---
title: "Selection and Tiered Management of Key Accounts (KA)"
description: "This article discusses the selection and tiered management of key accounts (KA) in the FMCG industry, emphasizing the importance of channel definition and resource allocation. It provides a practical guide through a case study, covering criteria for selecting KA clients and methods for classifying them by geography and cooperation level."
author: "曹扬"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-03-26"
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---

# Selection and Tiered Management of Key Accounts (KA)

> This article discusses the selection and tiered management of key accounts (KA) in the FMCG industry, emphasizing the importance of channel definition and resource allocation. It provides a practical guide through a case study, covering criteria for selecting KA clients and methods for classifying them by geography and cooperation level.

**Editor's Note:** The continuous 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 line on offline channels is more critical in the current volatile market environment. How to hold the line? 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 Channel Management for Coca-Cola China's Key Account Management Group, has launched the "Key Account (KA) Management Practice" series, hoping to provide frontline channel managers with a complete methodology for managing offline key accounts in a "chaotic market."** This series consists of about 20 issues in total, and this is the seventh issue, as follows.
Starting from this article, we enter the practical section. This article will give you an in-depth understanding of two aspects: **1. The significance behind customer selection and tiered management is the rational use of resources. 2. The methods of customer selection and tiered management are full of professional wisdom.**
### **Before Managing Customers, Select the Right People**
**Strategy for establishing a key account department and finding talent.** Before General Manager Liu established the key account department and selected customers, he needed to find a department manager. After careful thought and research, he decided to select and cultivate a KA department manager from within the company.
There were three main reasons:
  * He himself was recruited from outside, and external recruitment is costly for the company; too much external recruitment is not conducive to cultivating local talent.
  * After investigation and research, he found that there were potential candidates within the company who could be developed.
  * By cultivating local employees, the company saves money and develops a more loyal talent.
General Manager Liu reported this idea to the general manager. The general manager said: "This is a good idea, and I support it in principle. I suggest you start with a two-pronged approach, focusing on internal recruitment while also searching the talent market." General Manager Liu understood the implication of these words. With the general manager's support, he immediately began selecting people. It was a difficult but hopeful task. Finally, a channel manager named Shi Jun came into view.
General Manager Liu called Shi Jun for a talk.
General Manager Liu: "Our company is now starting a very important but risky project. We will manage some modern trade outlets, supermarkets, and convenience stores as key accounts. We will establish a key account department to manage these key accounts. Are you interested?"
Shi Jun: "I have a friend working in KA at a Fortune 500 company. I have a rough understanding of key accounts; it's very challenging, requiring managing many difficult customers. People in KA are very professional. That's all I know."
General Manager Liu: "I've reviewed your resume. You've done sales, brand, and channel work. A key account department manager needs a variety of skills, combining brand, channel, and sales. But you haven't done key account work, so you'll need to learn from scratch, which will be a bigger challenge for you."
Shi Jun: "Can you teach me? I'm willing to learn."
General Manager Liu: "I have confidence in you. You can choose the people for your department from the marketing and sales departments. If you agree, I'll report to the general manager soon, and the appointment will come down quickly."
Shi Jun: "General Manager Liu, how should I start my work now?"
General Manager Liu: "You need to start screening customers and classifying them. I'll give you 3 days to prepare a report for me."
### **First Define Channels, Then Key Accounts**
Shi Jun sorted through the customers in the company system, consulted his friend in KA, and searched online. Finally, he selected 100 customers as key accounts and excitedly reported to General Manager Liu.
General Manager Liu looked at the customer list and asked, "What are your criteria for screening customers?"
Shi Jun was taken aback. He then said, "I asked my friend about their company's key account list, basically selecting national chains like Walmart, China Resources, RT-Mart, Carrefour, Wumart, and then selecting our regional customers."
General Manager Liu smiled and said, "This approach to key accounts is relatively simple and common. But there are two problems. Have you considered them?"
  * **Are there any customers that should be key accounts but are missing from your list?**
  * **Are there any customers that don't qualify but are on the key account list?**
  * **What if a customer requests to join the company's key accounts?**
  * **How do you balance the interests of the sales team?**
Joining key accounts means more resource investment and stricter supervision. The ultimate goal is **to achieve a win-win situation for both the company and the customer by investing in true key accounts.** Shi Jun pondered General Manager Liu's words; some content he understood, some he didn't quite grasp.
General Manager Liu, seeing Shi Jun's expression, said, "Have you ever encountered sales representatives changing the channel nature of customers? When the company gives policies for hypermarkets, sales reps modify customer data that originally belonged to supermarkets to hypermarkets, just to get more resources!"
Shi Jun then understood: key account management must start with channels. The channel to which a customer belongs cannot be arbitrarily changed. It should start with channel sorting, ensuring that each customer's channel nature is correct. Shi Jun said, "I'll first sort out the company's customers according to channel standards. Previously, customer management was somewhat chaotic."
General Manager Liu continued, "**1. Why define channels first?** Each outlet is different, but they can be roughly divided by channel. From a channel marketing perspective, to achieve the company's goals, we need to adopt appropriate packaging, pricing, gross profit, and promotions in appropriate channels. Simply put, the company wants different channel customers to make money. If customers are misclassified, either the customer or the company will suffer!"
Finally, General Manager Liu said, "I'll give you some channel materials. Combine them with the company's actual situation to determine new channel standards and clean up customer data."
Shi Jun understood General Manager Liu's intention: he wanted Shi Jun to sort out channels before selecting customers. He had thought he had already selected customers and was eagerly awaiting praise, but instead he was given a mountain of tasks.
**2. Definition of Modern Trade Channels** Channels group similar types of customers. Modern trade mainly includes hypermarkets, supermarkets, and convenience stores.
**Hypermarket Channel:** Self-service shopping channel with shopping carts and baskets, area greater than 6,000 square meters, more than 20 checkout counters, POS system, tens of thousands of SKUs, including groceries, general merchandise, and fresh produce, including independent and chain hypermarkets.
**Supermarket Channel:** Self-service shopping channel with shopping carts and baskets, area around 800-2,000 square meters, 4-8 checkout counters, POS system, wide product range but more focused on food and groceries, including independent and chain supermarkets.
**Convenience Store Channel:** Self-service chain stores, some provide shopping baskets, business area not exceeding 500 square meters, with checkout counters, product variety relatively less than hypermarkets and supermarkets. Business hours exceed 16 hours.
**3. Value and Significance of Channel Division** Although Shi Jun had done channel work before, he didn't understand why channels were divided or its value and significance. He just "copied" good practices from other companies. Through this re-division, he found several differences from before.
  * Selecting the most important customers from each channel constitutes key accounts. Each channel is important to the company. If you rank all customers by overall sales, large chain hypermarkets would dominate, ignoring emerging channels like convenience stores. **This is the subtlety of channel management!**
  * Channel division is for convenient customer management and investment planning. Different periods have different pricing policies. Channel division facilitates precise resource allocation.
  * The focus of channels changes over time. Twenty years ago, the focus was on hypermarkets; now hypermarkets are declining, and investment in convenience stores is increasing.
  * Channel division must be strictly enforced and cannot be changed arbitrarily. Like household registration management by the police, it is a serious matter. Arbitrarily changing channels means falsification and defrauding company resources.
### **Selection and Tiered Management of Key Accounts**
**Now, the newly appointed key account department manager, Shi Jun, revised the company's channel standards according to General Manager Liu's requirements, and classified all customers into channels according to the new standards, laying the foundation for the next step of key account screening. Before screening key accounts, Shi Jun became smarter. He didn't rush to do it but scheduled a meeting with General Manager Liu to first hear his methods for customer screening and tiered management, and then continue after understanding. The following dialogue is General Manager Liu's professional exposition on customer selection and tiered management.**
**I. Screening of Key Accounts**
Shi Jun: "General Manager Liu, I now know that screening customers from modern trade requires selecting from hypermarket, supermarket, and convenience store channels. What conditions must be met to become a key account?"
General Manager Liu: "The most basic condition for screening key accounts is based on labor cost calculation, meaning a customer's sales volume can support the labor cost, i.e., the customer manager and sales representative must have sufficient sales contribution. I have determined a reasonable labor cost with the finance department. I initially estimate that 2 million yuan in sales revenue is needed."
**There are 4 conditions for screening key accounts:**
1. Must meet the minimum annual sales requirement.
2. Spans 2 or more provincial capitals or prefecture-level administrative regions.
3. Customer ranks in the top 10 in business within the provincial capital or prefecture-level administrative region.
4. Recognized international and national customers are automatically counted as KA.
Shi Jun: "Screening customers requires meeting minimum sales and ranking in various levels of business, so customers with chain conditions will be prioritized and eligible for the key account list."
General Manager Liu: "You're right. The screening conditions for key accounts are simple and clear, all hard conditions. In the face of interests, we need to uphold the principle of fairness and justice."
**II. Tiered Management of Key Accounts**
General Manager Liu continued: "Channel definition and customer screening are the foundation, preparing for classified management. First, customer classification mainly has the following methods."
By geography, customers can be divided into: national customers, regional customers, and local customers.
  * **National Customers:** Refers to stores covering most provinces, municipalities, and autonomous regions nationwide. Customers have headquarters and regional organizations, adopting a management model separating operations and procurement, such as Walmart, China Resources, RT-Mart, Carrefour, Yonghui, 7-11, Lawson, etc.
  * **Regional Customers:** Refers to customers covering more than two provinces but not most provinces, municipalities, and autonomous regions. Examples include Wumart, Bubugao, etc.
  * **Local Customers:** Refers to stores covering one or more prefecture-level administrative regions within a province.
Shi Jun: "Classifying by geography clearly shows the customer's coverage, and thus its business scale."
General Manager Liu: "Besides geographic classification, there is also **classification by cooperation relationship, mainly divided into transactional customers, collaborative customers, and strategic cooperative customers.** The lowest level of cooperation is **transactional customers**. The company's relationship with such customers is purely transactional, with no more professional cooperation. Most customers fall into this category."
Shi Jun: "Is it related to the customer's professionalism? The higher the customer's professionalism, the more demands, and thus more cooperation content."
General Manager Liu: "You're smart! The intermediate level of cooperation is **collaborative customers**. The company provides more professional support and assistance, mainly due to customer requirements. The company gives a lot and also gains a lot. The highest level of cooperation is **strategic cooperative customers**. The company and strategic cooperative customers set very high goals, both invest substantial resources, share common assessment indicators, adopt high-level meetings and multi-departmental counterpart cooperation, formulate joint business plans, and achieve common goals."
Shi Jun: "Strategic cooperative customers seem very advanced. Is there a way to judge who our strategic partners are?"
General Manager Liu: "Mainly through sales volume, market share, management capability, cooperation relationship, and development potential, using quantitative indicators for classification. This requires obtaining a lot of customer information. The key is data. From customer tiering, you can see the importance of data!"
Shi Jun: "From the two types of customer classification by geography and cooperation, they should be dynamic, right? For example, a national customer might become a regional customer due to poor performance or stagnant business development, while a local customer might grow into a regional customer and eventually become a famous national customer?"
General Manager Liu: "Correct. Cooperation relationships are also changing. Some customers can transform from transactional to strategic. Customer management is dynamic, and this is very important."
**III. What is the Significance of Tiered Management?**
Shi Jun: "General Manager Liu, why do we need tiered management? Isn't it too complicated?"
General Manager Liu: "Tiered management is a manifestation of refinement. Whether it's complicated or not depends on what you compare it to. If the team's job is just to sell goods without more planning and store execution, compared to such extensive management, it is somewhat complicated. But refined management is an inevitable trend in company development. The general manager's promotion of digital sales is a manifestation of refined management. This is the requirement of the times and the result of fierce competition."
Shi Jun: "I understand that the company's high-performance goals require refined management to achieve, so tiered management must be done and done well."
General Manager Liu: "Essentially, tiered management is to achieve higher goals and use resources more rationally. This is mainly reflected in the following aspects:"
  * **Equip corresponding sales representatives and merchandisers according to the number of stores.** For example, high-volume stores have fast product turnover, requiring more shelf space and ground promotion restocking, so merchandisers can be stationed there. For low-volume stores, daily visits or visits every three days can be arranged.
  * **Arrange the frequency of sales representative visits based on store sales volume.** High-volume stores are visited once or twice a week, while low-volume stores are visited once every two weeks or even once every four weeks.
Shi Jun: "Understood. Whether it's the company's sales representatives or the distributor's sales representatives, they are arranged this way. What are the differences in work content?"
General Manager Liu: "Besides staffing, tiered management also involves work content requirements. From transactional customers, strategic customers, to strategic cooperative customers, work content increases from low to high."
  * **Transactional Customers: Sign annual agreement, annual business plan, arrange 3 promotional activities per year.**
  * **Strategic Customers: Sign annual agreement, annual business plan, rolling three-month market plan.**
  * **Strategic Cooperative Customers: Sign annual agreement, strategic cooperation plan, rolling three-month market plan.**
Shi Jun: "Cooperation content increases from low to high, and work content becomes more and more. What if a strategic customer requests to sign a strategic cooperation plan?"
General Manager Liu: "From a fairness perspective, if a transactional customer can also achieve the highest sales targets and strictest assessment indicators, they can also engage in strategic cooperation. In reality, only a very few professional customers do joint business plans. Moreover, not every company can do strategic cooperation if they want to; it's related to capability, mainly whether your key account department has the professional skills and experience for strategic cooperation. From our company's perspective, the key account department has just been established and does not yet have the capability for strategic cooperation. We need to cultivate it step by step. The key is you, Shi Jun, you need to improve your professional capabilities quickly!"
### **In Conclusion:**
Shi Jun took notes carefully and after listening to General Manager Liu's introduction, he said: "General Manager Liu, thank you for taking the time to provide detailed guidance. Let me briefly summarize my understanding."
**1. This is a very serious job and must be fair and just**
  * Determine the channel nature and screening criteria of customers, which cannot be arbitrarily changed.
  * Standards are unified, treat everyone equally, and everything is based on performance.
  * All matters are under the company's supervision.
**2. Tiered management means more effective allocation of resources**
  * Based on the company's limited resources, allocate resources to customers with the greatest returns.
  * Customer tiers are dynamic, with capability and performance as the sole criteria.
**3. The more investment, the more work content, and the stricter management**
  * Every key account is a key investment; the more investment, the more requirements.
  * Investment is proportional to professionalism; the stronger the professionalism, the more investment received.
  * Always under company supervision, from budget formulation to goal achievement, in a cycle.
General Manager Liu: "You summarized well. Simple things often reflect professional subtlety. You now understand, but understanding is one thing, actual operation is another. You need more practice. The challenges of KA management are great; this is just the beginning!"
 _-END-_


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