... for the supplier for the first five years. There are overheads in having multiple sales teams in different geographies all trying to coordinate their approach to a single company.
And even if the supplier can get its collective act together, stop its sales guys moaning about commission splits, and run interference on the internal subterfuge, the customer then decides that it wants the best of both worlds – a global supply contract -- and then special deals locally.
Add the “general incompetence buffer” found inside conglomerates – for example international subsidiaries that were acquired rather than grown having completely different corporate cultures -- and it’s easier to lose money on GAM than it is to grow the profit base.
The worst customer verticals for GAM have been telecoms.
Telco subsidiaries actively compete with each other to buy completely different hardware and architect their networks in a unique way. The global procurement teams do a great deal with one supplier, assuring everyone that large orders will flow, and then a local sub will find a great reason to buy from a completely different company.
After telecoms, banks, pharma and oil companies jostle for the next highest spot on the global account management pain list.
By contrast, consider Dell as a global customer of Microsoft. We can imagine that one contract is signed. One “gold master CD” of software is shipped. And every PC that rolls off a Dell production line gets a copy of the software. Once a quarter a report is spat out from a central IS system that tells everyone how many copies were shipped and a single invoice raised.
Likewise, consider Ford Motors as a global client of advertising firm WPP. A single “Global Team Blue” blended sales, purchasing and creative organisation looks after Ford’s $4bn global advertising spend. Given the nature of Ford’s global business and the importance of advertising to delivering car sales, this is an obviously good use of GAM for both parties. (Of course, having a GAM process in place where the barrier to entry is low means that a competitor can easily take the whole business in one hit - as Omnicom did to WPP in early 2019.)
It’s much more of a challenge for, say, a shipping company to purchase consistently priced bunker fuel to keep its fleet going. The product is physical, it’s produced in a variety of locations and at different price points based upon the quality, the amount of refining required and the storage options.
Delivering people on a global supply deal is probably the most difficult. Finding staff for Aberdeen’s oil business is easier than finding them for Siberia or Khazakstan. Personnel costs vary greatly and it’s also easy to lose staff to the customer and to customer competitors.
So the key challenge for global account management is to ensure that the nature of the supplier offeringis the driver, not the request from the client to have global supplier contracts. If the margins are high, then any short-term pain can be swallowed while the supplier spins up to speed. Global consistency is critical, even if the cost to deliver product or service in different locations vary greatly. And free movement of staff and product needs to be put in place, despite the vagaries of governments and borders.
Going willy-nilly into a GAM program is fraught with danger. HP started a GAM program with their top 250 customers by spend -- and one year later dropped 2/3rds of these from the program. Just being a high spending customer is not enough to deliver benefits from a GAM methodology.
So what makes a good global account?
If they’re more than 20% of your global company’s turnover, they are a commercial risk as well an opportunity, and should be treated as royalty. If that means GAM, then so be it.
If a multinational customer is more than 25% of company profits, then a program should be looked at to see if profits can be increased via GAM with similar companies.
And if competitors are offering GAM, then a deep soul search needs to happen quickly, as GAM should always help the supplier that offers it vs any local-only suppliers.
If the customer has large franchises in multiple countries, then it should at least make the long list.
Importantly, only if the customer has the ability to make use of a GAM relationship should it be offered it. The client needs processes, structures, IS systems and organisations that formally sign up to GAM – and that includes centralised authority and budgets. If each country has its own formal P&L, then that’s a red flag that needs investigation.
More important is customer organisational culture. If they know how to act globally, and are well behaved to each other, then a supplier’s GAM program will be gracefully integrated. If they play nasty at country level, then no matter what the supplier does, the GAM program will be a bag of worms.
Most important? Organisational integration. Only when the supplier becomes embedded into the customer, with shared email addresses, shared offices, shared R&D programs, shared objectives based upon customer top level business metrics and even a shared non-exec or two, does a GAM program operate at the highest possible level.
If you agree that a “shared everything model” is the highest form of GAM, how does your current global account management plan stack up? How do you plan to take it to the next level?
Methodical ramblings after twenty-five years in Sales, Marketing and SalesOps.