Beware of "Strategic" Accounts!

A strategic account is a good thing, right? Wrong. A strategic account can be a freakin' disaster unless you're a strategic vendor.  Let me explain.

Contrary to popular belief, a strategic account is not a customer that generates a lot of revenue and profits. That's just an "account."  An account is strategic if, and o...nly if, your overall go-to-market strategy will fail if you lose that account.  That's what makes it "strategic" rather than just "tactical". 

In general, there are two types of strategic accounts:

1. Major reference accounts.  The mere fact that you have the account lends your firm credibility it needs to make other sales.  Example: a small software vendor lands Exxon as a client – and splatters that win all over its marketing materials.  
2. Market entry accounts. The account gives you the opportunity to learn the ropes and make connections in a new market that's essential to your long-term growth.  Example: a test equipment manufacturer lands a small aerospace account that could potentially open the door to lucrative defense contracts.

Here's the rule of thumb: if you're willing to lose money to keep the account happy, they're strategic. And that's the problem.  If the account figures out that they're strategic, they'll realize they can tie you down and demand basically anything, including free products and free support. And you'll have to submit, because you're basically out of business if you don't.

Whenever the subject of strategic accounts comes up, I'm reminded of the time I was part of a team negotiating a "strategic" agreement with Microsoft. I asked my manager what position our executives would be taking at an upcoming high-level meeting. My boss, a man of few words but much wisdom, said: "Well, since it's Microsoft, the position we will be taking is bent over a barrel with our pants around our ankles."  True story.

Anyway, Sam Reese, CEO of the giant sales training firm Miller Heiman, says that there's only one safe way to have a strategic account, and that's to become a strategic vendor to that account. In other words, you’ve got to set things up so that you're as important to the account as the account is to you.  That way, if the relationship goes sour, you're not the only one who gets, uh..., spanked.

Next post, I'll explain how to become a strategic vendor.