The importance of understanding share of spend for strategic accounts

I have suggested ways by which you might be able to grow revenues despite the recession and especially by understanding and building effective relationships with influential individuals at good existing customers.

One key influence on your ability to do so through the approach I suggested was your share of spend with your customers. So today the question is:

DO YOU KNOW THE SHARE OF SPEND YOU HAVE FROM YOUR KEY CUSTOMERS?

One very useful tool was suggested to MD2MD, the Managing Directors’ Group I chair at a recent meeting by our speaker that day, a great guy called Phil Jesson.   Phil has a real expertise on key account management and suggested we should know our share of spend for each of our key accounts, and proposed we should have a simple record sheet for each key account to help us do so. And I wish I’d known about it ten years ago. I’d certainly have had all my key account managers presenting it at their account review meetings!

As always the tool itself is actually quite simple. The skill comes simply in deciding to use it (your job) and in getting the information to complete it (your account team’s job).

It’s probably best illustrated with an example, so here’s one.

The sheet is quite simple. List across the columns all of your main product ranges. List down the side yourself and all of your competitors. Then attempt to fill in all the intersections. How much does your customer spend with you on each product group, and how much with each competitor. Total across and down and see how much they spend altogether, and compare that to your revenues form them to understand your share, and the opportunity for growth in that account.

Now, before you get too upset, I do realise that the tool is the easy bit and getting the information is the difficult bit. But have you tried?

Even without full information and with a lot of guesswork, you can focus better on the accounts that have most growth potential.

And I’d also put it to you that a really good account manager with an excellent client relationship and a good knowledge of their customer should be able to complete the form with a little discipline and some friendly chats with their friends in the account.

And I don’t just mean direct questions – that may be possible if the relationship is really good. I mean sensible, careful questions asked gently over a series of meetings. For example, how much do you spend on X asked today; Who else do you use for X asked next month and what share of your business do we have compared to Y asked the following month will add up to a large part of the information you need.

So once again, I leave you with a challenge. Do you know how much your customer spends on products and services you could supply and what proportion of that spend do you have?