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All things Pharma

Weighing up value: Identification of your key accounts

Key Account Management might be an effective way of approaching your business, but it certainly isn’t a quick fix. Management Consultant Joanna Allen explains how to go about identifying your key accounts.

Previous articles have explored Key Account Management (KAM) as the means by which organisations manage their strategically important customer relationships. Key accounts are said to be ones producing the most profit for an organisation or possessing the potential to do so. Developing these accounts and relationships with their customers to aid their retention can be critical to business success. Identification of these accounts requires systematic analysis in order to decide which accounts are crucial to the organisation. Secondary to this is the determination of the needs of the accounts, and implementation of added values services – ensuring they receive premium customer service to increase customer satisfaction. Wide discussion around what constitutes a key account exists across different industries. Given the different metrics and measurements of definition it is hardly surprising that a model key account does not exist. Research performed by IMONIC showed that, when questioned, Key Account Managers from other industries could offer up at least eight different definitions of a key account. These ranged from customers who contribute significantly to turnover to their oldest trading customers. Potentially the most fitting definition for the pharmaceutical industry is key customers who are also alliance partners, i.e. those with whom we can build collaborative partnerships, focusing on shared value and commitment, especially given the NHS and industry share a common agenda to improve health or prevent disease. The question therefore becomes: how do you identify these key accounts in order to form alliances with them?  

The identification stage

In the identification stage, considerations of how you match your internal resources to the external opportunities and which accounts will generate the best return on investment for the organisation is required. Given the critical importance of this stage, time is required in the analysis of your current accounts and the ranking of them. This goes beyond analysis of your sales and competitor data, to a more comprehensive analysis of the internal and external environment in which you operate. Internal environmental analysis considerations need to be given to the resources that are available to you, these may be financial, availability of added value services or internal organisational skills that you can utilise to improve your competitive offering. A good starting point in the analysis of your external environment is utilisation of the PESTLE model, which is widely used in other business sectors and will be familiar to those of you with any marketing experience. The PESTLE model encourages you to examine a wide variety of external influences that may impact negatively on your business or present opportunities. Key to completing the analysis is the ability to look at the future rather than the past.    

PESTLE Analysis

Political InfluencesWhilst these can arise from central government policies, consideration needs to be given to local issues and their impact. Patient groups are a source of political influence so awareness of their agenda is needed and how you can leverage the opportunities that they present. Internal politics may also impact on available resources and therefore require consideration.
Economical InfluencesThese influences can be multi-factorial and include the customer drivers and the impact of their budgets, internal resources available to you, the seasonality, if any, of your product and factors specific to the industry or your product area.
Socio-cultural InfluencesRelated to the attitudes of consumers, demographics of the area that you operate in, including population shifts, education, local attitudes towards health and living standards. Addressing inequalities in health is a key agenda item for many local NHS organisations – does this relate to your area?
Technology InfluencesConsideration needs to be given to any new products impacting on your market, internal and external research and current trends in your therapeutic area. What tools do you have at your disposal to improve internal and external collaboration? What technological changes are impacting on your customers?
Legal InfluencesThis includes current and future legislation which may impact on your business, including the ABPI Code of Conduct.
Environmental InfluencesSpans a broad range of issues. Of importance are factors considered important to your customer.

  Identification of the influences with the potential to impact on your business in a negative or a positive way will allow you to rank the influencers in order of the most and least important. In performing the ranking, consideration needs to be given to the identification of influencers that may span several categories, as these can create the greatest potential or be the highest source of risk. A comprehensive PESTLE analysis helps define the opportunities and threats to your business, allowing creation of a SWOT analysis matching your internal resources to your external opportunities.   Further analysis PESTLE analysis followed by SWOT creation is a useful starting point in key account identification, but neither fully considers the competitive threats that you may face in your operating environment. Michel Porter (1979) defined five competitive forces businesses are faced with. These are:

The bargaining power of customers: In very competitive markets this is relatively high and customers may leverage their advantage to gain better services elements.

The threat of substitute products: If customers perceive no difference in the products or services offered to them, there is a risk that they will substitute for a lower priced product.

The threat of new entrants: Whilst the number of new products coming to market may be slowing, there is always a need to be aware of potential new entrants which create a threat to your business.

The intensity of competitor rivalry: This will vary depending on the therapeutic area but a comprehensive knowledge of your competitor will help you gain advantage. This goes further than the cost or perceived weaknesses of products and extends to the added value service that may attract customers, and the resources that are available to them.

The bargaining power of suppliers whilst Porter views this in the context of supplying raw materials it can be extended to pharmaceuticals in form of who supplies the medicines to the public. Combining the three analyses allows you to: 1) Define the opportunities and potential threats in the market place 2) Match your internal resources to the external opportunities 3) Analyze the potential threats from competitors.  

The JOST model

Following robust analysis of your internal, external and competitive environment, it is then possible to categorise your accounts and determine the strategic approach to them. The JOST Key Account Management matrix was designed to rank key accounts in the pharmaceutical industry, as other generic models were less specific to the changing needs of our customers and their operating environment. A complete explanation of the model can be provided by the author on request. The model’s intention is to be a fluid, as customer priorities change, increasing or decreasing their attractiveness over time. The launch of new products and the provision of new services to the customer will also change competitive advantage. Effective analysis and use of the model enables benchmarking and identification of areas of weaknesses compared to competitors, thus allowing planning to create added value services which will provide differentiation. Relationship selling has previously being held in high regard within the environment so care needs to be exercised in the top two thirds of the grid in order not to loose potential relationships for the future. Completion of the matrix requires a comprehensive knowledge of competitor activities and their priorities. This is essential in terms of accounts where no advantage exists over the competitor. If these accounts are not a priority to your competitor leverage can be gained through the lack of competitor activity in them. The principles of Key Account Management state that, to practice it effectively, it is only possible to work 25 to 30 accounts at any one time. Therefore, your competitor cannot be everywhere. Guide to plotting your accounts:

Competitive advantage: This may be related to the company, your products or the added value services that you can provide in comparison to your main competitor. A combination of all three gives the strongest advantage.

Account attractiveness: This is related to how your offerings fit with the priorities and needs of the customer, how large the account is and how long it will take to secure the account. A large account with a fit to products or services that can be secured faster than others represents the most attractive account.  

JOST Key Account Management Matrix 

Stakeholder mapping

Having identified and prioritised your key accounts, it is then possible to start to identify and map out the key stakeholders within an account. Stakeholder mapping is the process of identifying the key people crucial to the success of your strategy. These people can possess either high or low power and have a high or low interest in your strategy. An individual or group of individuals with high interest and high power will be critical to the success of your plans, it is important to remember that these stakeholders will be internal and external. For example, your manager will have both high power and interest so you need to plan your benchmarks of success and how and when you will communicate them to him/her. The matrix below provides a structure to plot your key customers and define your tactics for dealing with them.  

Power Interest Grid

High Power, Low Interest  Keep informed and involve accordingly. Satisfy their needs/wants but do not over engage them.   High Power, High InterestKey organisational stakeholders – need to fully engage with these and ensure that their needs/wants are satisfied.
Low Power, Low Interest  Monitor this group – provide input as required.           High Interest, Low Power  Keep these people informed – they may be able to help you with information.

Whilst the planning and identification process may seem lengthy, it is critical to ensure that you have the right accounts with the right plan to ensure long term success. KAM is not a short-term fix – research shows it takes between five and twelve meetings with the key decision-maker before an account can be earned. This process requires a high level of planning and the setting of milestones to demonstrate your effectiveness in moving the account forward. Whilst it may be a resource-heavy adoption in other industries, the last 15 years have shown that there is a distinct relationship between profitability and KAM and that ultimately the benefits outweigh the risks.  

Joanna Allen is a Management Consultant with 15 years industry experience, providing a range of tailored programmes to improve people performance. Joanna can be contacted at joanna@jostconsulting.co.uk.

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