How Big Should Strategic Accounts Be?

On the face of it, this seems an absurd question—strategic accounts are almost always the largest accounts you have. But maybe your big clients are so large that their demands are squeezing your margins badly? I think about markets like commercial real estate, where huge customers bring in the big revenue but create such headaches that in some cases they are less profitable than middle-sized firms.

Offering poison pills to your competitors

I know one firm that was managing three large hospitals. The hospitals generated the supplier’s largest revenue but were just breakeven profitable. The management firm spent four years soliciting and gaining smaller accounts that offered higher profitability and fewer headaches. Then when the revenue of the three large hospitals was covered by higher-margin customers, the firm simply did not bid on the hospitals’ management contracts. The firm’s competitors leaped in, seeing the hospital business as a gift from God. They bid low and ended up with what can only be called “poison pills.” In one strategic thrust, the first management firm had significantly raised its profitable revenue while significantly dropping its competitors’ profitability. 

Where’s your strategy in your strategic accounts?

Let’s go back for a second to the phrase “strategic accounts.” In my experience, many strategic account programs select accounts by revenue size; they do not select with an eye to their marketing/sales strategy. But those who do follow their strategy often define strategic accounts not as the huge customers but perhaps as customers with huge growth/profit potential. Or customers in a new market that will soon require offerings such as yours.

Do your competitors deserve some accounts you are currently serving?

Are your accounts very big or are they very big and profitable? Are you currently serving some accounts that your competitors really deserve to have? JSperry