of supply and offer products and services whichare tailored to the clients particular needs.

Price is less important in the clients choice of supplier.

Both parties have some goals in common.

The two organisations have made some form of commitment to eachother.

Invest as necessary in these clients in order to continue the businessrelationship for mutual advantage, but do not over invest.

Price is still a major factor in the decision to buy but security of supply

is very important and so is service.Spend more time with some of these clients and aim to develop adeeper relationship with them in time.

These clients usually want a standard product, off the shelf. Price isthe key factor in their decision to buy.

The relationship is helpful and professional, but transactional.

Do not invest large amounts of time in the business relationship atthis stage.


40/50

Exploratory

Basic

Cooperative

Interdependent

Integrated

Strategic

intent ofseller

Strategic intent of buyer

Adapted from a model developed by Millman, A.F. and Wilson, K.J.

From Key Account Selling to Key Account Management (1994)


41/50


42/50

Business Partnership Process

1

2

3

4

5

6

7

8

Market / segmentselection criteria

Defining and selectingtarget key accounts

Industry driving forcesanalysis

Clients annual reportsummary and financialanalysis

Clients internal valuechain analysis

Clients buying process

and information needsanalysis

Our sales history withthe client

Competitive analysis

Clients objectivesanalysis

9

For each key account

Clients

Basic

CSF

Analysis

Process

Ourobjectives,strategiesand planfor T + 3

The Applications

Portfolio Analysis

Strategic High Potential

Key Operational Support

GainingAdvantage

AvoidingDisadvantage


43/50

Applications whichare critical to

achieving future

business strategy

Strategic

Applications whichmay be critical inachieving future

business strategy

High Potent ial

Applications uponwhich the

organisation

currently dependsfor success

Key Operat ional

Applications whichare valuable but

not critical

to success

Support

Creating

Advantage

Avo id ing

Disadvantage

The application portfolio

Adapted from Professor Chris Edwards, Cranfield School of Management


44/50

The market understanding process

KA A

KA B

KA C

KA D

Etc.

Marketing Sales Mfg. IT R & DEtc.

Finance &Accounting

HR Logistics

T

he

Marketing

Director


45/50

Blake and Mouton

1/9The clients

friend

9/9The problem

solver

1/1

The ordertaker

9/1

The pressuresalesman

5/5Compromise

Method approach

Concern for

client

Concern for making the sale

9

1

91


46/50

Significant differences

Buying companies valued...

integrity

Trust

Selling companies valued

Selling skills

Negotiating skills


47/50

Developing key account professionals

Commercial awareness

Interpreting business performance

Advanced marketing techniques

Business planning/strategy

Finance

Project management

Interpersonal skills


48/50


49/50

Appendix

KA Planning Process

The output of the key account planning process Diagnostic tools/Key AccountPl i


50/50

p y p g p

ie. The contents of the KA Strategic plan

g

techniques

Mission statement

Financial summary

Critical success factors analysis

Downside risk assessment

Porter matrix

BCG matrix

Directional policy matrix

Ansoff matrix

SWOT analyses

Porters value chain analysis

Key Account Overview

Key AccountStrategies

Key account portfolioSummary

Key accountopportunities/threats

Key account strengths &weaknesses

Issues to beaddressed

Suppliers trading historyBuying process

Definition of businessSTEEP analysis summary

Market researchMarket segmentationGap analysisProduct life cycle analysisDiffusion of innovation

Ansoff matrixSTEEP analysisMarket mapping

Product

PricePromotion

Place

by product

by market

overall

by productby marketoverall

Planning

Process

Phase 1Goal setting

Phase 2

Situation review(i) For the customer

Phase 3StrategyFormulation

Phase 4

Mission statements

Market structure summary

Key AccountCompetitor

Analysis

Key account objectives& strategies

by product

by marketoverall

Key accountassumptions

Directional policy matrixResponse elacitiesThe marketing mix

Supplier objectives

Supplier strategies

Account Mining - Key Account Management

Documents

Transcript of Account Mining - Key Account Management