Key Account

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Key Account

  1. 1. Key Account Selling The key to long-term sales success OMEGA COST SAVINGS PROGRAM Key Account in Action
  2. 2. (I) KEY ACCOUNT SELLING An introduction
  3. 3. What is Key Account Selling? <ul><li>Definitions </li></ul><ul><li>Why bother? </li></ul><ul><li>What are the long-term benefits? </li></ul><ul><li>What has it to do with 80/20 principle? </li></ul><ul><li>Cautions </li></ul>What is Key Account Selling?
  4. 4. Definition of Key Account <ul><li>What is a Key Account? </li></ul><ul><li>Key Accounts are the 20% of customers who provide 80% of your profits </li></ul><ul><li>Key Accounts are defined as the prospects or existing customers who have the potential or now fall in the 80/20 category. </li></ul><ul><li>Any customer that is of strategic importance to your company – loss of it of inability to secure potential future revenue would cause a significant impact. </li></ul>What is Key Account Selling?
  5. 5. ACCOUNTS PROFITS What is Key Account Selling? 20% 80% 80% 20%
  6. 6. 80/20 principle <ul><li>For all corporations, some form of 80/20 rule operates. </li></ul><ul><li>e.g. 80% of the firm’s revenues is supplied by 20% of its customers. </li></ul><ul><li>If this rule, or a close variant (90/10; 75/25), operates in the firm’s customer environment, the critical business implication is that these 20% (or 10% or 25%) of customers have an importance to the firm’s long-run future that exceeds that of the “average” customer </li></ul>What is Key Account Selling?
  7. 7. 80% $28K 20% $110K $138K A Customer’s Sales What is Key Account Selling? $28K 80% 20% $110K $50K Undeveloped Potential $188K $160K
  8. 8. Definition of Key Account Selling <ul><li>A systematic set of processes in identification & profiling of key accounts, design and adaptation of information-based & value-added selling strategies, profiling own market positioning for high sustainability of growth in sales. </li></ul>What is Key Account Selling?
  9. 9. In other words <ul><li>Key Account Selling </li></ul><ul><li>It’s not just calling higher in an organization, but... when we finally get to top management, we better have something new to tell them about their business that will positively impact their profits and ... we better have the data to prove it and the support of his / her staff to back us up </li></ul>What is Key Account Selling?
  10. 10. Without Key Account Selling <ul><li>If we cannot demonstrate our value to our top 20% Key Accounts - in terms of increased profits (for them) - we will be classified as a commodity supplier and run the risk of losing our business to a cut rate competitor </li></ul>What is Key Account Selling?
  11. 11. Why bother? <ul><li>Market saturation </li></ul><ul><li>Mere relationship selling is a relic of the past </li></ul><ul><li>Bygone is the Single-Point-Contact and good old days in sales </li></ul>What is Key Account Selling?
  12. 12. Where Have We Been? <ul><li>Relationship Based Selling </li></ul><ul><li>Good old boy network </li></ul><ul><li>Friendships with key people </li></ul><ul><li>Take them out to lunch </li></ul><ul><li>Entertainment </li></ul><ul><li>Based on personal relationships </li></ul><ul><li>We’ve got the best products, service and people </li></ul>What is Key Account Selling?
  13. 13. Where Have We Been? <ul><li>Problems </li></ul><ul><li>No one has time to be entertained any more </li></ul><ul><li>Our “old” friends are retiring </li></ul><ul><li>New, young blood coming in </li></ul><ul><li>They want to make a name for themselves </li></ul><ul><li>Management is forced to look at “ value ” </li></ul><ul><li>Credibility of what a sales rep says is fading </li></ul><ul><li>Lots of competitors have good products and services and all are less expensive </li></ul><ul><li>Mergers and acquisitions </li></ul>What is Key Account Selling?
  14. 14. Where Are We Today? <ul><li>Problems </li></ul><ul><li>Our value doesn’t make up the difference between competitor’s price and ours </li></ul><ul><li>Competitor’s are now offering some of the same services as we do </li></ul><ul><li>Competitors ask to be just a second source for a percent of the business </li></ul><ul><li>Our customers “must cut costs in all areas” </li></ul><ul><li>Our past strengths are becoming “minimum requirements” </li></ul><ul><li>Our customers are also 80/20 ing, and are reducing their number of vendors </li></ul>What is Key Account Selling?
  15. 15. Pressures on Distributor’s current system for interfacing with customers The traditional distributor’s sales force system Increase in selling costs Increased competition Pressure from customers Affirmative reductions in number of suppliers Changes in the procurement process Rising importance of procurement Increasing account concentration – higher bargaining power What is Key Account Selling?
  16. 16. The Changing Nature of Sales Force Activity Critical internal & customer pressures Sales Force Customers Key account management New approaches for small customers What is Key Account Selling?
  17. 17. The Distributor (Supplier-Firm) / Customer (Key-Account) Relationship Deliver Superior Value Products and Services Add Organizational Value Commodity Relationship VENDOR QUALITY SUPPLIER PARTNERSHIP Increased competitive pressure Deeper distributor / customer relationship What is Key Account Selling?
  18. 18. What are the long-term benefits of running Key Account program for Omega distributors? <ul><li>Economies of scale in selling </li></ul><ul><ul><li>Improved understanding of key account’s goals, and requirements </li></ul></ul><ul><ul><li>Enhanced ability to manage complex relationships </li></ul></ul><ul><li>Sustainability of sales </li></ul><ul><ul><li>Increased key account switching costs </li></ul></ul><ul><li>Credible reference for greater market penetration </li></ul><ul><li>Constant feedback to research and development for product and service improvements </li></ul>What is Key Account Selling?
  19. 19. What is the value of a Key Account program for the individual key account customer? <ul><li>A single point of contact </li></ul><ul><li>Lower overall costs </li></ul><ul><li>Enhanced value with prioritized attention from distributor and Omega Division </li></ul><ul><li>Guaranteed delivery when capacity is short </li></ul><ul><li>Long-term relationship </li></ul><ul><ul><li>Joint identification of opportunities and solutions to problems in win-win partnership </li></ul></ul>What is Key Account Selling?
  20. 20. What has it to do with 80/20 principle? <ul><li>Understand who are your 80/20 customers, their needs and profile </li></ul><ul><li>Redeployment of sales efforts and resources </li></ul><ul><li>Understand your own ranking , positioning, growth potential or 80/20 status in your key customers suppliers profile – seek improvement – adopt aggressive growth strategy </li></ul>What is Key Account Selling?
  21. 21. Redeployment of sales efforts and resources <ul><li>High value customers should be treated differently from the “average” customers </li></ul><ul><li>They should receive a disproportionate share of resources and are worthy of greater managerial attention </li></ul>What is Key Account Selling?
  22. 22. How about the small customers? <ul><li>20% of your firm’s revenues are derived from 80% of its customers. </li></ul><ul><li>Stop serving small customers? </li></ul><ul><li>Identify less expensive methods for the firm to deal with these accounts </li></ul>What is Key Account Selling?
  23. 23. Cautions for Key Account Management <ul><li>Too many eggs in one basket </li></ul><ul><li>Insufficient benefits to the distributor </li></ul><ul><li>Insufficient benefits to the potential key account </li></ul><ul><li>Limitation of opportunities </li></ul><ul><li>Cost and Bureaucracy </li></ul><ul><li>Significant organizational change </li></ul>What is Key Account Selling?
  24. 24. Selecting Key Accounts - Criteria <ul><li>Direct Sales Revenue and Profit </li></ul><ul><ul><li>Current Sales Revenue </li></ul></ul><ul><ul><li>Current Profits </li></ul></ul><ul><ul><li>Future Sales Volume and Profit </li></ul></ul><ul><ul><li>Financial Security </li></ul></ul><ul><ul><li>Acquisition Potential </li></ul></ul><ul><ul><ul><li>Key account effort on firms likely to be acquired may be wasted if the acquiring organization is given the dominant procurement responsibility </li></ul></ul></ul><ul><ul><ul><li>Selecting potential acquirers as key accounts may bring long-run benefits </li></ul></ul></ul>What is Key Account Selling?                        
  25. 25. Selecting Key Accounts - Criteria <ul><li>Organizational Interrelationships </li></ul><ul><ul><li>Coherence with firm strategy </li></ul></ul><ul><ul><ul><li>Key account selection is a strategy implementation decision </li></ul></ul></ul><ul><ul><li>Supplier valued by the customer </li></ul></ul><ul><ul><ul><li>Customer believes, or can be persuaded, that distributor can meet its needs over the long run </li></ul></ul></ul><ul><ul><li>Cultural Fit </li></ul></ul>What is Key Account Selling?
  26. 26. Selecting Key Accounts - Criteria <ul><li>Indirect Potential Volume & Profits… </li></ul><ul><li>Strategic Key Account </li></ul><ul><ul><li>Opinion Leadership </li></ul></ul><ul><ul><li>Example: Leading financial services group ICICI was the 1 st Indian company listed on NYSE. One of ICICI’s key accounts is Infosys, India’s fastest growing software company, well-known for its commercial success, product quality, and high ethical standards, and the first Indian company listed on NASDAQ. Although ICICI transacts little business with Infosys, it regards as a key account because of its exemplary reputation. </li></ul></ul>What is Key Account Selling?
  27. 27. Compensatory Approach for Calculating Key Account Attractiveness What is Key Account Selling?
  28. 28. Key Account Manager’s Time Allocation (%) What is Key Account Selling?
  29. 29. (II) KEY ACCOUNT MANAGEMENT MODEL Situation Analysis & Strategy COMING SOON!

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