Marketing Strategy and Competitive Positioning pdf ebook

The case for strategic account investment
This brings us to a critical question – if strategic accounts may be less profitable for a sup-
plier and impose higher levels of risk on the supplier’s business, then how is it possible to 
make a case for increasing dependence on such accounts, and to invest in SAM systems to 
further reinforce the dependence of the company on low-profit, high-risk business? There 
may be no choice, certainly in the short term, other than to meet the requirements of 
dominant customers for special treatment, but to regard this element of the business as 
the highest investment priority for the longer term may be questionable. Indeed, the more 
rational course might be to find ways of ring-fencing such customers and diverting resources 
to develop other, more profitable, parts of the customer portfolio.
SAM strategy also carries the substantial opportunity cost that heavy management focus 
on key accounts reduces the attention given to other customers, who in reality offer higher 
margins and lower risk. Indeed, there is a significant danger that having invested in SAM 
with a customer, even as the account becomes progressively less profitable because of excess 
demands, inertia and reluctance to admit failure may easily cause the supplier to cling to 
the key account relationship regardless of disappearing margins.
There is a strong, and for some companies urgent, argument that investment priorities 
should be reconsidered in many customer relationships, with an emphasis on long-term 
profitability and balanced risk exposure, and less on the short-term characteristics of exist-
ing markets. The logic is that if the business model has failed, then the issue becomes one 
of searching for and developing a new business model, not persisting with the old model 
until commercial failure ensues. The goal is to invest in strength and enhanced future earn-
ings, not to invest in positions of weakness and to maintain the status quo, only to enjoy 
progressively reduced earnings.