Key Account Management: A Complete Action Kit of Tools and Techniques for Achieving Profitable Key Supplier Status

357 Pages·2004·3.6 MB·English

by  Peter Cheverton

PETER CHEVERTON
Key Account
Management
A complete action kit of tools and
techniques for achieving profitable key
supplier status
Third Edition
First published in Great Britain in 1999 by Kogan Page Limited
Second edition 2001
Third edition published in Great Britain and the United States in 2004
Reprinted 2004, 2005
Apart from any fair dealing for the purposes of research or private study, or crit-
icism or review, as permitted under the Copyright, Designs and Patents Act 1988,
this publication may only be reproduced, stored or transmitted, in any form or by
any means, with the prior permission in writing of the publishers, or in the case of
reprographic reproduction in accordance with the terms and licences issued by the
CLA. Enquiries concerning reproduction outside these terms should be sent to the
publishers at the undermentioned addresses:
120 Pentonville Road 525 South 4th Street, #241
London N1 9JN Philadelphia PA19147
UK USA
www.kogan-page.co.uk
© Peter Cheverton, 1999, 2001, 2004
The right of Peter Cheverton to be identified as the author of this work has been
asserted by him in accordance with the Copyright, Designs and Patents Act 1988.
ISBN 0 7494 4169 0
British Library Cataloguing-in-Publication Data
ACIPrecord for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Cheverton, Peter.
Key account management : a complete action kit of tools and techniques
for achieving profitable key supplier status / Peter Cheverton.-- 3rd
ed.
p. cm.
Includes bibliographical references and index.
ISBN 0-7494-4169-0
1. Selling--Key accounts. 2. Marketing--Key accounts. 3. Customer
services. I. Title.
HF5438.8.K48C47 2004
658.8'04--dc22
2003024861
Typeset by Saxon Graphics Ltd, Derby
Printed and bound in Great Britain by Cambrian Printers Ltd, Aberystwyth, Wales
Contents
Foreword vii
Preface ix
Preface to the third edition x
Acknowledgements xi
And it was all going so very well… 1
PART I DEFINING KEY ACCOUNT MANAGEMENT
1 What is a key account? 5
So, what is the right answer? 6; The key account ‘investment’ 7;
Does everybody know? 8; Why key ‘account’? Ajustification 9
2 Managing the future 10
Where to start? 11; The importance of balance 12; Guessing the
future – certainty or drift? 13; How fast do we expect the future to
arrive? 14; What KAM is not 14
3 Assessing the opportunity 15
PESTLE analysis 15; Porter’s analysis 16; Asecure future through
competitive advantage? 19; Understanding the market chain and
where you sit 22; The ‘opportunity snail’ 30; Long-term
competitive advantage? 33
iii
Contents
4 Key account management – its purpose 35
Why Kam? 35; Three simple purposes 37; Sales and business
objectives 38; Sanity checks 38; Implications of KAM 40; So, what will
KAM ‘feel’ like? 41; Good practice? 42; Is there a KAM process? 43
5 Developing the relationship 45
The milk round 45; The hunter 46; The farmer 47; From hunter to
farmer 48; The key account relationship development model 49;
Some pros and cons of each stage 56; Some things to watch out
for 64; Avoiding frustration 67; An update to the KAM process 69
6 The good, the bad, the sad and the ugly 70
The bad story 71; The sad story 72; The ugly story 73; The good
story 74; The second good story 76
7 KAM profitability 78
The tale of the National Health Service 78; Will KAM be profitable? 79
PART II THE CUSTOMER’S PERSPECTIVE
8 Purchasing professionals 93
Hold on a minute, why should they let you in? 93; The purchasing
‘revolution’ 93; Supply chain management 96; Supply side
management 99; Spend intelligence 102; Purchasing strategy 105
9 Supplier positioning – becoming a key supplier 107
Supplier positioning models 107; The risk/significance/spend
model 108; What relationships, what activities? 112; So, who’s the
key supplier? 116; Is there any escape for suppliers? 118
10 Measuring value 120
Weaknesses of the spend model 120; Measuring value 121; The
risk/significance/value model 123; Open book trading 125
11 Measuring trust 128
The risk/significance/trust model 129
12 Supply base optimization 134
Reducing supplier numbers 134; Rationalization &centralization-
control and profitability 137; Developing suppliers’ capabilities 138
13 Culture and values – becoming a strategic supplier 140
What are they up against? 140; Business strategy 141; What to
sell and where? The Ansoff matrix and risk 142; What to sell and
where? The Product Life Cycle 146; Why will people buy? Porter
and competitive advantage 150; What makes your business hum?
Treacy and Weirsema’s business value drivers 151; The cultural
match 156
iv
Contents
PART III PREPARING FOR KEY ACCOUNT MANAGEMENT
14 What will it take? Goals and obstacles 161
Goals 161; Obstacles 162
15 What will it take? Skills 165
The changing requirement 165; The team’s skills and abilities 167;
Attitudes and behaviours 168
16 What will it take? Systems and processes 171
Customer classification and customer distinction 172; Information
systems 172; Communication 178; Operational systems and
processes 180; Performance measurement 181
17 What will it take? Organization and resources 186
Organization 186; Human resources 192
18 What will it take? Making it happen 200
Alignment and managing the change 200; The change equation 201;
Critical success factors (CSFs) 203
PART IV IDENTIFYING KEY ACCOUNTS
19 The 10 step process 209
Step 3 – assemble the selection team 210
20 Segmentation 212
The problem for support functions in an unsegmented business
213; What is segmentation? 214; The benefits of segmentation 216;
Methods for segmentation 217; Market mapping 217; Who buys
what, how, when and where? 220;Making the cut 222;
Segmentation and KAM identification 225; Benefits of
segmentation for KAM 227; Anew type of marketing plan? KAM
and relationship marketing 228
21 Identifying your key accounts 230
An identification and selection process 231; Is all this really
necessary? 234; The perfect investment portfolio? 236;
The selection factors and the selection process 238; The selection
process 241; How much effort and how much detail? 243; Key
accounts and multiple business unit suppliers 244
22 Customer distinction 246
Determining distinct strategies 247; Some comments and
advice 249
v
Contents
PART V ENTRY STRATEGIES
23 The customer’s decision-making process 255
Entry strategy 255; The buying decision process 256
24 Selling to the organization – the DMU 259
DMU – the decision-making unit 259; Interests and influences –
entry strategies 261; The buyer’s role 261; Other interests and
influences 266; Levels of seniority 271; Entry strategies 272;
The contact matrix & GROWs 273; Contacts over time 276; Avecia –
a live application 277
PART VI MEETING THE CUSTOMER’S NEEDS
25 Meeting the business needs – beyond benefits 283
Where are you with your customers? 284; The customer’s total
business experience 287
26 Positive impact analysis (PIA) 291
The value chain 292; Some hints on using positive impact
analysis 304
27 Key account management and the e-revolution 305
Some useful terms 307; Steps towards the revolution 308;
E-commerce and supplier positioning 309; Some more terms… 311;
Getting into e-commerce… 314; E-commerce, threat or solution? 316
28 Making the proposal 321
Open to change? 322; Proposal analysis 323
29 Selling to the individual 326
Logic or emotion? 327; Ensuring rapport 328
PART VII KEEPING ON TRACK
30 Getting there – timetables and performance 333
Timetables for implementation 334; Training development
tracks 336; Regular health checks 338
31 Writing the key account plan 341
The plan’s purpose 341; Akey account template? 342; Some
‘must haves’ 343; Afew tips 345; Asample running order 346
32 Getting further help 349
References and further reading 350
Index 383
vi
Foreword
Good books on key account management are rare. One of the reasons for this
lies in the past, in the way that key account management (KAM) has been
defined and described. The past 40 years have been characterized by a view
that KAM is mainly a selling task, albeit at a high level, and that the respon-
sibility for its implementation rests almost entirely with the sales team.
Yet all our research at Cranfield School of Management indicates that,
above all else, it is this mentality that prevents the forging of mature, trust-
worthy and profitable relationships. Key account management is not a sales
initiative, it is not something you do tocustomers, and key account strategies
will require the full support of the business.
Key account management is a team effort and, more than that, it is a
business-wide effort. Our research has shown repeatedly that major clients
want more than a sales–buyer interface and they want more than a tradi-
tional salesperson managing the relationship. If suppliers and customers are
to forge significant relationships, as businesses, then both sides must look to
new ways of managing those relationships.
Relationships are at the very heart of KAM. They provide the source of
information and understanding that can be built into added value activities.
They also provide the foundations for long-term business based on mutual
trust and confidence. If you care about customer retention then you should
care about KAM.
So let’s escape the trap of the last 40 years – KAM is not something we do
tocustomers, it is something we do withcustomers, and perhaps the greatest
vii
Foreword
single motivation for developing key account strategies is that the customer
is looking for new ways of working alongside key suppliers.
Purchasing organizations are looking more and more to the techniques of
supply chain management as a means of prioritizing and managing rela-
tionships with significant suppliers. Those suppliers must respond with
customer-sensitive strategies that will touch on everything, from the people
involved to the systems and processes used, and even to the structure and
organization of the supplier’s business.
Key account management provides the strategic base, the processes and
the disciplines to handle this situation, alongside those other common chal-
lenges – globalization, market maturity and customer power.
The purpose is clear – the pursuit of competitive advantage. The days are
long gone when major customers would tolerate average, overpriced
products and services. Being a ‘pimply me too’ just won’t work any more.
Just stop to consider for a moment – whoever heard of Alexander the
Mediocre?
Competitive advantage puts you in a position to succeed, but there is
more that you need to do. There is the question of profit. Most companies, if
they are honest, are not able to measure the profitability of their key
accounts. Many companies, once they determine to measure these things,
often find their largest customers to be their least profitable. Very few
companies measure the long-term returns of customer retention – annual
results are often all that count. Key account management should be seen as
the route to profitable key supplier status – the challenge of understanding
profit must be taken head on. This book will provide the help required.
Peter Cheverton has used the Cranfield research to great effect. I have
worked closely with him for many years and have respect and admiration
for his work as a trainer and consultant with major clients. The task of imple-
menting key account strategies is far from easy, and Peter brings a combi-
nation of clarity, experience, enthusiasm and common sense to the task. This
book is an excellent distillation of his experience, building on the Cranfield
research and producing the essential guide to global best practice.
Please be assured that reading this book will be a rewarding experience.
Professor Malcolm McDonald
viii
Preface
This book is designed as a practical guide to implementing key account
management strategies. Wherever it has been helpful to use real examples of
good and bad practice to illustrate important points, this has been done.
Many of these examples come from my own experience in working with
clients of INSIGHT Marketing and People, an international training and
consultancy firm. Wherever possible the companies involved are openly
discussed, but, for reasons that I hope are obvious, this is not always the
case. In some of the more anonymous cases, details may have been altered
slightly, either to aid clarity, or to protect the not so innocent!
I am pleased to be able to say that my training and consulting work brings
me in contact with far more examples of good, than bad, practice, but the
purpose of this book has not always permitted such a ratio. I hope that my
own clients will forgive me for not filling these pages with more stories of
their undoubted excellence in this field.
Please regard examples of good practice as merely examples, not role
models, and those of bad practice as ways of illustrating the warning signs
that line the route towards key account management (KAM).
ix