Typically, when deciding which accounts to manage strategically, companies use revenue as the main criteria. This makes some sense. Managing accounts strategically requires a large investment in time and resources, so receiving adequate revenue to justify this investment is valid.
However Strategic Account Management (SAM) is about managing the accounts in your business strategically. Managing to achieve your company’s strategic objectives, there are many other factors that influence whether an account deserves you investing more time and resources. Some common criteria to select strategic accounts are shown in the table below.
When segmenting, it is critical the leadership team understands and agrees with the chosen classifications to ensure time and resources are correctly allocated by all departments.
Some of the greatest SAM achievements are with companies who would not qualify for a SAM program based on only revenue. To help you understand how other criteria might be applied in your organisation, let’s examine three of the possible criteria you could use to select strategic accounts:
By current revenue
By growth potential
By Current Revenue
One reason to be cautious about using current revenue as your primary selection criteria is that research has revealed that it is far less important than companies expect. Research by the Strategic Account Management Association (SAMA) revealed that before establishing their SAM programs, companies nominated ‘past/current revenue size’ as the most important selection criteria. However, after they had established their programs ‘past/current revenue size’ dropped from number one to number five in importance. This highlights that being your largest account by revenue is unlikely to indicate that the account will be ‘right’ for SAM.
By Growth Potential
High growth accounts have the potential to underpin the future success of your company. However, you will not identify them based on their current revenue, so you need to study their strategy and their potential for revenue growth.
During their growth, high-growth accounts need companies to support then because they are often resource-poor as their growth exceeds their own resources. So high-growth customers rely on their key suppliers to support their growth by helping develop and execute their plans.
These high-growth accounts are often too small to attract the attention of your competitors, and these accounts don’t have the time or resources to regularly go-to-market. So, the opportunity exists to provide real value to them to support their growth, and achieve above average profits for your company as you grow with them. They are also less likely to be transactional because they rely so heavily on your expertise.
One common example is companies expanding geographically. For example, a company who provided analysis of retail store locations had a retail account with aggressive growth plans to expand nationally. Based on the company’s recommendations for store location, the first few stores opened had performed ahead of expectations and this built high trust and confidence. This high trust and confidence and a good strategic account management plan resulted in the retail account working exclusively with the store location company for the next three years as it expanded nationally.
After three years, the retail customer was a Top 5 account. Meanwhile, the store location company had built a unique insight and understanding of the account creating barriers to entry against competitors.
Reinforcing the potential of high growth accounts, research by SAMA revealed that ‘potential revenue’ proved to be the number one criteria in selecting the right strategic accounts. Early in the SAM journey many companies simply don’t have close enough relationships with their customers to understand their strategy and plans for growth. Identifying high-growth potential accounts can be difficult; however, the extra effort can pay big dividends!
People at some accounts are central to the network of an entire industry. People in these accounts understand the trends, have relationships with the major players, and have significant influence within the industry network. Having strategic relationships with these accounts and their people, and being able to leverage their knowledge and their influence can be vital to your long-term success. They are often the customers who refer you to others and value your counsel on broader business issues.
For some time, a construction company had been trying to enter a new market with limited success. Through their network they became aware one of their existing accounts was a major player in this new market. But they had no executive relationships within the account. Through their network they contacted the right people at the account, who were very helpful in coaching them on the best strategy to be successful. The executives at the account explained the current competitors, the influential players and relationships in the market, and the existing risks and opportunities. Armed with this information the company revised their strategy and had faster and greater success.
Another example is in the advertising industry, where the General Manager of one of the major agencies was well respected. He had deep industry knowledge and a reputation for having very high expectations of suppliers. If you were one of his preferred suppliers you had immediate credibility. So doing business with this General Manager helped you win business with other customers.
The remaining criteria are discussed in the book, Managing B2B customers you can’t afford to lose. The key points to take from here are:
- there are a range of criteria to choose from
- the leadership team must understand and agree with the criteria used
Each account needs to be managed differently. Examine your situation carefully and use the criteria to choose accounts that give you the greatest strategic advantage. Before selecting your accounts, download our ebook and gain a greater understanding of the risks and opportunities in your account base. Establish: “Why do we need Strategic Account Management?”