Using Key Account Management to Capture Market Opportunities

1
Using Key Account Management to Capture Market
Opportunities
CONFIDENTIAL
2
INTRODUCTION

• Following is a sample client discussion/horizontal
  LOP that outlines a multi-level sales
  improvement program that includes
• Frontline sales performance improvement/better
  intra-unit management of large customers
• Cross-selling and sales coordination (typically
  across units)
• Solutions and vertical packaging
• With key account management (KAM) as an enabler.
• This document takes a comprehensive view to sales
  improvement and KAM however, KAM or other sales
  improvement efforts can and often are shorter or
  more narrowly focused.
• In addition, in this particular example, we had
  deep knowledge of the client situation through
  previous strategy and pricing studies, as
  represented on the example pages attached. This
  might not be the case in your client situation.
• For more information on these and other sales and
  channel topics, contact the North American Sales
  Channel Practice.

3
TODAYS DISCUSSION

• Overview of key account management
• Perspectives on the opportunity
• Basic beliefs and approach
• Selected examples
• Discuss a suggested approach
• Diagnosing the opportunity
• Building the capabilities and capturing near-term
  value
• Designing the organization
• Resource requirements
• Highlight XYZ qualifications
• Firm experience and resources
• Understanding of your company
• Field questions and discuss next steps

4
TODAYS DISCUSSION

• Overview of key account management
• Perspectives on the opportunity
• Basic beliefs and approach
• Selected examples
• Discuss a suggested approach
• Diagnosing the opportunity
• Building the capabilities and capturing near-term
  value
• Designing the organization
• Resource requirements
• Highlight XYZ qualifications
• Firm experience and resources
• Understanding of your company
• Field questions and discuss next steps

5
SUMMARY PERSPECTIVES (note KAM in this example
is one part of the larger multi-level sales
improvement program)

• Our experience with sales improvement efforts
  indicates that improving sales and go-to-market
  related activities is often a huge value lever
  for companies
• Initial estimates suggest that an incremental
  sales opportunity of over 20 may exist
• Approximately 50 of the opportunity in any area
  is achievable within 12 months of implementation
• Key Account Management is only one part of the
  answer. Achieving these results requires a
  multi-level sales improvement program including
• Improved sales force performance/sales
  stimulation
• Cross-selling and sales coordination
• Solutions and vertical packaging
• In undertaking a key account management effort,
  your company should ensure that the effort is
• Founded in a deep understanding of customers
  real needs and what they value in suppliers
• Clearly identifies the nature of the sales
  improvement opportunity for each customer
  relative to competitive alternatives
• Tailors the go-to-market and key account approach
  to fit the opportunity
• Balances near-term value capture with
  best-in-class skill building
• Tracks performance and enforces accountability

6
IMPACT FROM SALES IMPROVEMENT IS SIGNIFICANT
XYZ CLIENT EXPERIENCE
Improvement lever
Opportunity size
Typical capture rate
Sales force performance and stimulation Cross-s
elling and improved sales coordination Solutions
/ vertical applications

• 60-100 in addressed areas within 6-18 months,
  depending on buying cycles
• 6-18 months in areas addressed
• Often more intra-division than inter-division
• 12-36 months
• Winners focus on driving a smaller number of high
  potential opportunities

• Median 10 revenue increase
• 1/2 5-10 improvement
• 1/2 gt10 improvement
• Reduction in sales related costs of 5-10 or more
• Opportunities exist in 20-40 of cases with a
  10-20 success rate
• Typically 10-20 of customers are potential
  solutions buyers
• Conversion rates often in 20-30 range
• Revenues 1.5-5X current, depending on solution

Key account management can be an enabler across
all of these
Source XYZ Marketing Practice
7
ROUGH ESTIMATE OF THE TOTAL SALES IMPROVEMENT
OPPORTUNITY FOR YOUR COMPANY (disguised example)
Incremental sales Million
250-600

• Opportunity for 10-15 increase in revenues
  from sales improvement programs
• Gross margin improvement of 300-500 million
• Actual results will depend on
• Scope of effort
• Pace of program
• Execution quality

Solutions
200-800
950 2,400
Cross-selling
500-1000
Sales performance
Total opportunity
Source Team analysis
8
BASIC BELIEFS ABOUT KEY ACCOUNT MANAGEMENT

• Many companies have adopted some form of key
  account management as a means to break out of
  product silos and capture incremental value from
  some of their larger customers. Quite a number
  have achieved real increases through
  cross-selling and developing commercial and/or
  technical solutions for customers
• However, we have seen many clients over-invest
  in account management structures and processes
  without gaining much benefit because they put in
  place one size fits all account coordinators
  without a clear idea of how they might create
  value for different types of customers or the
  company
• When developing a key account program we
  typically take a very customer-focused,
  market-back approach and follow a simple 4-step
  process
• Identify real nature of opportunity at
  overlapping customers/segments
• Engage in a customer-level account planning
  effort to ensure value and better understand the
  skills required to capture it
• Clarify decision making, coordinating processes,
  incentives, and make structural decisions
• Roll out new structure and processes

9
KEY ACCOUNT MANAGEMENT IS INCREASINGLY PART OF
THE SALES APPROACH

• More intense competition for selling to prize
  accounts
• Customers actively reducing the supplier base
• Customers raising requirements for service and
  cost performance
• Some competitors willing to do what it takes to
  win the business

• Higher customer concentration
• Consolidation
• Buying groups

New role and importance of key account
management

• Increased customer demand for coordination across
  markets
• Within North America
• Worldwide

• Greater complexity of product/service offerings
• Intimate understanding of customer business and
  products required to deliver promised value
• More decision makers involved in purchasing
  process
• Standardization efforts broaden decision making
  base
• Multi-tier coordination often more important
  (e.g., HQ and field)

• Growing customer requirement for deeper supplier
  relationships
• Purchasing economics of scale
• Supply chain initiatives

10
MANY COMPANIES HAVE FAILED IN UNDERTAKING KAM
PROGRAMS
We know our customers and their needs well and
are developing new methods of value creation

• Often companies view KAM with a we pay view and
  take actions that destroy value
• Dedicated account teams when not needed
• Special services/products to all key accounts
• Unprofitable pricing/discounting
• Anything goes in the name of partnering

We have a good long term win-win relationship
We are a great sales and marketing team
11
SUCCESS BEGINS WITH A DEEP UNDERSTANDING OF
CUSTOMERS AND YOUR VALUE PROPOSITION
Elements of an integrated go-to-market approach
Fundamental questions

• Who are my customers?
• Current and potential
• Purchasers and influencers
• What products/services do they buy?
• Now and future
• What do we offer and what can we offer?
• What do they need?
• Known and latent
• How do they buy?
• Current and potentially

12
NATURE OF THE OPPORTUNITY AVAILABLE FROM
COORDINATED ACCOUNT APPROACH
Product/service offerings heavily linked
Assemble components together in unique way to
meet customer specific needs
Integration
Achieve penetration/ retention by explicitly
linking commercial terms of one product/ service
transaction to considerations on another product/
service
Coordination
Stimulate referrals/ cross-sellingto increase
probability of stand-alone sales
Taking one-time action to use relationship in one
area to become qualified supplier in another
Information exchange
Increase satisfaction/decrease go-to-market cost
by leveraginginformation / support resources
Product/service offerings remain distinct
13
CHOICE OF SALES AND CHANNEL STRATEGY
Potential go-to-market approach
Advantages
Market-oriented BU with complete PL authority

• Can develop complete package for common sets of
  customers

Common front-end sales force across all/most
product groups

• Provides a focal point who can organize customer
  touch in the most effective and efficient way

Overlay account management group with signing
authority

• Balances need to package and need to have
  specialists tied to product groups

Overlay account management groups without many
decision rights

• Provides focal point for account
  planning/coordination

Assignment of lead unit for multi-unit accounts

• Allows for account planning with less overhead

Coordinating processes and incentives for
independent units

• Stimulates referrals and collaboration without
  bureaucracy

14
CLIENT EXAMPLE OVERLAY ACCOUNT MANAGEMENT TO
CAPTURE SOLUTIONS OPPORTUNITY
Company Challenge

• Leading high tech company
• Sales to large accounts lagging due to focus on
  retention over new opportunity identification
• Develop tailored account strategy for different
  account segments and team approach to drive sales
  and share of wallet

Impact
Share of Wallet for pilot accounts in top 50 Index

• Actions
• Segmented accounts into tiers based on size,
  growth, strategic importance, needs
• Evaluated sales funnel for top 50 accounts as
  well as for smaller accounts, and developed
  tailored account strategies and team approach for
  each
• Deployed generalist key account teams focused on
  growing business at top 50 accounts with product
  specialists providing support as needed and
  dedicated telesales reps for retention

108-120
8-20
100
Before Program
6 months after imple-mentation
15
REVISED CLIENT SALES ORGANIZATION
Key characteristics

• Organization
• Sales distribution organization part of
  corporate overhead, forms team with sales
  personnel from BUs to meet client needs
• BUs retain their own PLs, sell to both internal
  and external customers
• Incentives
• BU product specialists have quotas across many
  customer accounts, including both solutions and
  component sales
• Sales distribution account managers have quotas
  for their individual customer accounts
• Quotas set only by senior management
• Pricing
• List-based pricing primarily used
• Some concern over who eats the discount with
  solution sales
• Complicated, customer-specific pricing as profit
  margins vary widely between BUs
• Skill sets for account managers
• Hired as industry experts
• Solid senior client relations
• Cross-functional training is manageable because
  they are supported by specialists and consultants

Solutions customers
Consulting
Sales and distribution organization

• Drives client relationship and has deep industry
  expertise
• Coordinates specialists and consultants

• Develop industry-specific solutions
• Customize the solutions for specific client needs

Servers
Software
Services
Micro electronics

• Used for deep product expertise for solution
  sales
• Responsible for direct sales to single product
  customers

Sales
Sales
Sales
Sales
Business units (BUs)
16
USING LEAD UNITS FOR KEY ACCOUNT MANAGEMENT FOR
CROSS-SELLING AND LEAD SHARING
Company Challenge

• Global multi-business unit technology/industrial
  manufacturer
• Six billion dollar BUs that make products that
  could be sold into the same end market
• Before KAM virtually no cross-business unit
  collaboration
• Buyers for different products often not the same
• Sales force perceived risk of opening account as
  far outweighing any potential sales incentive

Actions taken
Impact

• 400 potential accounts narrowed to 50 based on
  size of opportunity and ease of account
  access/penetration, then focused on 15 of most
  interest to BU leaders
• Created full-time executive level position at
  corporate center to manage and roll-out program
• Made salesperson with the strongest relationship
  in account the point person for KAM activities
  did not create new position
• Established guidelines for incentives, metrics,
  reporting structure, roles and governance

• Identified opportunities to capture 3-4 billion
  incremental sales within 3 years
• Began closing deals within 6 months, after
  initial ramp-up and roll-out period
• Closed 9 major cross-business unit deals within
  first year
• Opportunities captured to date have been 100
  incremental sales

17
APPROPRIATE GTM/KEY ACCOUNT APPROACH A FUNCTION
OF NATURE AND SCOPE OF OPPORTUNITY
Typical scope of KAM efforts
Potential go-to-market approach
û

• Likely overkill
• Costing more than benefits created
• Possibly reducing effectiveness of component-only
  sale

• Market oriented BU with complete pl authority
• Common front-end sales force across all/most
  product groups
• Overlay account management group with signing
  authority
• Overlay account management groups without many
  decision rights
• Assignment of lead unit for multi-unit accounts
• Coordinating processes and incentives for
  independent units
• Traditional sales representatives and
  distributors

ü
ü
ü
Realistic options
ü
ü
û
Likely insufficient to accomplish objectives
Info exchange/ cost reduction
Qualification/ one-time action
Cross-sell / referral
Coordinated account strategy
Unique technical solutions
Turnkey solutions
Nature of Opportunity
18
KEY CONSIDERATIONS IN CREATING TRUE ACCOUNT
MANAGEMENT
Losers
Winners

• All key accounts alike Band-Aid organizational
  changes
• Big accounts get most attention
• Sales/margin for transaction
• Judgment-based decisions
• Short-term account planning reacting to
  opportunities
• Relationship-driven model
• Leveraging sales
• Relying on negotiation skills to extract value
• Minimal market feedback one-way sales cycle

• Tailored delivery systems
• Highest priority to accounts with growth
  potential
• Lifetime profitability/market value
• Fact-based decisions
• Longer-term account strategies identifying and
  developing opportunities
• Value creation and partnership model
• Leveraging organization
• Relying on understanding of joint economics to
  optimize value
• Customer and field feedback loops feed an ongoing
  process

19
TODAYS DISCUSSION

• Overview of key account management
• Perspectives on the opportunity
• Basic beliefs and approach
• Selected examples
• Discuss a suggested approach for your company
• Diagnosing the opportunity
• Building the capabilities and capturing near-term
  value
• Designing the organization
• Resource requirements
• Highlight XYZ qualifications
• Firm experience and resources
• Understanding of your company
• Field questions and discuss next steps

20
OVERVIEW OF SUGGESTED APPROACH FOR KAM ENGAGEMENT
Phase 2
Phase 3
Phase 1
Launch the organization of the future
Execution with target customer sets
Opportunity assessment and program design
Build the customer knowledge base
3 months (varies by program)
8 weeks
Timing
6 weeks
Purpose

• Increase success from market-back,
  opportunity-driven design

• Create momentum through early wins
• Begin building capabilities

• Establish longer-term, experience-based solution

Activities

• Begin to build the market / customer knowledge
  base
• Understand segment and customer opportunities
• Evaluate capability and change readiness
• Choose customer sets and design execution phase

• Develop the account-level fact base
• Execute key account management pilots
• Assign role and responsibilities
• Engage in pilot account planning
• Develop tactical action plans
• Execute initial account actions, evaluate and
  refine plans
• Initiate longer term account action items
• Complete and go live with customer knowledge
  base

• Outline scope and nature of remaining opportunity
• Determine go-to-market / KAM structure
• Clarify processes and supporting mechanisms
• Begin full-scale implementation

Scope

• Opportunities selected in Phase 1
• Solutions/verticals-based (e.g., oil and gas,
  utilities)
• Cross-selling focused (e.g., multi-bu accounts
  in IAS, Controls and Power overlaps)
• Sales penetration at major accounts(e.g.,
  Compaq, Whirlpool)

• Subset of customer base from across the
  organization, including
• Multi-divisional accounts
• Multi-bu accounts
• Single-bu global accounts?

• Company-wide, high-level go-to-market
  organization design

21
PHASE 1 DETAIL OPPORTUNITY ASSESSMENT PHASE
Opportunity assessment and program design
Timing
1 week
3 weeks
1 week
1 week
Activities

• Assemble basic, internal customer information
• Outline customer information requirements
• Assess availability of additional information and
  begin collection process
• Compile list of your company offerings and
  capabilities

• Synthesize all available information (e.g., sales
  perspectives, financials, previous customer
  interviews, external data, etc.) into segment and
  customer attractiveness
• Develop preliminary view of opportunity and
  likely approach for capture
• Estimate magnitude of opportunity

• Assess management and organization readiness
• Skill for new tasks
• Will to change and try new approach
• Estimate timing of impact
• Map opportunity attractiveness versus
  feasibility for pilot

• Select initial customers sets to begin
• Outline resource requirements, process, and
  timing
• Refine work plans, tools, and approach
• Gain agreement to proceed

22
CUSTOMER SEGMENTATION BASED ON ATTRACTIVENESS
Current sales volume
Growth potential - share of wallet and organic
Competitive landscape (the company/ customer fit)
Key
Major
Core
Customer segmentation based on attractiveness
Customer willingness to partner with the company
Current and future estimated profitability
23
PRIORITIZING CUSTOMER SETS BY NATURE OF
OPPORTUNITY
Improve major accounts
Cross-sell
Solutions
Computer and server OEMs
High
Global oil gas producers
Customers who buy sensors and drives

• Opportunity attractiveness

Low
White goods manufacturers

• Key factors to consider
• Size of sales opportunity
• Estimated profitability
• Competitive intensity and reaction
• Distinctiveness of potential value proposition

Low
High
Feasibility for pilot

• Key factors to consider
• Timing for impact
• Capability and commitment of management
• Organizational skill level
• Access to customer sets

24
PHASE 2 DETAIL EXECUTION WITH TARGET CUSTOMER
SETS
Execution with target customer sets
Execute initial account actions, evaluate and
refine
Initiate longer term account action items
Engage in pilot key account planning
Refine the opportunity and account strategy
Develop the tactical account plan
Develop the account-level fact base
Timing
2-3 weeks
4-6 weeks
2 weeks
2-3 weeks
TBD
Activities

• Develop detailed account level fact base for
  targeted customer set
• Customer information
• Account performance
• Competitive assessment
• Strategic issues and opportunities

• Detail actions and timing for all required areas
• Sales and marketing
• Engineering
• Manufacturing
• Identify required resources
• People
• Skills
• Assemble the team across bus/divisions
• Create tactical plan and assignments
• Finalize specific metrics
• Revenue
• Margins
• Timing

• Execute near term and quick hit actions
• Track progress against plans
• Iterate account plans and re-initiate actions as
  required
• Highlight process and account successes and
  failures
• Synthesize key learnings as input for
  organization design

• Launch longer term actions
• Monitor progress
• Refine account plans as necessary
• Ensure accountability

• Verify/refine nature of opportunity
• Outline account strategy and approach
• Establish account level aspirations
• Clarify account-specific product / service value
  proposition
• Establish pricing
• Conduct economic modeling
• Iterate

25
ACCOUNT LEVEL FACT BASE TEMPLATE
Area

Issues to explore

Potential analyses
Customer performance and strategy Our
performance in servicing the customer Our
position with customer relative to competitors

• What is the customers overall business strategy?
• How is the customer performing financially?
• How is the customer performing in the
  marketplace?
• What is the customers product line strategy?
• What is the customers production strategy?
• What is the customers sourcing strategy?
• What is the customers sourcing organization and
  process?
• What share of wallet are we receiving?
• How much profit do we make from this customer?
• Where do we stand with key decision makers?
• How have we done in recent negotiations?
• How did we perform against last years plan?
• What are our customers needs?

• Statement of customer objectives, SWOT
• Stock price trends, ROCE
• Market share trends
• Time line by platform
• Build projections by platform location
• Supplier list by component geography, customer
  affiliations, consolidation efforts
• Org chart, key decision makers, key buying
  factors, selection process, recent negotiation
  reviews
• Account share trends in units and revenue
• Profitability trends in OP, pocket margin, NPV
• Relationship mapping and strength evaluation
• Won/lost bid analysis and reasons
• Performance vs. objectives
• Prioritization and weighting of key buying
  factors, technical innovation priorities
• Value maps, competitiveperfo

Reactor, extruder, purifier, or other process
unit that is the bottleneck in the process
26
ACCOUNT PLANNING SUMMARY PAGE - CUSTOMER X
Situation summary Account type Goals for 2000
Nocross district is a high-margin, large-volume
account with a dominant position in a growing
market. The company has been unable to retain
its position over the years Key Become
customers No. 1 supplier. Obtain 30
penetration in product 1 and maintain 85
penetration in product 2
Profitability drivers

• Earned cost savings standard 3 (with volume
  gt300,000 lb.)
• Payment terms 75 days (due to national
  agreement)
• AL BW as percentage of total BW lb. 23

1998 /lb. vs. benchmark
2000 target /lb. vs. benchmark
1998 /lb.
Key activities to achieve goals
Responsibility
Timing
Pocket margin Freight costs MSC costs AR
carrying costs
n/a 2.4 0.2 2.4
10.0 above 0.24 below 1.60 above 0.90 above
Same 1.0 below Same 1.9 above

• Introduce pilot VMI program to the zone
  warehouse (sole source) with delayed billing tied
  to inventory turns
• Introduce differentiated pricing for FTL, full
  pallet business
• Support/reengage in job business (reach (30 hit
  ratio)
• Continue to help them with their customers

July-December 1999 August 1999 Year round Year
round
Pounds Revenues Margins ( Millions)
Important supporting facts summary Sales and
margins historical and projected
Penetration breakout Product 1 Percent
Current
Target
Product 1 100 9 million lb.
Product 1 100 9.3 million lb.
3,778

• Key findings volume and margins have decreased
  significantly as competitor presence has
  intensified
• Recommendations leverage relationship to regain
  and surpass historical position

3,244
Other
3,000
Other
Client
Company 1
2,240
2,057
1,779
Client
Company 2
1,332
1,178
986
801
636
Company 1
Company 3
Company 3
Company 2
1996
1997
1998
1999 YTD
2000 est.
Product 2 100 310,000 lb.
Product 2 100 320,000 lb.
Assumes average price and margin for 1999
Company 1
Company 1
Performance relative to competitors across key
buying factors
Importance to customer
Factor
Score
Actions
Below average Average Average Better Better Bet
ter Average n/a Above average Above average n/a

• Pricing
• Quality
• Payment terms
• Delivery
• On time
• Fill rate
• Lead time
• Product line
• Inventory management
• Sales support
• Tech support
• Promo funds

Must prove competitive pricing Terms
negotiated with Nationals. May want to extend to
this district in connection with VMI to
zone Adjust downward where applicable Institu
te VMI for warehouse 1 (the zone) Maintain
relationship
0 0
Client
Client
Companys position summary

• Only building supplier with long-term
  relationships
• Product line 2
• Good delivery service
• Inconsistent pricing
• Product development (outside of core business)
• Conveniently located to service fill-in volume
• New zone warehouse located only 20 miles from
  plant/MSC
• Competitors better positioned for product 2 will
  calls
• Competitors have strengthened relationships

Strengths Weaknesses Opportunities Threats
27
PHASE 3 DETAIL LAUNCH ORGANIZATION OF THE FUTURE
Launch the organization of the future
Timing
2 weeks
2 weeks
4 weeks
TBD
Activities

• Mine customer information and lessons learned
  from pilot phases
• Identify likely opportunities for remainder of
  customers sets
• Size the magnitude and scope of the remaining
  opportunity

• Translate opportunity into requirements for
  front-end of business
• Assess ability of alternative go-to-market / KAM
  approaches to capture opportunity
• Identify any back-end of the business
  constraints
• Define detailed structure
• Roles
• Responsibilities

• Outline staffing needs and skill requirements
• Create approach for
• Transfer pricing
• Incentives
• PLs
• Resource deployment
• Information flow
• Support systems
• Outline implementation and transition plan

• Launch required changes
• Monitor and track progress
• Ensure accountability

28
NOKIA SALES ORGANIZATION AND MECHANISMS

• Key processes and mechanisms
• All transfer prices (TP) and recommended global
  reference prices (GRP) set by 10 people in
  product units and strategic planning
• Product managers sell their products and services
  to the KAM at TP (no authority to adjust TP), KAM
  then makes final pricing/trade-off decisions to
  customer
• KAM and product managers bonus based on 50 local
  and 50 consolidated margin, so no one group
  eats discount
• Account strategy and disputes decided in monthly
  key account board meetings attended by product
  VPs, market VPs, and country heads
• TP discussion held only at PU and MO head level
  (no discussions between KAM and PMs)
• KAM have license to hunt with customer after
  winning account

Market/sales regions (MOs)
Account team
Europe
Account manager (KAM)
China
U.S.
Project manager
Product manager
Project manager
Project manager
Services
Services group
System marketing
Product unit 1 Bay stations
Product unit 2 Switches
Product unit 3 Handsets
Product units (PUs)
Regional sales/marketing structure composed of
region manager, country managers and account
managers within countries
29
TRANSITION CHALLENGES NEED TO BE CAREFULLY MANAGED
Approaches for transition plan to address
critical challenges

• Use opportunity define specifications and ensure
  right team is in place
• Use senior executive visits as basis for
  exploring new areas with customers
• During transitions team lead monitors customer
  satisfaction on a more frequent basis

Customers
Sales reps

• Over-communicate/involve super reps in design
• Test value of double credit for sales resources
  for teaming
• Source team leaders internally/externally to get
  right skills
• Invest in extensive training, but only for high
  potential reps hire externally to fill
  additional positions

• Roll-out new approach to only as many teams as
  sufficient quantity (scale) and quality (skills)
  of specialists is available

Specialized talent

• Define new metrics (outputs and drivers) to
  measure joint team performance
• Pilot changes in 1-2 accounts before rolling out
  to minimize risk/team
• Adjust budgeting/planning process to include
  cross-organization resources and ensure
  synchronization of targets

Organization
30
PROPOSED PROJECT ORGANIZATION AND RESOURCES

• Steering Committee

Task Force

• Additional XYZ Resources
• B2B Marketing Practice
• Company Client Service Team
• Research and Information Dept.
• Relevant industry Practices, e.g.,
• Assembly and Automotive
• Telecom
• Energy

• Additional your company Resources
• Sales
• Marketing
• Engineering/Design
• Finance
• IT
• Corporate Learning

Core Team Leadership
XYZ
Company

• Selected Division / BU Sales Leaders

Working Team - Assessment, 1st Pilot and
Organization Phases
Working Teams - 2nd and 3rd Pilot Teams

• Customer Knowledge Base Development Team
• Company Project Manager

XYZ
Company
XYZ
Company

• Engagement Manager
• Associate
• Associate

• 1 Sales/mktg person from each division (50)

• Engagement Manager
• Associate

• Account Reps
• Other functional resources

For 2nd Pilot Team
For 3rd Pilot Team
31
TODAYS DISCUSSION

• Overview of key account management
• Perspectives on the opportunity
• Basic beliefs and approach
• Selected examples
• Discuss a suggested approach for your company
• Diagnosing the opportunity
• Building the capabilities and capturing near-term
  value
• Designing the organization
• Resource requirements
• Highlight XYZ qualifications
• Firm experience and resources
• Understanding of your company
• Field questions and discuss next steps

32
XYZS VIEW OF REQUIRED QUALIFICATIONS
For any consulting assignment
For this study

• A depth and breadth of experience and expertise
  in the industry, functional areas, and type of
  problem covered by the assignment
• An unquestioned record of successful engagements,
  a professional approach, and improved client
  performance on the part of the consulting firm
  overall
• High confidence in the individual consultants who
  will be carrying out the work

• In-depth experience in the diverse set of your
  company industries XX, YY, ZZ, and AA
• Deep insight of your cos customers needs
  expressed and latent
• Clear understanding of your cos capabilities,
  products, and services and the ability to
  identify opportunities to more full leverage them
• Extensive and relevant expertise in each of B2B
  go-to-market strategy, account planning, sales
  force improvement, and organizational
  effectiveness
• Proven track record in designing and helping
  implement comprehensive and successful
  performance improvement programs in large
  companies
• A broad and sustained history of achieving
  substantial performance improvements through
  client/consultant partnerships whose financial
  and qualitative benefits far outweigh their costs
• A clearly professional approach to consulting, in
  which the clients interests are paramount and
  the highest standards of objectivity and
  integrity are maintained throughout
• Proven ability to engage, excite, and enhance the
  skills of client personnel so that they have the
  will and capability to implement the studys
  results
• Excellent personal chemistry and feeling of trust
  with members of the consulting team

33
XYZ MARKETING PRACTICE SERVICE LINES
Impact timing
Sectors with strong reference cases
Short term
Medium term
Our value proposition
Brand strategy

• Combine industry knowledge, proprietary
  XYZ/envision techniques, and our focus on
  implementing brand delivery pro-grams, to create
  distinctive brands in a pay-as-you-go approach

• Banking, insur-ance, retail, media, hi-tech,
  pharma.

Marketing spending effectiveness

• Use proven approaches (over 50 studies), to
  consistently allowed clients to reallocate 10-25
  of their advertising, sponsorship, CRM spending,
  and Internet marketing spending

• Banking, auto, packaged goods, retail

Customer behavior-changing strategies (CRM)

• Use proprietary techniques and our experience in
  over 200 situations we have been able to grow
  revenue of the target customer group by 10-20
  over 2- to 3-year period tactical programs have
  grown target customer revenue 5-10 over a 6-9
  month period

• Banking, insurance, retail, pharmaceuticals

Core service lines
Pricing

• Use proven approaches (over 800 studies in past 3
  years) and proprietary research we average a 3-
  to 5-point ROS revenue through short-/medium-term
  pricing programs

• B2B, FIG, hi-tech

Sales

• Use proven approaches (over 1,000 studies
  worldwide in past 3 years) and key relationships
  (e.g., Siebel, Huthwaite), to improve sales
  productivity by 10-20 while reducing costs by
  5-10

• B2B, hi-tech, telecom, FIG

Customer insights

• Use proprietary technologies and relationships
  (e.g., Media Matrix) plus experienced market
  researchers to develop insights that are the
  foundation for marketing strategies and programs

• All

3-D marketing strategies

• Use 3-D opportunity (functional, process, and
  relationship) benefits framework, to help clients
  create innovative and distinctive customer
  propositions

• Packaged goods, retail, insurance, B2B, pharma.

Additional areas
Marketing capability building

• Use proven approaches and significant research
  (e.g., joint programs with HBS), to help clients
  build marketing capabilities in a pay-as-you-go
  approach

• Banking, B2B, media, retail

34
SIGNIFICANT B2B SALES AND CHANNEL STUDY EXPERIENCE
Sales and channel management studies 2001 100
Percent 425 studies (worldwide)
Percent by type of study
Percent by industry
Packaged goods
Channel manage-ment
Metals
Energy
Financial services
Transportation
Other
Retail
Pulp and Paper

• Sales force management
• Sales productivity
• KAM
• Sales organization

Chemicals
Auto/ assembly
Go-to-market strategy
High tech
Telecom
Pharma/medical
Global FPIS with sales/channel as primary or
secondary study objective North American FPIS
Government, media, professional services
35
BREADTH OF INDUSTRY AND CUSTOMER KNOWLEDGE
Percent XYZ engagements by industry, 2001 100
4261
XYZ global Practices
Industry
Agri. Food Chains

• Auto Assembly
• Banking Securities
• Chemicals
• Elec. Power Nat. Gas
• Emerging Markets/Banking
• Insurance
• Media Entertainment
• Metals Mining
• Nonprofit
• Packaged Goods

• Payor/Provider
• Petroleum
• Pharmaceuticals Medical Products
• Pulp Paper
• Retail, Apparel, Leisure
• Technology
• Communications
• Travel Leisure
• Venture Capital/ Principal Investing

Auto Assembly
Banking Securities
Chemicals
Consumer/Pkg. Goods
Elec. Power Nat. Gas
High-tech
Insurance
Media Entertainment
Functional
Metals Mining

• Business Building
• Corp. Finance Strategy
• Global Strategy
• Marketing
• Op. Strategy Effectiveness
• Organization

Nonprofit
Payor/Provider
Petroleum
Pharma. Med. Pdts
Private Equity
Firm-sponsored initiatives
Professional Services

• _at_XYZ (Electronic Commerce)
• Broadband
• Client Communications
• Mobile Commerce
• XYZ Global Institute

Public Sector
Pulp Paper
Retail, Apparel, Hosp.
Telecommunications
Travel Logistics Serv.
Aerospace and Electronics
36
TODAYS DISCUSSION

• Overview of key account management
• Perspectives on the opportunity
• Basic beliefs and approach
• Selected examples
• Discuss a suggested approach for your company
• Diagnosing the opportunity
• Building the capabilities and capturing near-term
  value
• Designing the organization
• Resource requirements
• Highlight XYZ qualifications
• Firm experience and resources
• Understanding of your company
• Field questions and discuss next steps

37
APPENDIX

• Selected client case examples
• Detailed workplans and deliverables mini-pack
  follow-up to client discussion

38
CASE EXAMPLES
Deep dive case examples

• High tech client
• Industrial products client
• Chemicals client

• Key account management to capture solutions
  opportunity
• Key account management to capture cross-sell
  business
• Key account management planning and information
  to improve management of global, single-BU
  accounts

Snapshot case examples
Building automation client Industrial
electronics client Diversified technology client

• Key account management to capture cross-sell
  business
• Key account management to capture cross-sell
  business
• Key account management to capture solutions
  opportunity

39
CLIENT EXAMPLE KEY ACCOUNT MANAGEMENT TO CAPTURE
SOLUTIONS BUSINESS OPPORTUNITY
Company Challenge

• Leading high tech company
• Sales to large accounts lagging due to focus on
  retention over new opportunity identification
• Sales to smaller accounts lagging due to lack of
  relationships/alliances with VARs and local
  market differences
• Develop tailored account strategy for different
  account segments and team approach to drive sales
  and share of wallet

What we did
Impact
Sales performance for small and large accounts in
pilot Index
Share of Wallet for pilot accounts in top 50 Index

• Actions
• Segmented accounts into tiers based on size,
  growth, strategic importance, needs
• Evaluated sales funnel for top 50 accounts as
  well as for smaller accounts, and developed
  tailored account strategies and team approach for
  each
• Top 50 accounts deployed teams focused on
  growing business with product specialist support
  to generalists pitching new opportunities, and
  dedicated telesales reps for retention
• Smaller accounts created pull marketing
  campaign for name and product recognition, built
  VARS relationships, and launched small business
  marketing clusters to drive local area marketing
• Resources
• 1 XYZ team of 5 for 6 months driving analysis,
  recommendations, and pilot
• Client team (with XYZ support) rolled out account
  plans and team approach over 1 year

108-123
108-120
8-23
8-20
100
100
Before XYZ
6 months after imple-mentation
Before XYZ
6 months after imple-mentation
40
REVISED CLIENT SALES ORGANIZATION
Key characteristics

• Organization
• Sales distribution organization part of
  corporate overhead, forms team with sales
  personnel from BUs to meet client needs
• BUs retain their own PLs, sell to both internal
  and external customers
• Incentives
• BU product specialists have quotas across many
  customer accounts, including both solutions and
  component sales
• Sales distribution account managers have quotas
  for their individual customer accounts
• Quotas set only by senior management
• Pricing
• List-based pricing primarily used
• Some concern over who eats the discount with
  solution sales
• Complicated, customer-specific pricing as profit
  margins vary widely between BUs
• Skill sets for account managers
• Hired as industry experts
• Solid senior client relations
• Cross-functional training is manageable because
  they are supported by specialists and consultants

Solutions customers
Consulting
Sales and distribution organization

• Drives client relationship and has deep industry
  expertise
• Coordinates specialists and consultants

• Develop industry-specific solutions
• Customize the solutions for specific client needs

Servers
Software
Services
Micro electronics

• Used for deep product expertise for solution
  sales
• Responsible for direct sales to single product
  customers

Sales
Sales
Sales
Sales
Business units (BUs)
41
CHALLENGES DURING IMPLEMENTATION OF A SOLUTIONS
KEY ACCOUNT MANAGEMENT APPROACH
Relevance to Invensys
Clients challenges
42
CASE EXAMPLES
Deep dive case examples

• High tech client
• Industrial products client
• Chemicals client

• Key account management to capture solutions
  opportunity
• Key account management to capture cross-sell
  business
• Key account management planning and information
  to improve management of global, single-BU
  accounts

Snapshot case examples
Building automation client Industrial
electronics client Diversified technology client

• Key account management to capture cross-sell
  business
• Key account management to capture cross-sell
  business
• Key account management to capture solutions
  opportunity

43
CLIENT EXAMPLE USING LEAD UNITS FOR KEY ACCOUNT
MANAGEMENT FOR CROSS-SELLING AND LEAD SHARING
Company Challenge

• Global multi-business unit technology/industrial
  manufacturer
• 6 billion BUs that make products that could be
  sold into the same end market
• Before KAM virtually no cross-business unit
  collaboration
• Buyers for different products often not the same
• Sales force perceived risk of opening account as
  far outweighing any potential sales incentive

Actions taken
Impact

• 400 potential accounts narrowed to 50 based on
  size of opportunity and ease of account
  access/penetration, then focused on 15 of most
  interest to BU leaders
• Created full-time executive level position at
  corporate center to manage and roll-out program
• Made salesperson with the strongest relationship
  in account the point person for KAM activities
  did not create new position
• Established guidelines for incentives, metrics,
  reporting structure, roles, and governance

• Identified opportunities to capture 3-4 billion
  incremental sales within 3 years
• Began closing deals within 6 months, after
  initial ramp-up and roll-out period
• Closed 9 of the 15 major cross-business unit
  deals selected within first year
• Opportunities captured to date have been 100
  incremental sales

44
CROSS-SELLING WAS LIMITED AMONG MAJOR ACCOUNTS
ABC company account sales 100 xx billion
Major accounts of multiple BUs

• Only 3 accounts currently capture at least 5
  million in sales from more than one BU
• Few customers are aware of the full range of
  offerings ABC can deliver to them

5
Major accounts of a single BU
30
Smaller accounts
65
Major accounts exceeding 5 million
sales from one or more BUs Source Corporate
sales database interviews
45
SUBSTANTIAL CROSS-SELLING OPPORTUNITY EXISTS
ABC company customers addressable spending
Billions
Total BU market 100 500 billion
125-150
105-130
20
Current ABC sales
500
35-50
55-80
No relationships
Additional opportunity for existing BUs
70-75
Existing relationships
25-30
Spending in group market
Additional opportunity
Cross-selling opportunity for new BUs
5-15 capture
Revenue potential Year 1 3-12 billion Year 4
4-16 billion
Ratios estimated based on analysis of Fortune
500 customers and analysis of 160 top
customers Capture rate estimated based on
average market share and spending capture within
existing customers ( 3-20) Source U.S.
Business Initiative team analysis of major
accounts
46
TWO APPROACHES TO CROSS-BUSINESS UNIT SELLING

• Cross-BU selling elements
• Cross-selling to existing customers Leveraging
  existing customer relationships to sell
  additional products and services by introducing
  new BUs into the relationship
• Joint selling to new customers Approaching new,
  high potential customers through the combined
  efforts of multiple BUs

High
Integrated solutions within BUs
Cross-BU solutions
Depth of integration
Component products/services
Cross-BU selling/bundling
Low
High
Low

• Cross-selling objectives
• Increase product/service sales
• Deepen customer relationships
• Capture cross-BU synergies in sales and service
  delivery

Degree of cross-BU packaging
Source XYZ analysis
47
PROCESS FOR SELECTING KEY ACCOUNTS
Top accounts and wish lists from BUs
10-15 target accounts
50 accounts

• Large opportunity for ABC company
• High growth potential (e.g., high P/E industry or
  company growth rate)
• Strong existing relationship
• Multiple business unit opportunity (e.g.,
  non-lead BU sales exceeds 1M)

Key criteria

• Size of opportunity
• Account experience confirms opportunity
  (untapped sales, profitability/growth)
• Strategically important to ABC company (e.g.,
  visibility, competitive positioning, large sales
  contribution)
• Access/ease of account penetration
• Account open-ness to KAM approach
• No known obstacles/ barriers to account
• Access to appropriate decision-makers
• ABC company market share/ competitive position
• Opportunity to influence procurement decisions
• Ability to identify appropriate account manager
  (internally or externally)

Source XYZ analysis
48
CASE EXAMPLES
Deep dive case examples

• High tech client
• Industrial products client
• Chemicals client

• Key account management to capture solutions
  opportunity
• Key account management to capture cross-sell
  business
• Key account management planning and information
  to improve management of global, single-BU
  accounts

Snapshot case examples
Building automation client Industrial
electronics client Diversified technology client

• Key account management to capture cross-sell
  business
• Key account management to capture cross-sell
  business
• Key account management to capture solutions
  opportunity

49
CLIENT EXAMPLE IMPROVED INFORMATION AND KEY
ACCOUNT MANAGEMENT FOR LARGE, MULTI-REGIONAL
CUSTOMERS

• Global chemicals manufacturer
• Sales concentrated among complex,
  multi-regional/national accounts with large
  product breadth
• Lack of account planning capability aggravated by
  low information transparency within the
  organization
• Develop tailored account strategy for key
  accounts to preserve/grow wallet share and
  increase
• profitability despite increasing competitive
  environment
• Improve information quality and build account
  planning capabilities

Company Challenge
What we did
Impact
ROS increase for accounts in pilot Index
Operating profit increase for accounts in
pilot Index

• Actions
• Selected subset of key accounts to pilot process
• Improved quality and consistency of customer
  information profile via standardized collection
  mechanisms
• Developed improved information for pilot accounts
• Accuracy of cost-to-serve variations
• Granularity of customer and location
  profitability
• Developed KAM planning templates and processes
• Conducted deep dive account planning
• Account strategy with cross-organizational team
• Account tactics with account sales team
• Resources
• 1 XYZ team of 2 for 3 months driving analysis,
  recommendations, and pilot
• Client team (with XYZ support) currently rolling
  out program to remaining key accounts

150-175
50-75
103-105
100
100
3-5
Before XYZ
Pilot results
Before XYZ
Pilot results
50
ABCS KEY ACCOUNT MANAGEMENT APPROACH

• Account economics