greatest assets, but close behind them are your effective strate- gic account managers.
Key 5: Create firmwide relationships at multiple levels of re- lationships between the firm and its most critical accounts.
Establish parallel linkages that raise emotional switching costs between you and your strategic accounts.
Key 6: Regularly quantify and communicate the value re- ceived from and delivered to strategic accounts.Remember: if you don’t quantify value, it doesn’t exist, either to your firm or to the accounts.
Key 7: Use technology judiciously.Technology solutions may seem dazzling but you need to approach them with high cau- tion. Such solutions can create a prohibitive payback for strate- gic account management.
Are there other keys? Of course, and each firm will priori- tize them and our keys differently. These are, however, the seven keys we believe any firm seeking successful strategic ac- count management needs to deal with. If they do so thought- fully and creatively, they can then reap the rewards of success- ful strategic account management (Figure 9–1).
F I G U R E 9– 1
Benefits of Strategic Account Management
1. A sustainable competitive advantage.
2. Greater account loyalty.
3. Greater account profitability.
BENEFIT NUMBER ONE: STRATEGIC
ACCOUNT MANAGEMENT’S SUSTAINABLE COMPETITIVE ADVANTAGE
Perhaps the greatest danger at an unaligned supplier is unmanaged customer interactions. When we, as customers, call such a firm for help and customer service cannot help us, too of- ten we are shuffled around like vagrants, occasionally ending up in infinite voicemail loops. If we do speak to employees they may none-too-subtly communicate
their lack of urgency to solve our problem, thus poisoning a golden marketing opportunity.
Because that experience is all too common, a supplier can create a competitive advantage by align- ing all of its functions on its most critical customers’ expectations.
This may sound like a busi- ness-to-customer approach, but at the heart of most business-to-busi-
ness interactions are two people having a conversation.
When account contacts call aligned firms with questions or problems, there is no “that’s
not my job” response. Aligned employees know that maintain- ing customer loyalty is everyone’s job. And such behavior does maintain—and increase—cus- tomer loyalty. When we call a firm where everyone tries to be helpful, our experience is so dif- ferent, it creates a memorable im- pression. In aligned firms, cus-
tomer service is not a department—it’s an organizational commitment. And account contacts experience that commit- ment in virtually every call.
Aligning a firm around strategic accounts starts with a firm aligning itself after systematically learning accounts’ ex-
At the heart of most business- to-business interactions are two people having a conversation.
In aligned firms customer service is not a department—
it’s an organizational commitment.
pectations. The firm then shares those expectations with all em- ployees and asks them what the company needs to do to meet and exceed those customers’ ex- pectations consistently. The firm transforms employee answers into systems and processes for the company to develop and imple- ment. Even though we say this in three sentences, firm alignment takes at least 12 to 36 months be- cause it requires substantial orga- nizational commitment, commu- nication, and self-discipline. As with most of life’s challenges, it’s far easier to state our resolve than to actually develop and focus it long term.
Once established, though, firm alignment tends to create a virtuous cycle, in which employees work smarter, not harder, and where teamwork increases em- ployee satisfaction, customer satis- faction, firm productivity, and prof- itability. This cycle, once started, makes it doubly difficult for com- petitors to duplicate service and re- lationship quality levels. Get most employees headed in the same di- rection and few things can stop them—unless customers change their expectations or employees get shifted to other priorities. To pre- vent priority shifting, we return to how critical it is to get the long-term buy-in of all firm executives. If any of them acts as if this commitment is flexible, they can turn alignment into another programdu jour.
This can instill or reinforce employee cynicism and can sometimes create higher cross-functional barriers for customers to leap over.
“That’s not my job” can return with a vengeance.
As with most of life’s challenges, it’s far easier to state our resolve than to actually develop and focus it long term.
[W]hen sustainable competitive
advantages are harder and harder to come by,
aligning a firm around its strategic accounts offers just such an advantage.
If a firm can stay the course, though, the competitive ad- vantage can become sustainable—ifthe firm continues to moni- tor customer expectations and redirect itself when those expec- tations change. The good news here is that, once employees align and focus on customer expectations, experiencing the firm as team, it becomes that much easier to redirect their ef- forts to serve changing customer needs. This is not the case with unaligned competitors, who still have to climb the first—and highest—mountain. At a time when sustainable competitive advantages are harder and harder to come by, aligning a firm around its strategic accounts offers just such an advantage.
BENEFIT NUMBER TWO: STRATEGIC ACCOUNT MANAGEMENT’S GREATER ACCOUNT LOYALTY
Strategic account management can create greater customer loyalty, which in turn can create greater customer profitabil- ity. There has been a great deal of research into what customer loyalty can mean for a supplier. In The Loyalty Effect, Fred Reichheld makes a compelling case that a 5 percent increase in retention leads to a 35 percent to 95 percent increase in the cus- tomer’s net present value.1While Reichheld bases his figures on retail relationships, the principle holds true in busi- ness-to-business relationships. Given the value of most strate- gic accounts, these loyalty numbers can become very dramatic over time. David Jones, a management consultant, provided us with both business-to-business and business-to-consumer examples:
One of the world’s largest telecommunications firms has clearly seen the benefits of establishing relationships with its strategic accounts. After it made the shift from a transactional to a rela- tionship-based approach, its annual customer churn rates fell dramatically. For customers buying more than three products, customer retention was 99 percent compared with about 40 per- cent several years before.
1 Reichheld, Frederick F. (1996).The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value(p.36). Boston: Harvard University Press.
The value of relationships can also be seen in mass markets in the telecommunications industry. BellSouth’s Complete Choice plan, for example, provides customers with an array of services such as call block, call waiting, caller ID, etc. for one monthly price. It also serves as an excellent base from which to sell cellular service, long distance, and other services. The Com- pany has found that customers who buy even one additional ser- vice have “dramatically higher” than average retention rates.”2 How can strategic account management drive greater loy- alty and profitability? For the most complex relationships, where decentralized suppliers are serving decentralized cus- tomers, the number of possible errors rises geometrically, as do the number of actual errors. A strategic account manager, act- ing as the single point of ownership and given the right level of power to make decisions, can help solve these issues as they arise. At the same time, the account manager can think lon- ger-term and start to set up systems and processes to limit re- curring problems and make selling and buying a much easier proposition for both sides. Ease of doing business is an almost universal expectation of strategic accounts.
If the SAM has the firm aligned behind her, she will almost certainly be orchestrating relationships between her firm and the strategic account. Each of these function-to-function and executive-to-executive relationships (as well as being a com- pelling value equation) creates another tether between the two firms until, ideally, the bonds are exceedingly hard to break.
We’ve already seen what can happen when there are few interfirm relationships: one transfer, one new buyer influence, one promotion, and the entire dynamics of the relationship can change—if not disappear. To increase loyalty and long-term customer value, the strategic account manager needs to ask himself continually how he can deepen and broaden the rela- tionship with the account. Generally speaking, the more work- ing relationships, the more layers of loyalty. The greater the loyalty, the greater can be the customer’s value over time.
2 David Jones, in an email to the authors, November 11, 2002.