1980s through the mid-1990s constitute the vast majority
of this satisfied bunch – and it took them ten years of trial
and error, on average, to get to the point where their gains
(a bigger share of the customer’s business and a richer sales
mix) outweighed their pains (lower prices and a higher cost
Contrary to the prevailing view, however, global account
management can be good for suppliers. That’s the conclusion we’ve drawn from a study of 165 major suppliers
that one of us helped conduct, from our consulting work,
and from journal articles on individual companies’ experiences. Our findings: Within a few years of their introduction,
these programs can improve customer satisfaction by 20%
or more and raise both profits and revenues by 15% or more.
Mature programs – those at least five years old – can generate
increases twice as large or more. 2
Much of the pain associated with GAM arises from confusion about when and how suppliers should offer it to customers. Such confusion has caused companies either to offer
GAM to the wrong customers (yes, on occasion you can and
should say no) or to offer the wrong form of GAM to the
right customers. This article provides a framework that will
help suppliers to avoid these mistakes.
The Spread of Global Account Management
Global account management is the natural extension of national account management. Its initial adopters were primarily technology giants like Hewlett-Packard, IBM, and Xerox,
whose customers – especially large multinationals in the
automotive, financial services, and petrochemical industries –
were demanding that the IT products and services provided
to all of their locations be compatible and supported to the
same standard. GAM has since been adopted by medium-size
suppliers, too, and is now used in nearly every sector.
Not surprisingly, multinational customers have been and
continue to be the driving force behind the spread of GAM.
These companies recognize that when purchasing is centralized and far-flung units can no longer negotiate their own
deals, prices become much more transparent. In addition,
by consolidating orders a buyer can demand bigger volume
discounts and manage product specifications and service
more effectively. This often means a substantial loss in pricing power for suppliers – and that’s not the only negative.
All too often a customer’s national operations resist abiding
by a global contract that requires them to give all their business to a single supplier and, instead, try to continue to pick
their own suppliers and dictate their own terms. Even worse,
the new organization and processes required to serve global
accounts can easily cause costs to soar – especially if customers demand customization. We have found that the cost
of GAM per customer adds from $100,000 to more than
$1 million to what a supplier had been spending in individual countries for sales and support. Given that a supplier
may have scores or even hundreds of global accounts, the
total cost of GAM can be enormous.
Suppliers hope, of course, that these negatives will be outweighed by the promised positives: a bigger share of existing
business and, in many cases, strategic-partner status that will
lead to new, higher-value-added business. The problem is
that an account may take a long time to become lucrative,
if it ever does. For example, HP had 26 global accounts in
1993; over the next three years it expanded that number
to 250 and then slashed it to 95 in 1997, when it realized
that costs were exceeding returns. Today 200 of HP’s nearly
20,000 corporate clients have global account status and are
highly profitable, because HP has mastered the science of
selecting and structuring global accounts.
If companies understand how to answer three fundamental questions – whether GAM is appropriate at all, which
customers are suitable candidates, and what form or forms
GAM should take – they, too, can reach the Promised Land,
and sooner rather than later.
Should You Even Consider Adopting It?
You can determine if GAM is appropriate for your company
by using four criteria: whether your products or services
need global coordination and are profitable enough to justify it, whether your multinational customers want GAM,
whether your multinational customers are important to
your business, and whether you can gain competitive advantage from GAM.
Products and services. The nature of its own offerings – not
a customer’s desire for volume discounts or global contracts –
should be the first factor a supplier considers when contemplating GAM. Prime candidates are complex products and
services such as computers, process controls, and global fueling contracts, or value-added commodities such as specialty
chemicals, food ingredients, and corporate banking. Offerings must command a high margin, must be globally consistent or compatible, must meet complex specifications across
borders, or must be supplied to an integrated transnational
operation in a carefully coordinated fashion.
George S. Yip ( email@example.com) is a vice president and director of research and innovation at Capgemini, based in London,
and a professor at London Business School. Audrey J.M. Bink ( firstname.lastname@example.org) is the head of marketing communications at
Uxbridge College in London and previously was a manager at DMV International in the Netherlands. Yip and Bink are the authors of Managing
Global Customers: An Integrated Approach, to be published in September 2007 by Oxford University Press. Several British organizations – the
Leverhulme Trust, the Advanced Institute of Management Research, the Economic and Social Research Council, and the Engineering and
Physical Sciences Research Council – have supported their work.