Situation
Perhaps our vision of the ultimate Strategic Account Relationship is one with extensive cooperation in which the customer considers us a valued, trusted member of their most important strategic initiative teams. But as exciting as these kinds of complex, interdependent relationships are, we need to keep our feet on the ground, and define the relationship that is mutually profitable and appropriate. This chapter defines different levels of strategic relationships and presents a tools for determining where you are and where you can go in the strategic account relationship.

Solution: Strategic Relationships involve large amounts of revenue
In order to be strategic a relationship must either be large (lots of revenue) or have the potential for being large (more revenue—somewhere—in the future).

Even when large relationships don’t have the potential for getting much bigger, they can be strategic if there is danger that you may lose revenue through competition or eroding margins. You may decide to invest to protect revenue or margins.

Example:
10 criteria were used to select strategic accounts
Put an X next to the three criteria below that were rejected as screeners:
Hard-quantitative criteria
Contribution
Customer lifetime value
Size-Annual revenue over $1 million
Contribution to capacity
Potential for growth
Utilization of 25% of technology
Soft (qualitative) criteria
Potential to introduce new products
Potential to create business w other accounts
Vulnerability
Ability to use Sabert assets & capabilities
Oppy to learn from customer
Relationship criteria
Relationship improvement potential
Strength of relationship

If the relationship is small now, but could be big, you may decide to treat it as strategic and invest to grow it.

And even though a marquis customer will never be large or profitable, it may provide your firm with credibility (“We serve FedEX,” or “we were selected by P&G, “ etc.) You may decide to invest in these relationships so you can win smaller customers at full prices.

Serving customers like Wal Mart, may not generate high margins, but may provide you with large volume with which to cover fixed costs as well as with strategically important information.

And serving customers like Toyota that require dramatic cost reductions year over year may be a source of innovation in your internal processes that pay off in greater margins with smaller clients.

The common denominator is ROI: If you are going to invest in a strategic relationship, there needs to be a return—somewhere—to justify the investment.

In order to optimize you investment in a strategic relationship, you need to assess where that relationship is today and where it might be able to go in the future.

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