China is country with a culture that is deeply-rooted in the cultivation of relationships or "guan xi". In fact, without the right relationships, certain kinds of sales will simply not materialise. Chinese sales people take pride in their relationship-development skills, but unfortunately most Chinese sales people are focusing on the wrong relationships. Even if they are building the right relationships, there are still other criteria to be successful in Key Account Management. These are:
* Cultivating as many relationships as possible in a Key Account, but most importantly with the entrenched influencers AND be aware of their entrenched interests and practices;
* Through your relationships in the account, understand the long-term AND short-term business objectives, and find out ways how you can help them in achieving some of these objectives;
* Since you don't have infinite amount of time and resources, prioritise your activities that will give you optimal results
One key objective of Key Account Management is to grow your business with the account. Many so-called Key Account Managers are simply glorified versions of Guest Relations Officers, and they do nothing that will either grow the business, or protect it from competitors.
To grow your business with your Key Accounts, you will have to first understand their business, and then find ways to add or create value for your customers. And you have to do so bearing in mind that you have other Accounts to attend to, and you have limited time, budget and other resources.
Who are Your Key Accounts?
Since there will be quite substantial amount of effort and resources used in managing Key Accounts, you may want to define which of your customers qualify as Key Accounts. In most cases, many sellers define Key Accounts as simply those whom bought the most from them. However, there may be some customers who bought the most, BUT squeezed you for prices below costs AND took forever to pay you. You don't want those customers to be your Key Accounts do you?
Here's a list of criteria that you can refer to:
* Buys at least a certain amount of sales from you each year or each quarter;
* Maintains a margin of x% with you on average;
* Consistently increases their purchase volume from you over the past few years or quarters;
* High potential size of their business (which can be measured by how much business your competitor is doing with them, or by an estimated figure if they bought an optimal amount from you);
* Creditworthy and pays on time;
* Provides you with access on their current and future business objectives;
* Open to new ideas, suggestions and discussions on what else you can do for them; etc.
There are no fixed way of defining which of these criteria are suitable for you, but the selection of Key Accounts are likely to be made with a combination of a few criteria. It is unlikely to be based on any one single criteria such as volume, margin or growth potential.
Managing Entrenched Relationships, Interests and Practices
According to Miller Heiman, successful sales people in complex sales situations will need to contact an average of 3-5 contacts in the customer's organisation before getting the sale. In managing Key Accounts this is even more critical.
Besides the fact that your contact in the Key Account may leave the company, what is even more critical is to understand what are the entrenched relationships, interests and practices.
Whatever you may be selling, every sale you make will have an impact on someone in your customers' organisations. Some of these people will be happy, some will be unhappy, and some will be neutral. In some situations, some people in your customers' organisations may feel that their entrenched interests will be threatened, and may just do whatever it takes to block your sale.
Hence, one of the first things a successful Key Account Manager will do is to established who are the entrenched influencers who will make or break a sale. That is to say:
* If you were to ask your customer to buy something substantial from you, who are those people whose buy-in you must have in order to win the deal?
* If you do know who these people are, do you know them in person yet?
* And if not, what steps are you taking so that you will eventually get to know all of them?
You will also have to know which entrenched interests you will be threatening, and what you can do to diffuse the situation. Some examples include:
* If the customer switch to buy more from you, will someone in the organisation lose out on the kick-backs given by their current vendor?;
* When you sell a better solution or equipment, will some IT managers or engineers feel that their value in their companies will be compromised with your advanced systems?
* When you provide proactive advice to your key accounts, will some senior managers feel that their influence levels will be diminished as such?
Generally, there are no hard-and-fast rule on how such situations can be diffused. In some cases, you can bypass those whom entrenched interests are against you. Sometimes,
* It just takes time to win their trust and support;
* You may even have to find out whom in your contacts can whisper a few kind words on your behalf to thee entrenched interests and relationships, and make sure you don't step onto someone's toes;
* In worst-case scenarios, you just have to wait for them to leave their company.
In addition to entrenched interests, you also need to be aware of entrenched practices. While many studies have shown that the standard 2-3 training programmes may not be the best training solutions, many companies still find it difficult to accept hybrids of coaching and training modules. Many companies also find it difficult to hire trainers or consultants who have not worked in their industry, but have delivered good consulting and training results for other companies in their same industry.
Besides knowing what may be your obstacles and challenges in your Key Accounts, the more extensive your relationships are with your Account, the more information you will get with regards to their long-term and short-term business objectives.
Over time, certain entrenched interests may fall out of favour, while emerging interests may gain favour. Successful Key Account managers have their fingers on their Accounts' pulse to know the subtle, underlying relationship changes that are happening over a period of time.
The Long and Short of Things
According to extensive research by HR Chally, successful sales people, especially Key Account Managers, understand their customers business needs, AND know how to serve these needs.
When studying the business needs of customers, Key Account Managers will have to understand which of those needs are long term, and which are for the short term. The key differences between the two are:
* Short term business needs tend to focus on quick, but sometimes unsustainable results;
* Long term business needs tend to focus on sustainable results in the future, but may require significant amount of resources, investment or sacrifice in the short term
By and large, many companies will shift their focus back and forth between long and short term needs, when it comes to their buying decisions. Key Account Managers will have to make a balance between the two, and suggest solutions accordingly.
In one instance, we were doing some advisory work for a client in the architectural hardware industry in Guangzhou. Our client focus largely on higher-end hardware, and find it difficult to penetrate a particular account (a furniture manufacturer), which was all about reducing price to reduce costs. Eventually, we understood that behind the short-term action of reducing costs, they do have a longer-term need to move their market position upwards, and there will be a gradual need to focus on quality instead of price.
We then advised the sales team to keep providing this Account with low-end products, while working closely with their design and sales departments (as opposed to their procurement department) to understand their next steps in their marketing efforts. We then our client sales people to provide advice to this Account on how, by using superior hardware with innovative designs, we can help them get closer to their future goals.
Setting Your Priorities Right
Besides knowing who qualify as your Key Accounts, you will still have to allocate enough time for the Account that matters most, and still have time for Accounts that will give you significant results 6 months later.
Here's a list of questions to help you set your priorities:
* Are you managing too many Accounts such that none of the accounts are given sufficient time at any one time?;
* Which of your Key Accounts will give you short-term results vs. those that will only give you results 3-6 months later?
* Are you spending the right amount of time with the right people (entrenched interest or otherwise), so that they can help you close more sales?;
* Are you doing the right things (providing information, doing demos, conducting pilots etc.) that will help you move closer to your sale?;
* Which of your Key Accounts are those that you deem necessary to have your senior managers pay visits? Why will this be a priority now?
* How can you manage your Accounts' needs, with minimal resources and costs?
* Most importantly, how can you make sure that you spend enough time with Accounts that will only give you results 3 or 6 or 12 months down the road, because if you don't, your competitors will steal them right under your nose?
Just like there are long-term and short-term business results pursued by our customers, successful Key Account Managers know how to balance between long and short-term Account Management priorities, so that they win, keep and grow these accounts even in tough economic times.