Are Your Strategic Accounts Underperforming? Maybe You Haven’t Selected the Right Accounts…PART 1 – Account Segmentation
By: Denny Chapman Jr.
Over the next couple of weeks, we are going to tackle the challenge of underperforming strategic accounts and dig into 5 proven strategic account management best practices to help determine what may be at the root of the problem. The 5 strategic account management best practices we are going to cover are; Account Segmentation, Building the SAM team, Standard Operating Procedures for SAM, the metric-based strategic account action plan, and Coaching the SAM Process. We will be dedicating one blog post for each of these 5 best practices, and providing additional resources (at the end) for you that could help in your efforts to maximize performance in your strategic accounts…So let’s not delay the ‘good stuff” any further.
Tell me if this scenario sounds familiar, or has happened inside of your organization when it was decided that the company (and the customers) could benefit from implementing a strategic account management program…
Leader 1: “Which of our accounts should we include in the strategic account management program…which accounts do we consider strategic?”
Leader 2: “Let’s pull a customer report from our CRM system on annual revenues, and sort from largest to smallest…the top 10-20 accounts that are doing the most business, spending the most money with us, we should make a strategic account.”
Leader 1: “That’s a great idea! I will get our CRM Admin on it right away, and will have our list of strategic accounts to you by the end of the day.”
If this sounds like a conversation from your organization, then we may have already figured out the first root cause of your underperforming strategic accounts…Your organization may have selected the wrong accounts to be a part of the program. Before we go into the detail on “why” this may not be the best way to segment your strategic accounts, it would be best for us to define exactly what a strategic account is. A strategic account is defined as an account where the ongoing relationship is critical to the success of your organization and (just as importantly) critical to the success of your customer’s organization. This is very different from top revenue producing accounts, which we call “Major” accounts. So what exactly constitutes this difference, and how can your organization create a segmentation model to account for these differences?
According to the Strategic Account Management Association (SAMA; www.Strategicaccounts.org) the key factors influencing the selection process of strategic accounts includes the customer’s strategic direction, geographic presence, financial viability, cultural fit, and management philosophy.
At The Chapman Group, we have an Account Segmentation model that includes all of the above listed, albeit with slightly different labeling, and we add to our segmentation methodology and Excel model a couple more very important criteria for you to consider. The following table outlines the segmentation model that our clients use to determine their strategic accounts (some factors and sub-factor categories may vary based on a client’s industry considerations):
1. Financial Importance
- Revenue Last 12 Months – Revenue actually received from account over past 12 months.
- New business over last 12 Months – New Business Awarded (signed business) received from account over past 12 months.
- Wallet Share – The percent of spend, for similar products and services across all business units that is currently received
2. Competitive Situation
- Level of Competitive Attackability – Viability that account would change from existing competitor relationship when presented with your organization as an option to meet needs.
- Strength of Competitor (Entrenchment) – The depth of dependency on and relationship with existing competitor within account that makes switching from existing competitor more difficult / a questionable decision.
3. Future Opportunity
- Revenue Opportunities – the value of opportunities currently in the pipeline for the account indicating potential revenue gains
- Customer in Growth Industry – the customer competes in an industry / market segment that is in a growth mode, thus increasing their likelihood to increase budgets / spend
- Total Market – Total available pipeline based on what your organization offers today in products and services.
- Account Perception of us as a Quality Provider – Assessment based on any recent data and/or perceptions from account on quality of deliverables; if based on more than one business unit, it is the reflection of an overall average across all business units.
- Consecutive Years of Relationship as of this Current Year – Number of consecutive years, as of the current year, that account has been under contract
- Loyalty Rating – A numerical assessment of our strategic alignment with an account (our risk of attrition).
- Senior Level Relationships – Evaluation of Senior Level “C-Suite” relationships within account Number of positive and influential relationships).
- Significant SBU Penetration – Identifies which business units are currently engaged with account.
5. Alignment / Fit
- Willingness to partner in a SAM Environment – Measurement of key indicators that assess the account’s propensity to partner.
- Capabilities that would add value to Client – Measurement of the “perceived value / importance” our organization brings to the partnership – value propositions that win and keep revenue.
To summarize, segmenting your customer base into who is and who is not a strategic account MUST BE based on more factors than simply revenue. Also lagging indicators (revenues – solution purchased) as well as predictive indicators (client Loyalty Index – likelihood to acquire future solutions) should be well balanced in the criteria – at least weighted 50/50. The relationship between a strategic account and your organization goes far deeper than top line revenues…and this must be reflected in the model you are using to segment your accounts. So if your strategic accounts are underperforming, it would be recommended to first look at how you segmented them to be strategic accounts to ensure that you did not miss ALL of the critical factors that determine who is and who is not a strategic account.
For more information on account segmentation and matching servicing models, we recommend that you visit The Chapman Group’s Resource Center and download the publication entitled Clients, Customers, or Buyers, Which Do You Have?