Implementing a Key Account Management Program

Problem

A distributor of construction materials was experiencing slow growth in its largest U.S. markets. With nearly all of the major contractors already as customers, their salespeople had begun pursuing smaller and smaller accounts in an effort to find additional revenue. However, nearly 75% of their profits were still being generated from their largest accounts, and the increased attention on small customers was producing marginal returns. Go To Market Partners helped the client to identify this reality and proposed a key account management program to re-focus their sales force on their most important customers.

Action

Go To Market Partners first helped the client’s senior executives determine the criteria for ‘key account’ status. After much debate, it was agreed that in order to justify the expense of a salesperson, key accounts had to purchase a minimum amount from the client on an annual basis or else have the ability to do so in the near term. To account for the different demographics of each of their locations, the precise revenue threshold could be determined locally; however, each location’s roster of key accounts had to constitute at least 75% of the branch’s revenue.

Go To Market Partners then worked with the client’s sales executives to develop a customized account management process that would help the salespeople establish strategic plans for each of their key accounts. The basic elements of the process were:

• Establishing annual financial targets for each key account
• Uncovering the unique business needs of each individual customer
• Negotiating customer service level expectations for the year
• Engaging any additional internal resources required to fulfill the promised levels of service
• Creating an action plan to exceed the service levels and document the actual performance
• Communicating the service level agreements and action plans internally
• Obtain feedback from the customers and continually update the action plan

Go To Market Partners also developed tools and templates to help the salespeople execute the account management process within the confines of their existing systems. To launch the program, the salespeople were trained in small groups on the new process, the accompanying tools, and the required skills such as uncovering customer needs and negotiating service level agreements.

Result

The account management program had a major impact on the client’s business. The renewed focus on their key customers’ needs resulted in increased customer satisfaction and deeper penetration within the accounts. Over the next 6 months, revenues from the newly designated key accounts grew at triple the rate of the non-key accounts, while profit margins remained steady. As a result, the client’s operating income doubled as revenues reached record levels – All derived from their existing customer base by their existing sales force.