How to be a Strategic Vendor

In my previous post, I explained that it's dangerous to have a strategic account without being a strategic vendor.  According to Sam Reese, CEO of the giant sales training firm Miller Heiman, there are three ways to become a strategic vendor:

1. Control a de-facto monopoly. ...Sell the customer a product that no other company can provide but which the customer absolutely needs to be successful.  Example: Microsoft is strategic to all PC vendors because PC users the PCs are useless without them.
2. Command a high cost of replacement. Sell the customer a product that would cost them a big wad of dough if they tried to go elsewhere. Example: IBM is strategic to thousands of firms because replacing mainframes with low-cost servers would be a logistical nightmare.
   
3. Offer a best-in-class product.  Sell the customer a product that’s significantly superior to the competition’s, making a change-over into a highly unattractive option. Aeron ergonomic chairs are strategic products to firms that use office furniture as a management status symbol.

If none of the above is true (or potentially true) about your relationship with a strategic account, your firm is at serious risk. The most you can hope is that you’re flying so far beneath the account’s radar that they don’t bother to take advantage.  

With all this in mind, you should be asking yourself five questions before entering into a strategic account relationship:

1. Do we really want this account?  Define the real benefits will your firm get from having an ongoing, potentially unprofitable relationship with this account.  If the advantage isn't clear, bail.
2. What could we build/supply to make us their strategic vendor? Define what you could do, and what it would cost, your firm to build or supply something that this customer couldn't do without once they've got it.
3. Is everyone on board with this?  Make sure that engineering and customer support are both willing to fulfill “special requests” for products and services that would make you into a strategic vendor for this account.
4. How much are we willing to lose?  Define exactly how far you’re willing to go to keep this customer happy.  And when you hit that limit, hit the road.
5. What do we do if we lose the account? Define an action plan in case the account demands more than you’re prepared to offer.  Never let an account become too strategic.

Once you've answered these questions to everyone's satisfaction, you can go ahead with the "strategic" relationship. 

A word of warning: if you've got a non-strategic account that's unprofitable, either figure out how to make it profitable or dump the account.  Don't fool yourself into throwing good sales cost after bad by labeling them "strategic."