For most businesses, the old ‘Pareto Principal’ adage rings true: 80% of your sales will come from 20% of your clients. It also makes sense then to treat the more valuable clients with greater care. Yet far too often, businesses do not have a dedicated process to nurture those key business relationships.
As a business coach, I know the reasons why many businesses don’t have processes for strategic account management. In many cases, it’s because the business has grown organically from word-of-mouth referrals. Because the business has a good reputation for doing good work, the owner will often feel that the clients are pretty much set and forget. Often the business owners I coach will tell me that they’ve worked with a client for years, and they’re locked in. “They’d never dream of going anywhere else,” they explain. To which I reply, “But someone supplied them before you, and they probably thought the same thing too.”
Customers big and small can churn for many reasons. The best way to avoid a costly breakup with your most valuable customers is to implement a Strategic Account Management program because it will:
- Foster customer loyalty
- Drive innovative and scalable service solutions
- Build your reputation as a supplier of choice
- Stimulate growth
- Increase profitability
What is Strategic Account Management?
Strategic Account Management (or Key Account Management) focuses on building long-term deep partnerships with key customers.
Through in-depth research and profiling, the process of strategic account management finds opportunities to drive value for their partners (the name they use instead of “customers”) by identifying problems, offering creative solutions, and leveraging partnerships to move both businesses toward their strategic goals.
The difference between Sales Process and Strategic Account Management
So, what’s the difference between sales and strategic account management? Sales (and sales programs like campaigns, special offers, promotions) focuses on short-term selling cycles. It’s main purpose is to fulfil an order a customer has. This means the customer usually knows what they want, and it’s up to the sales person or sales process to get the customer to buy from us, as much as possible and as many customers at the same time. This process of multiple customers buying at once is called concurrent customer acquisition, and it’s focussed on the present, the “buy now” sales.
Strategic Account Management goes further to develop deeper relationships with a small number of core customers over time and more focussed on the future and are therefore a vital part of long-term business success and profitability.
In my previous roles working for companies such as Carlton & United Breweries, Wattyl, and Laminex, I have had to adjust my mindset from, ‘get the next sale’ to, ‘how do I integrate better into my client’s business’.
There were 2 main benefits to the businesses I worked for:
1. I was able to make a better contribution to senior management, by giving them more accurate forecasting for budget planning and resource allocation, and
2. Getting our marketing plans to be better accepted by our channel partners.
For smaller business, those benefits would translate to mean:
1. Being able to plan your sales pipeline, and plan your workforce to be able to deliver that predicted work, and
2. Being able to plan pricing changes to target the work you want.
The 6 principles of influence and how they apply to strategic account management
Professor Robert Cialdini is an expert on persuasion and influence, having researched it for over 3 decades. He condensed his many years of research on influence into six universal principles. Strategic Account Management can use these principles of the inner workings of purchasing behaviours as a kit bag of strategies and tactics to build relationships that bear fruit for a long time.
Humans often feel the need to return a favour, or reciprocate kind gestures. For business-to-business (B2B) relationships, think complimentary tickets to events, merch, and gift hampers at Christmas or special occasions. For consumer customers, this might mean offering a free sample.
Once someone is engaged with something, they are more likely to stick with it. In business, this means cultivating brand and supplier loyalty; once someone is working with a product or using a service, they are more likely to commit to paying for it again.
3. Pack mentality
If more people do something, others are likely to do it as well. Often when suppliers can demonstrate their popularity or satisfaction across their wider customer base, others are more likely to buy in as well.
People are more likely to listen to an expert than anyone off the street. So, while pack mentality is important, having a relevant expert speak to the effectiveness of a brand’s product or service is essential to converting new consumers.
People who are like the target consumer are more likely to persuade the consumer to buy. People from similar demographics – whether in terms of ethnicity, socioeconomic class, religious inclination or even shared interests – are far more effective at persuading consumers than those they perceive as vastly different.
People tend to want what they perceive they cannot have. Making a product or service seem exclusive or as if it will go out of stock if they do not act quickly often makes it more enticing to the consumer and increases the likelihood that they will buy in.
Strategic Account Management best practice
An effective Strategic Account Management program is planned and not something you stumble upon. The most successful businesses rely on formal, measurable, repeatable processes to develop and maintain their most valuable customer relationships.
Whether you already have a process in place or plan to implement a new Strategic Account program, I use these best practices to put my business coaching clients ahead of the curve.
Assign dedicated Strategic Account Management responsibility
The first step to a successful program is to assign responsibility to someone. Best practice is not to have managers that must split their priorities or switch focus between making sales and developing Strategic Accounts.
The reason is that sales and strategic management have different objectives and use different skill sets and approaches to customer relationships.
While this separation of responsibilities may be ideal in organisations that have abundant resources, in reality, a blended approach is often necessary for small-mid size businesses.
In many of the small businesses I coach, the sales process is handled by one person (often the business owner). The strategic account management process we put in place is part of the business’s overarching sales and marketing strategy.
In the larger businesses I work with, those where the average sale (per client and per job) is around $100K or their revenue is over $5 million, we usually have separate roles for strategic account management and sales order fulfilment.
Whether strategic account management is included in the role of the salesperson (for smaller businesses) or it’s carved out into a dedicated Strategic Account Manager (for a larger business), the person responsible should be both analytical and personable. They need to build rapport with customers, think strategically about partnership opportunities and solutions, collaborate and communicate with high-level stakeholders and decision-makers and be able to influence both internally and externally.
Develop selection criteria for Strategic Accounts
While all customers are valuable, care should be given to which clients you select for the extra level of attention strategic account management will provide. Not all customers can be elevated to a strategic account – they have to be worth the extra cost to service.
When I’m talking to my business coaching clients about this, I explain that we’re looking at customers whose partnerships can significantly propel the business toward its high-level goals.
I coach business owners to develop a shortlist of selection criteria that recognise alignments between your two businesses. Focus on three to five objective criteria, weighted in relative importance to your business.
Revenue and growth potential are definitely high on the criteria list. But they’re not the only factors. In my experience coaching, I’ve seen my clients’ competitors chase revenue at the expense of other criteria, and they are later burned by a mismatch that they overlooked.
To ensure there is a strong fit between what your business offers and a long-term client, considered other criteria, such as:
- Product fit
- Cultural fit
- Geographic alignment
- Existing relationships
- Potential channel or joint venture partnership
To guard against getting burnt I would tend to make a weighted consideration on all these criteria.
Ensure a smooth handover from sales
When transferring from a sales account to a dedicated account manager, the handover process is an opportunity to communicate the extra level of care the client will now receive. How well the account transition is handled is an important part of building a trusted relationship and will avoid friction from miscommunication of goals, execution strategies or commitments.
Make sure to communicate clearly with the customer, so all parties understand:
- How often will the touchpoints be (physical, phone or email)
- Who are the dedicated contacts within each business (including up the line)
- What they can expect going forward (business planning & reviews)
In my experience mentoring businesses to implement strategic account management practices, setting clear expectations and more importantly, following through will foster a trusting relationship with your clients.
Create a customer profile and needs assessment
Once you have identified the types of clients to be included in your strategic account management process, you will need to develop in-depth customer profiles.
The person responsible for strategic account management must know these clients inside out. The aim is to understand their pain points and goals in order to identify opportunities for added value and collaboration your business can provide.
Your strategic account manager will need to conduct research on the client to build out a comprehensive profile, which will assess:
- Their business and the markets they operate in
- Goals and initiatives of the business
- Stakeholder roles and responsibilities
- Key decision makers
- Key performance indicators
- A needs assessment will identify opportunities for collaboration and partnership, typically it will consider:
- Where are the pain points for your clients?
- Where do your respective needs or goals overlap, and how do you help each other progress?
- Are there any risks on the horizon for their business that you can anticipate and address for them?
My mantra of Strategic Account Management is ‘to grow with your client’, so treat these clients as long-term investments. You are creating a strategic roadmap for both parties for the next 1-3 years.
Draft a strategic plan and proposal
Based on the needs assessment, drill down to the best strategic opportunities and draft an account plan. Once you have the plan polished and ready to present, approach your customer with the proposal.
This proposal will include things like:
- Strategic recommendations (potential partnerships with other businesses, mutual marketing solutions and/or multi divisional interaction/collaboration)
- Specific long-term goals with short-term hurdle rates/reviews
- Resourcing requirements including capital expenditure
In my previous roles, this is where I’ve demonstrated to my clients, like Bunnings and Tradelink, that I have gone above and beyond to understand and address their needs. The effort shows that our company is invested, and I was mapping out a mutually beneficial scenario for both parties.
Set a cadence for contact
Once you have a strategic plan in place, set a regular cadence for ongoing communication with your key accounts.
Outline a schedule for each touchpoint to ensure your customer is kept in the loop. By doing this, they will understand that they have the opportunity to give you valuable industry feedback, communicate forecasts and ask questions. On their side, they will appreciate being updated, which will instil trust and confidence in your business.
Clear communication is vital to a strong working relationship with your partners. This schedule will help both parties stay updated and assist your business with how you can innovate further.
Continually monitor and measure your performance on each account. Monitoring performance is not only important to ensure you deliver on your end but also to track how well the key account fulfills its return on investment to you.
While I wanted to drive value for the client, my ultimate goal was one of mutual long-term benefit. Measuring account performance continually gave me the opportunity to identify whether the relationship no longer held the same strategic value for the business and this also gave me a chance to pivot or reassess, before things went too far off track.
Wrapping it all up
Strategic Account Management is complex and takes investment of time, effort and thinking. However, these accounts represent your most valuable clients, so you cannot afford to drop the ball. Successful businesses are built on trust.
In my time as a business coach, I have seen firsthand how effective strategic account management is at growing businesses. And the research also supports what I’ve seen: A survey conducted by Concerto Marketing Group found that 83% of customers will recommend your brand to others and 82% will stick to your brand if they trust it. This means that when you build and grow trust, your customers will gladly advertise your brand to other customers like them. As smart business operators know, word of mouth referrals are the best form of marketing.
When the businesses I coach implement these strategies, they have deep knowledge of how the drivers of customer growth, profitability and cash flow are changing. And of how the customer’s markets and the interrelationships within the customer’s business are changing.
With this knowledge, they have solidified their position as a trusted resource and preferred partner for their clients. The value continues to be seen on the bottom line of my clients’ businesses, and also their clients’ businesses too. And ultimately, that’s the goal of strategic account management.
Carlo D’Andrea is an experienced business growth expert at Tenfold Business Coaching, Australia’s top ranked business coaching firm. With a background in senior leadership roles serving the trades, construction and manufacturing sectors, Carlo applies this knowledge to mentoring his clients.
Read more about Carlo here.