4.2.1 Selection of KA plus strategy map

The selection of key customers has a crucial effect on the success of the KA concept. These key customers must be those who will make a substantial contribution to growth in sales as well as incremental profit. The one picked out for special treatment should therefore be those who will provide a superior yield in the future.

As a consequence, the task of categorising potential KA needs to be carried out methodically and thoroughly. If a company fails to choose appropriately, the portfolio is likely to consist of a mixed bag of big names, old associates, and difficult/ over-demanding customers. Such a portfolio will never take the business to level a company expects to get out of a KA programme. (McDonald/ Woodburn)

With regard to a field-tested model for this crucial task the customer equity approach of Kappa packaging group appears to be an appropriate method for MTPRO
(Zupancic/ Belz/ Bussmann).

The Kappa approach is based on a scoring portfolio method. It is applied for existing key customers as well as for target key accounts. It consists of three steps:

1. Scoring of customer attractiveness
2. Scoring of competitive position
3. Visualisation of results in portfolio

These three steps are outlined as follows:

1. Scoring of customer attractiveness

The potential key accounts can be rated in terms of attractiveness according to a set of criteria. Rating and scoring key customers in this way enables a valid comparison of customers who may be quite different. The numerical score eventually reflects that differences. Kappa packaging applies 22 criteria. As for the KAM concept of MTPRO five criteria is considered to be the right number.

Mc Donald/ Woodburn illustrate a very practical method of choosing selection criteria. They propose a balanced spread of criteria which will reflect the following three categories;

Customer outcome-based criteria;

They are “hard” or quantitative factors, which can be clearly defined and measured. These factors reflect the customer, independent of the supplier’s company such as growth in customer’s market, customer size and purchase volume for the category they put a supplier’s company into.

Customer needs-based criteria;

They suggest the probability that your company in particular will gain the business. These criteria are qualitative but should be rather specific and still measurable. The customer needs should be in line with the supplier’s strategy. That means, for instance, customer needs in terms of product innovations, dedicated service offering, global presence et cetera.

Customer attribute-based criteria;

They represent what the relationship might be like and are therefore indicators of whether the business relationship will turn out successful and profitable. Such criteria are softer than those of the other two categories, but can still be assessed. Examples are the willingness to pay for value, the commitment to invest in relationship et cetera.

The wide spread of hard quantitative to soft qualitative criteria is most suitable for MTPRO. To apply all three categories avoids the danger of only attempting to select key accounts with big potential but, for example, no interest in a strategic partnership.

The overall score per customer is calculated by Excel in the framework of an additive scoring model.

2. Scoring of competitive position

The potential key accounts are rated in terms of relative business strength MTPRO has with the potential key accounts. It is MTPRO strength relative to the best competitor. Kappa packaging applies 19 criteria to rate the competitive position. The overall score per customer is calculated in the same way like with the scoring of the customer attractiveness.

3. Visualisation of Portfolio/ Portfolio Strategy

The scores of customer attractiveness and competitive position per customer are automatically carried over to a portfolio diagram. It is divided into four quadrants. Figure 11 below visualises the meaning of the quadrants.

Portfolio diagram of prospective key accounts (Source: On the basis of Zupancic Dirk / Belz Christian / Bussmann Wolfgang F.; Source: Kappa packaging)" class="wp-image-9085 size-full" height="314" src="https://sgbs.ch/wp-content/uploads/Figure-11-Portfolio-diagram-of-prospective-key-accounts.png" width="507"> Figure 11: Portfolio diagram of prospective key accounts (Source: On the basis of Zupancic Dirk / Belz Christian / Bussmann Wolfgang F.; Source: Kappa packaging)

As for MTPRO KAM concept the portfolio diagram serves as the assessment tool for the final selection of the 15 key accounts, illustrated in chapter 5.1.3, figure 14.