WHAT IS KEY ACCOUNT MANAGEMENT?

Why Do Key Account Management?

We are familiar with Sales Funnel. Marketing generates thousands of leads & passes on the qualified leads to sales who in turn win deals. So far so good. But for B2B companies who offer multiple solutions with long term engagements with their customers, winning the first deal is only the beginning. You then farm and mine those key accounts for more revenues. Basically, you LAND and then EXPAND.

Traditional sales funnel can be extended by adding an inverted funnel at its bottom into a shape ‘hourglass’. Images are a powerful means to drive home a point – in this case Key Account Management as critical component of revenue generation for b2b companies.

Refer to the diagram below:

For most B2B companies, the bottom half of the ‘hour glass’ generate 80%+ of the revenue in a given year. The most commonly used nomenclature is ‘Hunting’ & ‘Farming’. Hunting is acquiring new customers while Farming is growing business from existing customers.

Basically a hunter sells, while farmer helps customer buy.

The ‘hour glass’ also helps in organizing various functions in a B2B company. As you can see in the diagram it will be easy to define roles of marketing, inside sales, sales & key account management in the revenue life cycle.

Thus, role of technologies/tools for each function becomes clear. Tools for marketing automation, inside sales, lead qualification, sales process automation and finally Key Account Management.

Strategic Analysis of Key Accounts

Key Account Planning & Management require strategic thinking. At least once a year we need to look beyond dollar numbers, relationships and activities to think about our Key Accounts. A good deal of frameworks are mentioned in the book “Key Account Management-The definitive guide” by Malcom McDonald & Diana Woodburn.” A framework like KAM quadrant helps us in knowing the account attractiveness and our strength of relationship in that account.

• Strategic: Invest mindshare and ensure profitability
• Star: Invest time & money. Need not be profitable yet.
• Status: Maintain the status quo.
• Streamline: Manage for profitability.

Developing Key relationships

The way to a customer’s heart is through its business – not your business. As a minimum, the customer expects its key suppliers to understand:

• Its marketplace
• Its strategies
• What its customers want
• How it adds value in its business
• Where it makes its money.

Role of Key Account Managers

There are numerous ways in which the role of the key account manager can be expressed. Put very simply, the key account manager has two roles:

Implementation: This means deciding what should happen in an account and making sure it is delivered.

Implementation roles-

• Expert in the customer
• Value developer
• Point of accountability.

Facilitation: This involves developing the relationships that will enable the business strategy.

Facilitation roles-

• Boundary spanner
• Conduit
• Focal point of contact.

A key account manager helps ‘customers buy’ while a salesperson ‘sells’.

Key Account Management Best Practices

Key Account Management is the most effective, profitable management of your most important assets. It drives the profitability of B2B companies, and having a Key Account Strategy is the heart of any successful business in this sector.

Smart suppliers are keen to implement KAM., Sadly however, many KAM implementations fail and are abandoned.

One should keep the following best practices in mind in order to succeed with their KAM strategy

Focus on customers that matter most

To get started with the KAM program, you need to identify some Key Accounts, and you need to develop a criteria that differentiates them from the rest of the customer base.

Good advice here is to start small. It is easier to add customers to your KAM program than it is to ‘demote’ customers once you have told them they are key accounts.

As per an HBR report, Corporations like Xerox keep the number of true key accounts below 100, and they have far greater resources than most and have been practicing KAM for years.

Therefore, your organization must have a clear understanding of what a Key Account means to you, and follow the same categorization criteria throughout. Do not add certain customers to your Key Account program just because they have been customers a long while, or they are golfing buddies with the CEO.

Key Accounts need not necessarily be the customers who are paying you the most.They are usually the customers with maximum potential to buy new and additional products or service in the future. The customers who are most likely to be consistent and loyal, and so represent significant value in the long term.

Relationship is the key

Another important aspect of Key Account Management is focused on building loyalty and long-term relationship with the customers.

As more B2B Organizations want to portray themselves strategically unique to their customers, they must ensure to maintain and approach their relationship with Key Accounts slightly differently too.

Key Account Management is all about relationship building and most importantly trust building between organization and customer, KAM wishes to see buyer considering seller as partner, and not as a vendor.

Look for opportunity

You should always be looking to grow your sales numbers out of your existing Key Accounts.

It’s far more profitable to sell more products to existing customers than to invest time and effort into finding new customers.

To make the most of the potential to cross-sell existing Key Accounts, you need a strong strategy to bring best practices to your Key Account Managers and salespeople. Additional product should be about providing customers with something that will benefit them. You might be disappointed if you push unrelated products.

Use the relationships you have already established with your clients to ask questions and find out about the issues they are encountering and look for ways to resolve those by making improvements to your existing products or develop new ones.