When it comes to mathematics, music or other scientific disciplines there never seems to be an issue with definitions. A prime number is a prime number and a crotchet is a crotchet. No debate, no issue; we all know what is meant by these definitions.
Yet in business we often get a range of definitions and notions for the same thing. Just think of the word ‘strategic’ and you see what I mean.
The same issue of multiple definitions plagues the world of sales when it comes to defining client accounts. Structuring an effective sales operation and ensuring the correct allocation of resources and appropriate sales activity, is vital to success in selling. That is why we need accurate definitions for the different types of client accounts we can manage in our businesses.
Any allocation has to be done from two perspectives – the buyer’s and the seller’s. The buyer’s perspective needs to be determined using some expectation indexing methodology.
From the seller’s perspective, here are some guidelines to help you determine what types of accounts you have in your business.
1. Strategic accounts
Strategic accounts are those that are vitally important to the supplier organisation as a whole. Acquiring and then retaining them should be an organisation-wide imperative because the business that can be generated from these accounts dramatically influences the sales organisation’s own strategic goals. Some criteria that should be included in determining whether an account should have the title “strategic” conferred on it include:
- The buyer company is able to make purchases across the reasonably widest possible range of the seller’s portfolio
- The supplier wants to keep the account out of hands of other suppliers
- The supplier wants to grow market share quickly or gain a position in a market
- The supplier needs continuous production or high production volumes to achieve economies of scale
- The supplier wants to disadvantage their competitors
- A strategic account is not necessarily profitable and doesn’t always provide continuous or repetitive business. The client can often have a policy of shopping around.
- A strategic account does not guarantee easy access to senior executives and doesn’t usually foster transparency or loyalty.
- A strategic account does not always care about the supplier relationships
2. Major accounts
These customers are usually large, attractive accounts that can display some of the attributes of strategic accounts with some fundamental differences:
- They present less opportunities – usually making a few major purchases over a period of time i.e. major equipment supplies with possible consumable purchases as a tail
- They tend to switch suppliers indiscriminately, and show little loyalty
- Often tender driven through procurement
- Though they are important to the supplier organisation as a whole, they are usually of greater importance to lines of business, business units or divisions, rather than the supplier organisation as a whole.
A Key Account must provide sustainable, repetitive business where a fair exchange of value is established and articulated. A Key Account is an account which makes sustainable repeat purchases from the supplier.
- Both the supplier and buying organisations work with a philosophy based on forming partnerships of mutual benefit and collaboration.
- The client (buyer) places a premium on having a preferred supplier relationship that provides them with easy access to innovation, new ideas, keen pricing and superior service.
- In turn the client (buyer) is prepared to pay a premium, recognising that the higher level of service and commitment they expect from their preferred suppliers comes at a cost.
- The relationship between buyer and supplier in a key account is one of mutual dependence, with both working towards achieving a win-win outcome.
- Key Accounts are profitable.
- Key Accounts are about mutual respect
- Key Accounts are about reciprocity
- A Key Account does not have to be a large account, it can be medium sized account too.
4. Transactional accounts
These accounts make one-off purchases – even if large and complex – are usually transactional in nature. These accounts make up the backbone of the day-to-day sales operation and, though important, the loss of any one of these will not cripple the company or dramatically influence its own strategic goals.
5. Indirect /Agency sales accounts
A title given to those sales activities that are managed by agents or some other indirect sales channel such as tele-sales, online, etc. Important as they are, they are part of the mass marketing activity, rather than a strategic focus on selected accounts. This kind of sales activity is most effective for low margin, undifferentiated products and services where little customer education is required.
Remember everybody lives by selling something.