The Importance of Strategic Account Management for Organizations Involved in the Valve Industry

The valve industry has experienced significant disruptive events over the past dozen years, including the Deepwater Horizon oil spill incident, the oil crisis of 2014, global warming concerns, the COVID pandemic, evolving human resource shortages, current supply chain and logistics issues and recently, the war in Ukraine. These events have created a volatile environment with valve makers’ customer base resulting in a need to find new and diverse ways of addressing their needs, concerns and operations. One could say that the level of loyalty a customer has with its suppliers has decreased — thus increasing the likelihood of them reducing their supplier base and evaluating alternatives.

To counter these developing trends, valve manufacturers and distributors need to find ways to increase their influence with important accounts in order to protect the share of their customers’ valve and controls spend that they receive. Valve suppliers should also harness this opportunity to grow their business with these key accounts at a faster pace compared to standard market growth rates. We propose that valve makers and distributors consider the implementation of a strategic account management program as the primary way to address these issues and take advantage of the opportunities listed above.

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What is strategic account management? It is an enterprise-wide initiative to develop strategic relationships with a limited number of customers in order to achieve long-term, sustained, significant and measurable business value for both the strategic account and your company.

Why a strategic account management program? Because it delivers the following results:

It increases the intimacy in the relationship between the strategic account and your firm.
It mitigates the risk of losing the account.
It attains growth rates significantly greater than the average growth captured with standard accounts.
It provides a single contact as customers centralize decision making.
It leverages the strategic account leadership position in their industry to capture business currently going to competitors.

In order for the program to be successful, it must meet the following criteria for success:

The program must be an enterprise-wide initiative involving all business functions.

The program must comprise a limited number of customers to ensure effective resource allocation.

The program must deliver measurable value to both the strategic account and the valve manufacturer/supplier to be sustainable.

How do we start building the program? First, we need to select the accounts that are to be included in the program. We propose that the company start with the creation of a scorecard or selection matrix that encompasses the selection criteria to be used along with a selection scoring weight for each criterion. Representatives from different areas of the business within the organization score the candidates and a selection committee with representatives from different business functions (sales, operations, legal, finance, engineering, etc.) select the accounts to be included in the program. Selection criteria could include current sales volume, potential for growth and the account’s willingness to partner with the company as examples.

Example of account selection matrix. Credit: S&H Strategic Sales Consulting LLC

Once the accounts are selected, the company needs to assign the resources to be dedicated to the account. These would include strategic account managers, program managers if needed, site team leaders supporting local facilities, account-based marketers, manufacturing/operations, information technology, engineering/product management, customer service and finance resources, to name a few. The team would normally be virtual and led by the strategic account manager.

Now that the accounts have been selected and the account management team put in place, the growth plan can be created. The plan must start with an understating of the current situation with the account. We call this process the situational analysis. The situational analysis should include the following:

Analysis of the strategic account business
Analysis of the competition’s position with the strategic account
Analysis of the valve maker/supplier’s position with the strategic account

The situational analysis must uncover the customer’s mission, vision, financial health, current concerns and plans for growth/expansion. This analysis should reveal the key account’s organization including the key decision makers and influencers that impact valve and controls procurement decisions. The primary objective of this analysis is to match the opportunities with the products and services we may offer to enable the customer to successfully meet their goals.

By analyzing the competitive landscape surrounding the target account the company can discern how well-positioned it is with respect to their competitors by product group. We suggest the company create an analysis matrix in order to assess the competitive field in detail.

The company should also create a competitive matrix for each product and/or service group offered to the target account.

The analysis of the company’s position with the target account is the third and last step of the situational analysis. This process requires an objective assessment of the relationship with the strategic account including but not limited to the following:

Revenue
Gross margin
Operating income
Revenue to sales expense ratio
Revenue compounded annual growth rate (CAGR) over the four-year period
Current relationship status

However, the ultimate measure of a company’s position with an account is what we define as “share of wallet.” This metric is attained by calculating the ratio between the company’s annual revenue for each product or service group supplied and the customer’s total annual spend for each product and/or service group.

Santucci and Hughes leverage their combined five decades of experience in industrial sales in this recently published book. Credit: S&H Strategic Sales Consulting LLC

Once the situational analysis is complete, the company can now easily identify what defensive and offensive initiatives need to be put in place to mitigate any loss in business and, more importantly, identify the opportunities that can provide better than average revenue and profitability growth.

The company must also put in place a relationship-management plan. The relationship-management plan requires that all the key procurement decision makers, influencers and recommenders are identified, evaluated in terms of their function in the procurement process and rated regarding their attitude towards the company (i.e., advocate, supporter, neutral, blocker).

As the relationship becomes more intimate, the company may consider assigning an executive sponsor to the strategic account. There are several reasons to appoint a high-level company executive to a strategic account. The strategic account must feel that your company is becoming an integral part of its operation and thus, have a desire to deal in a more intimate manner with your firm. It is an opportunity to move to a planning-partner or trusted-adviser status. It opens the door for earlier knowledge of the strategic account’s strategies, initiatives, concerns and plans. It provides an enhanced overall customer experience to the strategic account. It allows for accelerated product portfolio expansion with the customer. In short, it provides an opportunity to carve out a larger share of wallet through collaboration.

All plans need to be monitored and reviewed periodically to ensure that the objectives are being met. Furthermore, as events occur, the account plan may need to be modified and/or updated. The reviews must be performed internally with the account team and company leadership and externally with the strategic account. External performance reviews are also opportunities to drive a positive evolution of the relationship. The following are some of the areas to consider during the performance review.

Identify and mitigate any issues the customer may have with the company’s products and services
Identify customer’s unmet needs
Address issues keeping the strategic account leadership team awake at night
Find co-creation opportunities

In conclusion, a well-run strategic account program can be the vehicle for valve makers and distributors to navigate through these disruptive times, find ways to keep abreast of customers’ most important needs, strategies, direction and, in short, provide significant benefits to both your company and your strategic accounts.

ABOUT THE AUTHORS

Richard Santucci, co-founder of S&H Strategic Sales Consulting LLC, was formerly a global key account director for units at Emerson Automation Solutions and Pentair PLC. He also was vice president of Latin America for a unit of Tyco Flow Control, where he doubled the business in three years while leading general management, sales, strategic planning and marketing functions. He also held numerous roles at Teledyne Analytical Instruments. He holds a bachelor of science degree in Chemistry from California State University, Los Angeles.

David Hughes, co-founder of S&H Strategic Sales Consulting LLC, was formerly the director of Global Strategic Accounts for Emerson Electric’s Final Control Business Segment. His involvement in strategic account management began when he was asked to initiate and develop the strategic account program, along with Richard Santucci, for Tyco Valves and Control’s Oil and Gas business in 2010. Prior to that, Hughes led Tyco Valves and Controls’ U.S. sales and distribution business — a business he grew 60% in three years. He also managed sales for Valquip Corporation. He served on the VMA board as chairman from2018-2019. He graduated from the University of Michigan with a bachelor’s degree in Business Administration.