KAM Strategy: Analyzing Your Key Account Portfolio

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Strategies To Strengthen Your Key Account Relationships

3 Levels Of Supplier Relationships

The following diagram shows the 3 categories of customer – supplier relationship on a graph.

The 3 categories of buyer-seller relationships are shown along two axes:

On the X Axis is the ‘Nature of the Relationship’ ranging from a mere transactional relationship on the left hand side to a true partnership on the right
On the Y Axis is the ‘Basis of competition’ with competing on price (or more to the point lowest price) on the bottom of the axis and competing on the results that the supplier has helped the customer to achieve shown on the top.

The 3 categories of customer-supplier relationship shown in the graph are as follows:

1. ‘Standard supplier’ is shown at the left hand bottom of the graph where the relationship is merely transactional – that is orders are placed on an ad-hoc basis by the buyer and then filled by the supplier.

2. ‘Preferred supplier’ is shown in the middle of the graph where the relationship involves longer term supply contracts and the supplier is competing on the basis of a price – service value combination.

3. ‘Strategic Supplier’ is shown in the top right of the graph where the relationship is a partnership and where the focus is on ‘results’. That is the supplier’s impact on the performance of the customer’s organization (or part thereof).

The prominent red arrow on the graph shows aspiration to be the preferred to strategic choice. The goal to strengthen customer relationships (y axis) and to reduce price sensitivity (x axis).

Each of the 3 supplier relationships is explained in more detailed on the next page.