Editor's Note: The decline in offline foot traffic has become an indisputable fact. However, this does not mean that offline channels are no longer important, or that attention and investment should be reduced. Compared to embracing the endless stream of new retail formats, holding the baseline of offline channels is more critical in the current volatile market environment. How to hold it? Only through meticulous cultivation and professional management to increase volume and efficiency.
To this end, New Distribution, in collaboration with Mr. Cao Yang, former General Manager of Coca-Cola China's Key Account Management Group, launches the "Key Account (KA) Management Practice" series, hoping to provide frontline channel managers with a complete methodology for operating offline key accounts in a "chaotic market." This series consists of about 20 issues in total, and this is the first issue, focusing on cognition, as follows.
KA is a Hypermarket
It is a Product of the Evolution of the FMCG Industry
KA is a hypermarket; many friends firmly believe this. Both KA and hypermarkets are imported concepts. Let's compare them directly in English:
KA is the abbreviation for Key Account, meaning important customer.
What is the English for hypermarket? Hypermarket. Supermarket is supermarket.
Now, do you see any problem with the logic that KA equals hypermarket?
There must be a reason for the saying that KA is a hypermarket.
1. From the Perspective of Retail Formats In the 1990s, retail formats completely different from traditional food stores appeared in China. Hypermarkets, supermarkets, and convenience stores were imported and entered China successively from the 1990s.
- In December 1995, Carrefour opened its first store in Beijing, the Chuangyijia store.
- Japan's 7-Eleven opened its first store in Guangzhou on July 11, 1996.
- In 1996, Walmart opened its first store in Shenzhen.
Carrefour and Walmart are classified as hypermarkets, while 7-Eleven is a convenience store. Convenience stores truly took off in 2015; at that time, the hottest retail format in China was the hypermarket.
This shows that the business scale of hypermarkets and convenience stores varies in different periods. Many professional brand owners consider Walmart and Carrefour as key accounts (KA), and 7-Eleven is also a key account, but the former belongs to the hypermarket channel, while the latter belongs to the convenience store channel.
2. From the Perspective of Brand Owners On the other hand, the concept of key accounts was introduced from abroad, mainly carried by multinational FMCG companies such as Coca-Cola, Procter & Gamble, and Unilever. The key account lists of these companies include hypermarkets, supermarkets, and convenience stores.
From 1995 to 2005, various foreign and local hypermarkets opened stores one after another, and their business was booming. They accounted for a high proportion of sales in the key account lists of major companies, sometimes as high as 90%.
Because in that era, hypermarket sales accounted for a high proportion of key accounts, people felt that hypermarkets were KA, and KA was hypermarkets. Since then, it has become a convention.
Since 2015, convenience stores have flourished, and 7-Eleven has also become a key account for brand owners.
In short, the rise and fall of channels vary in different periods: in the decade from 2000 to 2010, it was appropriate to say that KA was hypermarkets because the main performance was contributed by hypermarket customers. From 2011 to 2021, another decade passed, hypermarket business declined, and the concept that KA equals hypermarket is no longer appropriate.
This naming is a product of the continuous evolution of the FMCG industry.
****KA Equals Hypermarket Reflects Deep-Seated Problems KA and hypermarket are just names; is it necessary to be nitpicky?
Can't I just call hypermarkets KA?
On the surface, this is a naming issue, but in fact, it is not! At the company level, it could be a channel marketing strategy or a problem with key account management.
1. Confusion Between Channel and Key Account Concepts Different concepts can cause communication problems. When I discuss business with different brand owners and retailers, I first need to confirm whether KA refers to hypermarkets or key accounts. If the other party says "KA" but thinks "hypermarket," and I hear KA but think key accounts, it will cause ambiguity in the discussion.
Simply put, a hypermarket is a type of channel, composed of hundreds of chain or independent hypermarkets. Similarly, due to business needs, we divide into many channels, such as hypermarkets, supermarkets, convenience stores, catering, etc.
Key accounts are a collection of "few" important customers from multiple channels. This is the essential difference, and I will elaborate on it later.
2. Reflecting Problems in Management and Investment Strategy In a company, if the sales department has business in more than three channels, and hypermarkets are called KA, unless the company only operates in the hypermarket channel, how are key accounts in other channels managed?
If hypermarkets disappear one day, what would you call your company's key accounts?
As long as the company exists, there are customers, and there will always be key accounts (KA)!
From the sales department's perspective, channels are directly related to all sales teams, while key accounts are managed by one team within the sales department.
Professional brand owners will systematically plan and classify channels, and on this basis, formulate pricing strategies, brand and packaging strategies for different channels. From an investment strategy perspective, market investment and pricing policies are based on channel planning and classification.
****Channels Come First, Then Key Accounts 1. The Concept of Channels The famous American marketing scholar Philip Kotler believed: "A marketing channel is the set of all enterprises or individuals that acquire ownership of a good or service or help transfer ownership as the good or service moves from the producer to the consumer. Simply put, a marketing channel is the specific channel or path through which goods and services move from producer to consumer."
This explanation is a bit profound. In plain language...
Consumers, from the moment they open their eyes in the morning to when they close their eyes at night, consume in different scenarios: they eat when hungry, drink when thirsty; breakfast, lunch, dinner; shopping for the family, for loved ones, for themselves; sometimes planned purchases, sometimes impulse purchases.
Consumers will definitely consume in a consumption place: restaurants, roadside, shopping malls, highways, airports, hypermarkets, supermarkets, convenience stores, gas stations...
Based on different consumer behaviors, we define different consumption places. The same type of sales points forms a channel, and each type of similar sales points belongs to a channel.
Let's take hypermarkets and convenience stores as examples.
Hypermarkets: Consumers want to buy goods to take home for use, hoping to buy a lot at once, enough for several days, and at a reasonable price. Thus, hypermarkets exist to meet consumers' one-stop shopping needs, taking home daily necessities for several days. The characteristics of products are large packaging and low prices.
We define sales points with an area of over 6,000 square meters, tens of thousands of SKUs, and at least 20 checkout counters. We call sales points with similar area, product count, and checkout counter count hypermarkets. The hypermarket channel consists of hundreds of chain or independent hypermarkets, with large or family packaging and relatively low front-end gross margins.
Convenience Stores: Another type of sales point mainly solves consumers' temporary food and drink needs, mainly composed of fast food, beverages, snacks, and convenience foods, with a small amount of daily necessities.
Most packaging is single-serving small packages, beverages generally do not exceed 600ml, the business area is about 100 square meters, with 1-2 checkout counters. We call these similar sales points convenience stores. The convenience store channel also consists of hundreds of chain or independent convenience stores, with mainly individual small packages and higher front-end gross margins.
2. The Rise and Fall of Channels Reflect Market Changes and Trends Channel changes closely follow market changes. As mentioned earlier, from 2000 to 2010, offline channels flourished, and hypermarkets were at their peak. But after 2010, small formats represented by convenience stores rose, and online channels developed rapidly.
With channel changes, brand owners will correspondingly adjust their marketing strategies, aiming to achieve the best growth and maximum profit in channel marketing.
3. Channels Are the Link Between Brand Owners and Consumers, and the Path to Revenue and Profit Why must we classify channels?
For professional marketing operations!
Because a brand owner's market budget is limited. Where to invest and how much to invest first requires channel classification, which is a tool for resource allocation. By analyzing consumer behavior, we find opportunities in channels and formulate plans to increase channel revenue and profit.
The essence of channel marketing is: You need to know which brands of your company's products are most suitable for which channels; what packaging and price to use for each channel; how many sales points have your products; what is the sales volume per sales point; how much profit does each additional sales point bring? How much profit does each additional SKU per sales point bring? Ultimately, the company achieves revenue and profit growth.
****What Are Key Accounts? Key Accounts Are the Most Important Customers Selected from Each Channel
Above we discussed channels because key accounts are generated on the basis of channels.
There are many types of channels. Taking the food and beverage category as an example, there are hypermarkets, supermarkets, convenience stores, catering, aviation, theme parks, etc. You select the most important customers from each channel, and they become key accounts.
Key accounts are customers with one or more sales points that require special attention due to the company's strategic development or sales reasons. For example, in food and beverage (the following are random examples for reference only):
- Key accounts in the hypermarket channel include Walmart, China Resources Vanguard, RT-Mart, Carrefour, Wumart, etc.
- Key accounts in the convenience store channel include 7-Eleven, Lawson, FamilyMart, etc.
- Key accounts in the theme park channel include Disney, Universal Studios, Happy Valley, Chimelong, etc.
- Key accounts in the chain restaurant channel include McDonald's, KFC, Haidilao, etc.
1. What is the significance of key accounts to brand owners?
- Strategic significance is significant: Key accounts will maneuver among suppliers to obtain maximum benefits, and also provide a more fair competition platform for weaker brands. They are a battleground for all.
- If brand owners do not establish effective partnerships with customers, they will lose customers, sales, market share, and profits in fierce competition.
- Through key accounts, brand owners communicate directly with consumers, gain business growth opportunities, and continuously launch new brands and packaging with customer support.
- In the process of cooperation with customers, establish and improve the company's comprehensive key account management capabilities. Only a strong customer management system enables brand owners to have a sustained competitive advantage, and also creates barriers that competitors find difficult to cross.
2. Key Account Management is a Sales Method
- It is conducive to establishing a cross-departmental, customer-oriented corporate culture, which is more conducive to internal coordination and achieving Joint Business Plan (JBP) goals.
- Professional methods can increase customer value, thereby increasing customer loyalty, gaining more customer information or opportunities to approach senior figures, and having more choices in business opportunities.
- The connection between the two companies, rather than the personal relationship between the buyer and the account manager, is conducive to stable cooperation. Even if someone leaves, it will not cause major trouble for the company.
3. Key Account Management is More of an Investment Management
- Whether it is strategic cooperation or a joint business plan, investment in key accounts is a professional method with high investment, good returns, and shared risks. We often find that investing in expenses, although there is sales volume, does not bring profit. I will introduce these problems and solutions in the series of articles.
- In addition to market expense investment, cultivating talent for the company is also important. Account managers need comprehensive quality, strong learning ability, strong business ability, and strong pressure resistance. Some professional companies cultivate professional KA talents as a reserve for future management.
In short, professional key account management methods enable the company to obtain good investment returns and also obtain scarce key account talents.
Final Words:
This is the first part of the cognition chapter. To learn key account management, it is important to thoroughly understand the concepts, as they are the foundation for learning and mastering methods. The core content of this chapter includes the following two points:
1. Channel classification is determined based on consumer behavior. Various types of consumption places appear according to consumption behavior, and channel classification is carried out accordingly. Finally, key account lists are determined from different channels.
2. Detailed explanation of the concept of key accounts
Including definitions and misunderstandings, which we have already introduced in detail earlier.
Regarding the characteristics of KA, you need to remember that key accounts generally have distinct characteristics such as chain nature, wide coverage, strong professionalism, excellent management capabilities, and high requirements for brand owners.
These characteristics indicate that key accounts are not easy for brand owners to manage and serve.
In the comment section of the previous interview, I saw friends complaining about various customer fees, long settlement cycles, increasing bad debts, high communication costs among all parties, channel expense control, unreasonable input-output ratios, and other issues.
In the more than 30 years of development of the FMCG industry, these problems have always existed, and they have accompanied the continuous development and maturity of brand owners and retailers. Key account management is to face these difficulties and propose solutions.
Since there are many variables on both sides, we cannot guarantee that these methods are panaceas, but the difference between using and not using professional methods will be significant in the final business results!
In the following series of articles, I will systematically introduce key account management methods.
In short, professional customers require brand owners to have professional talents and professional methods to manage and serve them professionally.
Are you "watching" me?