Marketing and Sales Education Center

What is Strategic Account Management?

Posted on Thu, Jul 19, 2012

Strategic account management, sometimes called key account management is defined as a process-driven approach to managing your company's most important assets - your customers.  To succeed, Strategic Account Management must be more than your key account manager's or any single department's responsibility.  It's a total business mindset where every functional area or line of business must actively participate.  It is a process to acquire a deep understanding of not only its purchasing practices, but more importantly each key customer's business philosophies and strategies.  This requires you to understand your customer "high, wide and deep", forcing you to go beyond just understanding the Purchasing department's needs, but also Marketing, Operations, Finance, Logistics and Executive Management's needs and desires.

Most large companies practice consensus management across functional areas on most major decisions.  Therefore if you focus on only one department's needs, you will likely miss the mark on what the total organization will need to make a buying decision causing you to miss the immediate sale and potentially, a longer-term opportunity for your company to achieve preferred supplier status with your best customers.  By following strategic account concepts and practices, you will be able to clearly differentiate yourself from your competition with the customers that will drive the most revenue growth for your company.

Adopting a Strategic Account Management program in your organization is more important today than it ever was.  In a down economy with more competition for each purchasing dollar, it is more difficult to differentiate your company's products or services and earn a greater share of the market.  It is even more so today since it is so easy for your customers to find the products and services they need on line.  The evolution of sophisticated search engines and search algorithms has made it so much easier for your customers to find suppliers selling the same products and services.  This has made it so much harder to understand the different value propositions of competitive suppliers.

Companies that have adopted Strategic Account Management as a total company account development strategy often report revenue growth of 40% or more.  A key theme of strategic account management is mapping and strengthening your long-term relationships with your best customers across all functional departments and levels.  By plugging in your organization's management team at each level and department within your key account's organization to achieve common objectives, you can create a team selling approach and these multi-level relationships will help position your company as a preferred supplier or even a strategic ally.  When key executives change in your account's organization, you will not have to re-start the whole sales process because of the multi-level relationships that have been established.  Strategic Account Management is based on delivering exceptional client value that earns strategic supplier status.  Strategic Account Management is an initiative used to focus each employee on the company's most important customers for long-term growth and profitability.  This reduces competition significantly and will make it much more difficult for your competitors to penetrate your best customers.

How do most companies define Strategic Accounts?

Strategic accounts are non-balance sheet assets that require ongoing investment and management attention.  Strategic accounts are the important customers that drive your business growth to achieve its long-term strategic and financial goals.  Strategic accounts work jointly with suppliers to ensure each organization's long-term destiny and success and they are the few customers in your business which would be painful to lose or which, if properly managed, improve your company's outlook dramatically.  As a general rule, strategic accounts are the 20% of your accounts that provide about 80% of your revenue.  Focusing on these accounts synchronizes your business with the market.  To identify which of your accounts are strategic, you must analyze what makes an ideal customer in terms of long-term profitability and strategic impact.  You must develop a profile for what your best customer looks like and a rating system for the accounts that initially fit this profile.  Once you have that, you must compare your leading accounts against this profile.  You might be surprised by what you find.  In some cases, what you thought were leading candidates for strategic account status may not be and vice versa.  Some accounts you may not have considered as strategic may end up being just that.  This analysis may show you that you might have been leaving money on the table.

Request a Consultation

Tags: Strategic Account Management, Strategic Planning