Using Strategic Account Selection Criteria

This section provides additional ways to select the "right" customers and a list of strategic account selection criteria. We will also show how these criteria can be used to create an interim marketing strategy.

Over the years we have seen a wide range of strategic account selection criteria. Three teams at one client came up with more than 150 selection criteria, some of which are shown in Figure 4-4.

1. Revenue potential.

2. Profitability potential.

3. Marquee value.

4. Centralized purchasing.

5. Many opportunities at many locations.

6. Market leader.

7. Effect on major competitors of gaining this customer.

8. Existing executive relationships.

9. Complementary technologies.

10. Reputation for loyalty to suppliers.

11. Rigorous supplier certification program.

12. Buying orientation (strategic vs. transactional).

13. Cultural "fit" between companies.

14. Compatible or complementary systems.

15. Company's solvency.

16. Quick pay.

17. Can leverage us into a new technology.

18. Can leverage us into a new region, country, continent.

19. Product fit.

20. Flexibility.

21. Common raw materials base.

22. Acceptable acquisition cost (workable decision group).

23. They have existing strategic supplier alliances.

24. Innovative, state-of-the-art practices (R&D, manufacturing, etc.).

25. Potential customer has a value-added marketing strategy.

26. Potential customer has shown a repeated willingness to outsource.

27. Potential process synergy.

28. Expertise in competencies we need (inventory management, logistics, etc.).

29. Honest in its dealings.

30. Can be a channel partner for our offering.

Figure 4-4: Representative Strategic Account Selection Criteria

Many businesspeople find it difficult to move beyond revenue and profitability selection criteria. If your program's major goals are solely financial, however, you may be focusing on key account selling rather than strategic account management. Strategic account management requires a delicate balance. Your program has to generate the bottom-line return to justify its existence, but at the same time you have to re-envision the future continually to optimize as-yet-unseen strategic opportunities. In Frederick Reichheld's The Loyalty Effect, Dave Illingworth, group-VP of Lexus North America, makes this point very effectively: "The more you focus on the bottom line, the harder it is to hit." ^[4] Illingworth is presenting Toyota's approach to the market, which focuses on the elements that drive customer loyalty. By doing so, Toyota generated an amazing financial success story.

Another pitfall to watch for when generating selection criteria is that choosing eight or nine of them is really too many for the firm to remember, let alone act on. The best customer management firms tend to work with three to five account selection criteria, all of which ideally come from their strategy. In other words, those criteria answer the question: "Given our firm's marketing strategy, why are we focusing on these accounts?" By closely tying strategy and selection criteria, suppliers reinforce their firm's alignment and focus. And in so doing, these firms tend to succeed.

Firms lacking a clear customer management strategy can also list five or so selection criteria—revenue, profitability, and three other criteria—and then work backward to develop an interim marketing strategy, to be refined as needed. This can work very well if an executive cross-functional group develops and implements the selection criteria. The key point is that, ideally, the strategy and selection criteria complement each other. Otherwise, the firm's direction will not be as clear as it needs to be for alignment. And its returns will not be as significant.

^[4]Reichheld, Frederick F. (1996). The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value. (p.168). Boston: Harvard University Press.