Strategic Account Management in practice Common mistakes and critical success factors Bart Logghe - Philips Sales Management Forum - September 21 2007 - Athens

Many of Philips businesses face similar customer challenges Identifying, selecting and growing our business with the right accounts will determine success or failure! Increased concentration of sales with fewer customers The top accounts are getting bigger and bigger The power balance favours the customers Increasing pressure on prices and margins Increasing cost to serve Organisations & systems are often structured per country or product and not per account The profitability per customer is unknown

Identifying, selecting and growing our business with the right accounts will determine success or failure!

Increased concentration of sales with fewer customers

The top accounts are getting bigger and bigger

The power balance favours the customers

Increasing pressure on prices and margins

Increasing cost to serve

Organisations & systems are often structured per country or product and not per account

The profitability per customer is unknown

SAM is all about resource management Making choices how to utilize time, resources and money Which customers to invest in?

Making choices how to utilize time, resources and money

Which customers to invest in?

The development of Strategic Account relations Strategic intention customer Strategic intention Philips transaction cooperation partnership integration WASTE RISK Strategic Account Management

Today Philips is structured in two dimensions Europe Middle East & Africa North America Latin America Asia Pacific Regions (Aligned by geography) Lighting Consumer Electronics DAP Medical Systems PD’s (Aligned by products)

We have many Multi-PD, Multi-Region Customers              ’                

Philips becomes a “THIRD DIMENSION ORGANISATION” Europe Middle East & Africa North America Latin America Asia Pacific Retail Hospitals Hotels Aligned by: Key Account Customers Industry Segments Customer Groups Channels Regions (Aligned by geography) Lighting Consumer Electronics DAP Medical Systems PD’s (Aligned by products) Wholesale Others Auto- motive Telecom “ Third Dimension Organisation”

Aligned by:

Key Account Customers

Industry Segments

Customer Groups

Channels

Philips 10-Step SAM Approach Strategic Account Selection Strategic Account Plan M&S Competencies framework (incl. job description) Strategic Account Manager selection process Management Development, training, coaching Account +market information system Contact Network Contact Report Internal Review External Review Plan People Info Review Remarks : Step 1, 3, 4, 5 and 6 should be covered at the BU/BG level Step 2, 7, 8, 9 and 10 should be covered per Strategic Account

Strategic Account Selection

Strategic Account Plan

M&S Competencies framework (incl. job description)

Strategic Account Manager selection process

Management Development, training, coaching

Account +market information system

Contact Network

Contact Report

Internal Review

External Review

Remarks :

Step 1, 3, 4, 5 and 6 should be covered at the BU/BG level

Step 2, 7, 8, 9 and 10 should be covered per Strategic Account

We have segmented our retail accounts according to global, international and local reach Partnership Performance Wal-Mart Carrefour Tesco Costco Metro DSG Best Buy Ahold Casas Bahia KESA Auchan Target Home Depot EDA Casino Circuit City Euronics Sears Expert Regional Key Account Management Global Key Account Management N D E B D E M G Local Key Account Management High High Low Low EP Amazon.com

The importance of Philips top 20 accounts continues to rise 32% 43% Source: Management Ventures Inc/Philips Market Intelligence

Philips is showing continuous and profitable growth with its top global and international accounts Results: 2006 YTD December – per PD International Key Accounts Global Key Accounts +15% +28% +16% +9% +9% -2% +15% +10%

Through which we have received significant recognition US CE recognized as Vendor of the year at SAM’s USA – 2005 and 2006 Carrefour Best supplier of Masse de Marge – Spain- DAP-2006 One Philips Award –Gold and employee vote for One Philips Wal*Mart Approach- 2006 Best Buy Bravo Award (CE)- 2005 Comet Awards (CE UK) - 2005 Carrefour – Best Supplier 2007 (CE) Wal*Mart – One Billion Dollar Supplier 2006

We are investing heavily in state-of-the-art key account management and sales competencies More that 1,750 Philips employees trained in 2006 in the field of key account management/sales and category management Joint training programs on category management with key retailers focusing on end user – and shopper insights Master classes on Driving International Key Account Management and Alignment with business management executed for executive management in all regions Succession plans and management development programs in place for GKAM’s and IKAM’s

More that 1,750 Philips employees trained in 2006 in the field of key account management/sales and category management

Joint training programs on category management with key retailers focusing on end user – and shopper insights

Master classes on Driving International Key Account Management and Alignment with business management executed for executive management in all regions

Succession plans and management development programs in place for GKAM’s and IKAM’s

In benchmarking ourselves against leading FMCG companies we show clear areas of strength Companies interviewed Coca-Cola Heineken Johnson & Johnson Sara Lee Unilever Diageo Nestl é Philips is clearly leading in people competency management and account profitability measurement, but can improve multifunctional key account management/customer centric organisation.

Companies interviewed Coca-Cola Heineken

Johnson & Johnson Sara Lee Unilever

Diageo Nestl é

Common Mistake # 1 Strategic Account Management is regarded as part of the Sales Function

Common Mistake # 2 Strategic Account Managers have no P&L responsibility

Common Mistake # 3 Strategic Account Management is not discussed in the Board room

Common Mistake # 4 Strategic Account Management equals Relationship Management

Critical Success factor # 1 Strategic Account Managers need focus and dedication

Critical Success factor # 2 Strategic Account Plans focus on strategic alignment How to align the customer’s strategy with our strategy? Strategy comes before action planning!

Critical Success factor # 3 A comprehensive SAM Program is required

Critical Success factor # 4 Communication is integrated in the key account management system