Continuing a very episodic series on how some things might be bottle-necked, my next observation is around the number of key accounts that a company manages at any point in time.
This observation comes from a study of key account managers in 2006 that surveyed key account managers from 53 large companies. The study found that, while all companies tier customers, they also tend to limit the number of accounts that fit the description: “a customer relationship that is deemed significant to your company’s long-term growth because of that customer’s current and/or expected financial, learning or strategic value”. Specifically, the number of true key accounts tends to cluster around the 15- to 20-mark, irrespective of the company’s industry segment. That was a surprise, since we expected certain firms (like the delivery industry) to engage with a much larger number of accounts given their routine interactions with 100,000s of customers.
The fact that the number was constrained suggests a managerial, rather than an operational, bottleneck. Simply put: no company is capable of seriously engaging with more than a few handfuls of true key accounts at any one time.
This is an important constraint for marketers as they are the custodians of the firm’s value proposition and are often tasked with identifying the firm’s next growth platform. For most firms, breakthrough growth is going to come from identifying those customers who are positioned to grow and whose growth will depend on the use of contingent capabilities. But key accounts shouldn’t just be about stable revenue generation; they should also be about co-developing capabilities. Privileged access to these important customers becomes a major competitive differentiator for a given company.
The catch, however, is that it’s relatively rare for key accounts to be offered a unique value proposition outlining the strategic direction for both firms to pursue. Instead, it too often comes back to ‘white glove service’ and access to fun functions. These are all wonderful things, but they don’t really talk about offering access to key managers/staff or the firm’s scarcest capabilities. They sometimes contain goals around mutual investments, but it’s rare for these investments to link to a specific strategic intent. And thus, if your firm is trying to manage more than about 20 of these top-to-top relationships at the same time, well, then maybe it has placed too many small bets and needs to double-down on a selected few for it to make a difference.
MLC members: learn more about developing a key account strategy that uses your company’s core capabilities to address the needs of target customer segments.
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