In my previous post, I discussed key accounts and their role in product development. Today I would take the analysis several steps further by sharing a few common mistakes in selecting and categorizing key accounts.
In my experience in medical device marketing, suppliers and distributors are frequently small and medium size companies and I have always believed their process to properly identify and select their key accounts can be improved.
This is because the selection of key customers of a medical company has a fundamental effect on the success of its sales management strategy.
Also, categorizing the customer base needs to be internally agreed upon and normally takes more time and effort than expected. Nevertheless, the impact on sales can be relevant, therefore it is worth it.
With that being said, in this post, I’ll show you a few mistakes to avoid in selecting and classifying your key accounts from the point of view of a medical device supplier analyzing the distributor’s network.
What are your key accounts?
There are several definitions of key accounts. For the purpose of this short article, I will define a key account as a customer of strategic importance. In other words, the most valuable customers of the company.
Why selecting the right customers is important?
Identifying the key accounts is one of the most important decisions to establish a sales strategy for a medical device supplier using a direct or indirect sales force.
In fact, the key customers to which you have decided to provide special attention and service should be those that will generate more value and they should contribute to the fulfilment of the strategic plan of the company.
If you do not set a proper process to select the key accounts, you will probably end with a group of diverse accounts including long-term accounts (the good old boys), demanding or over-demanding customers (the difficult guys), promising new customers (the hopes) and the bigger accounts (the big ones).
Unfortunately, this kind of selection will not help you to develop your business according to the strategic plan.
Bear in mind also that key account management consists of delivering customized, distinctive and innovative strategies to “individual” customers.
Since the resources are limited in any company, the number of key accounts should not be large and choosing the right ones is fundamental for a successful key account management plan.
5 Pitfalls in account selection
1.Considering only the current results
This is the most common error in selecting key accounts. Although the current results are important, in the process of selecting the key customers you should have a long-term perspective.
Partially related to this mistake is overestimating the length of the commercial relationship. Often longer commercial relationships generate higher current results. However, the selection process should be able to properly assess new customers fairly.
2.Assuming the process is easy
When analyzing the customer base to select the key accounts, some people will not consider the complexity of the process as it should.
For example, if the management thinks that the process is easy and straightforward like producing a customer list, it will allocate limited resources; typically, a short time frame and few operational people involved.
In essence, misunderstanding the process and its importance will prevent the involvement of the senior management who can help to identify the correct criteria for the selection and their respective weight.
A similar mistake is considering the process of selection of the key accounts as just the list of the biggest customers.
3.Considering the selection static
Frequently I find people considering the selection fixed instead of dynamic. They think that the current key accounts will always be so.
On the contrary, your key account portfolio must be dynamic and you have to put in place a process for deselecting key customers as well as choosing new ones. The process must be regularly activated and if necessary realigned with the commercial strategy.
Finally, in selecting the key customer there will surely be some errors and some customers who aren’t responding to the key account program. Therefore, the pool of key accounts should be reviewed regularly, year after year.
4.Having too many key accounts
Another typical pitfall is related to the number of selected key accounts.
Since the resources are by definition scarce, the number of key accounts must be adequate to the available resources.
Moreover, when considering capacity, it is important to assess not only the commercial resources but all the cross-functional resources available. For example, the available resources of the regulatory affairs, supply chain and quality departments. Consequently, the number of selected accounts cannot be huge.
Selecting too many customers is a very common mistake impacting the possibility to capitalize on the key accounts.
5.Considering internal politics in the selection
Internal politics in the selection process is a concrete risk. Pressure to include specific customers for example, because they are an old customer or “my” best customer is normal. But with a rigorous process, you must be able to minimize it.
Also, involving the senior management in defining the criteria for selection and not only the key account managers will reduce the bias.
This is crucial because the selected customers form the future of your company, so you need a balanced and strategic view at all times.
Conclusion
In the medical device market, the relationship between supplier-distributor is becoming increasingly extensive and complex.
Current market conditions favor partnerships between suppliers and distributors and there’s a shift from the old-fashioned transaction focus towards a customer focus.
The selection and categorization of key customers must ensure that resources are correctly allocated to them in line with your company’s strategic plan.
In my opinion, your selection needs to be based on an effective and solid process that avoids these five key account selection mistakes.
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