Client Account Management

by Rus Slater

Client accounts

There was a time when pretty much the only place you would hear someone referred to as an ‘account manager’ was in the advertising industry. There, an ‘account manager’, or ‘account handler’ was responsible for managing all aspects of the relationship between the advertising agency and its specific client, including the market research, the creative side, strategy, space buying and production.

Over the past decade, the increase in outsourcing and the move to longer-term ‘partnering’ relationships has created a need for account management in most industries. Following the ‘80/20 rule’, most business-to-business organisations now find that large proportions of their income originate from a small number of long-term customers or clients. This presents huge benefits in terms of having a prior knowledge of the client’s requirements and simplifying ordering and billing processes. It is also a commonly-known fact that it is much less costly to continue to service existing customers than to seek out new ones.

At the same time, it presents some dangers, such as developing an unhealthy reliance upon one particular client. While it is easier and cheaper to keep an existing client, it is also unwise to put all your eggs in one basket – clients can be fickle and there are examples of large contracts being removed from a supplier for as little reason as a change of buying manager at the customer.

Many of these relationships are the result of a long and protracted tendering process, which is, by nature of the hurdles the supplier has to cross, expensive to adhere to.

Preferred Supplier List

Many suppliers are part of a PSL, or Preferred Supplier List. You may officially be a preferred supplier, but are you the chosen supplier? Being on the PSL doesn’t put cash in the bank... doing paid work does.

Example

A consultancy in the HR field spent several hundred man-hours responding to a tender request from a UK government department for the provision of outplacement services. They ‘won’ a place as one of two preferred suppliers on a 12-month contract.

There was much rejoicing.

After ten months, it was realised that they had actually billed the customer for a service for 124 units against a total expected contact of 3,500. They had missed the boat: their return on investment was £34,720 income against about £32,000 delivery cost (including the tendering process). They had hoped to bill in the region of £900,000.

Key point

Once you have ‘invested’ in getting through the tendering process, the only way to get the actual paying business is by managing your relationship with the client to get as much work as you can realistically fulfil, at the rate you agreed.

Similarly, many large organisations, especially in the public sector, set up ‘framework agreements’, so that their managers know the unit price of service and that a supplier has been ‘vetted’ before they commission work with their preferred supplier. Again, it can be very expensive to get a framework agreement set up, but there is no reward for having an agreement – you have to get the work from managers!

There are many examples of suppliers realising too late that they spent more getting on the PSL than they got back from the client.

Key accounts

Some organisations actively label certain clients as ‘key’. This is normally done on a simple financial criterion: for example, any client who contributes more than five per cent of the gross turnover of the company is a defined as a ‘Key Account’.

However many organisations don’t look into it this deeply and, if the cash flow is healthy, they simply enjoy life while it is good, and why not?