The Global Account Management

The globalization of industries and intense competitive environments have induced some firms to undertake global account management (GAM), a systematic, firm-wide process that suppliers use to identify, develop, and retain their most important customers in global business-to-business markets. When they expand internationally, firms often use global sourcing and expect suppliers to provide goods and services worldwide with consistent quality, efficiently, and at harmonized prices.

When mergers and acquisitions reduce the number of buyers, fewer and larger customers tend to purchase higher volumes, which gives buyers purchasing power over suppliers. Suppliers hope to protect their key business, because if they fail to supply a worldwide buyer in one market, they may endanger their business with that buyer in other markets as well. They also tend to prefer to accelerate their organic growth by deliberately concentrating their resources on select global customers, or global accounts.

Global accounts benefit from GAM, because this approach entails a value adding sourcing and innovation partnership. Overall, GAM can help both suppliers and their worldwide accounts strengthen their relationship and expand their global business. A supplier's GAM program usually consists of a program director and program manager, several global account managers and their team members, and specialists who provide product-related, logistical, financial, and legal support. For example, Procter & Gamble introduced a dedicated, several-hundred-person GAM team, led by one worldwide account manager, to cater on a worldwide basis to Wal-Mart Stores, Inc., its single largest customer.

Thus, GAM programs may locate at the corporate level if they cater to firm-wide customers, as in the case of Procter & Gamble, or they may be situated within strategic business units if global customers purchase mostly from a particular business unit. The program director generally provides strategic direction for the GAM program and reports directly to the board; the program manager usually is responsible for developing and operating the processes, tools, and systems required for GAM.

Important program processes include global accounts selection and de-selection, appointment and development of global account managers, account business planning, multilevel relationship building, customer knowledge management, and relationship performance measurement. Common criteria for selecting and deselecting worldwide accounts encompass, for example, future business volume and profit potentials, strategic and cultural alignment between the organizations, and the degree to which the customer purchases on a centralized, global basis. Perhaps the most important function in a GAM program is the global account manager (GAM).

Suppliers generally assign one full-time GAM per global account, whom they locate in geographic proximity to the headquarters of the global account. Thus, the GAM provides a prime contact for the buyer and orchestrates all supplier activities worldwide. The GAM also leads the multifunctional global account team, which should mirror the customer's buying team to ensure optimal collaboration. The role and responsibilities of a GAM thus go beyond those of an international sales manager; the GAM develops and leads the implementation of a global, long-term collaboration strategy with the global account.

This effort requires in-depth understanding of the global account's markets, entrepreneurial skills to identify and develop new business, and political aptitude to align the supplier's internal organization with that of the global customer. At IBM, for example, the GAM's position equates with that of a managing director who leads a dedicated business team that caters to a particular global account on a full profit and-loss basis. The challenges of GAM primarily pertain to the organizational complexity and cultural diversity inherent to such global, inter-organizational relationships.

For example, GAM programs introduce additional global structures that attempt to coordinate the supplier's activities by embracing several functions, markets, and business units, which often pursue diverging objectives. Furthermore, teamwork in a GAM team may be challenging because of the cultural diversity that results from different functional mindsets, such as research and development versus marketing, or from team members with different educational or cultural backgrounds. Consequently, suppliers implementing GAM attempt to align their go to-market strategies and reward systems firm-wide to ensure goal congruence.

Furthermore, they try to develop GAM talent and the collaborative capabilities of organizational members. Finally, suppliers need to resolve the global-local tensions that arise in response to a firm-wide program like GAM, such as product/service adaptation versus standardization.

Key Account Management - 7 Tactics to Build Into Your Sales Program

Not all customers are created equal ... in the volume that they buy from you or the profitability that they bring to you. Some of your customers have key significance to your business. They may be your largest customer, or your highest profit customer, or your must significant national (or international) account.

Do you practice key account management strategies in your business? If you don't, you probably should. Key account management is used in business to business sales relationships. Do you know what key account strategies are; and why and how you should you manage them?

Key account management focuses your business on those accounts that represent a large percentage of a significant business measure: be it overall sales volume; specific product sales; national account status; profitability; and more. For example, if you sell to a customer who annually buys 18 per cent of your overall volume, that account is likely a key account to your business. If a customer only buys one per cent, or less, of your overall volume, they are still important to your business but that customer is not a key account.

Key accounts have a good deal of power in any relationship with their suppliers. It is up to you to manage that power, and build a relationship that is a balanced partnership.

When you build your sales plan, you will need to add key account strategies. Make sure that the plan includes a worst case scenario; losing one or more of your key accounts and how you will handle that loss. Your business survival depends on your readiness to respond and pro-act, rather than react. Develop a scenario plan and analysis that will help you address a survival outcome.

It is challenging to replace a key account on short, or no, notice (I say this from personal experience). But it is possible. However, rather than losing a key account and having to deal with the consequences, focus your sales strategies and planning on building strong key account programs with strong exit barriers (customers will stay with you for a long time if you build the right program). Let me be painfully clear: it is better to keep your key accounts and grow them, than it is to lose one or more key accounts.

Key account management builds a focus on the overall value the customer or account brings. It is important to recognize it is not only sales volume and profit that is important, but the geographical closeness (if your customer is your next door neighbor it is easier to build a strong relationship); the long-term volume and relationship growth potential; the simplicity, or complexity, of providing a service; are all equally important (and in some circumstances, one value will be more important than another).

7 Key Account Tactics To Build Into Your Sales Program:

1. Set up a single point of contact for the key account: the key account manager. Dedicate internal staff to support the key account; e.g. the customer service representative; or shipper, or scheduler; or inventory manager; or whatever is required and have that staff report to the key account manager.
2. Volume discounts or rebates, or other price incentives: this is the standard - everyone does it; everyone expects it.
3. Build a priority ordering program for your key account(s), such as restricted access to your online order system.
4. Customize your product or service for the key account (for example, private labeling, or actual features of the product or service changed/customized for the key account).
5. Match your sales relationship with key account. For example, if the key account sells by the piece, carton, or whatever, your system should allow the same units of sale (multiplied if necessary).
6. Set up cross-business teams and initiatives to improve service, such as product development teams, quality improvement teams, branding efforts, etc.
7. Provide integrated delivery, fulfillment, re-order points, inventory, and invoicing.

Other than the tangible price value, the benefits your customer will receive from a key account program are less tangible: a highly customized, service-supported product or service.

Key account programs can also improve organizational efficiency; for example, improved sales efficiency, streamlined processes, focused communications, optimized order scheduling and inventory management, and a targeted sales plan (that might even include a global account management program) - there are efficiencies to be gained in this relationship. Business owners are challenged not to 'give back' those efficiencies in price reductions. The goal of key account management must be to not only keep the account but also to earn a reasonable profit from the account.

Key account management strategies are used in a business-to-business-selling environment rather than in a more-individual business-to-consumer-selling environment. Meeting your key customers' needs must be a driving force of your business. Build strong exit barriers (such as integrated inventory and re-ordering systems) so that your key accounts find it hard to leave.

Many business owners fear the key account relationship; they are afraid of the 'big stick' that the key account wields. But by building a strong key account management program that benefits both your customer and your business, there is nothing to fear - your key account will not want to leave (and take their business) because they will lose too much perceived, and real, value.