What is Key Account Management?
what is Key Account Management

What is Key Account Management?

Key Account Management is making your company customer-centric and committed to successful customer outcomes. The most critical element here is the relationship. How well do you know the customer stakeholders? Do you understand their buying and decision-making dynamics? Can you identify the personal goals and motivations of various team members?

Key Account Management is the process of identifying, efficiently managing and growing a company’s strategically important clients. The main motive of this process is to build long lasting mutually important relationships which would help revenue growth. Key Account Management is built on the philosophy that a minority of your clients (about 20% of clients) provide majority of a company’s revenue and hence profit (about 80% of profit).

 

Why DO Key Account Management?

Key Account Management is prominent to a company’s growth. Not all of the clients devote equally to a company’s growth and hence treating them equally would not be the right strategy. Only by shifting your resources and focus towards your most important accounts, can you truly grow revenue and build long lasting business relationships. Your focus on these accounts gives way to upselling and cross-selling along with ensuring account retention. Not only this, an organization can achieve industry recognition and referral by efficient implementation of Key Account Management.

What is NOT Key Account Management?

The following are situations that call out KAM into question:

KAM Definition

Organizations with a revenue of $ 100 million with 500 employees are a good fit for Key Account Management. However, many a times, such ‘good fit’ organizations have a loosely held definition of KAM. Without an ‘explicit’ and ‘declared’ Key Account Management plan, that defines clearly what strategic accounts are, organizations are not doing KAM.

Dedicated Client Managers

Organizations recognize that a handful of customers account for almost all their revenues (at least 80%). To manage expectations of such customers, there is a general practice of appointing dedicated client managers. While good at customer interactions and transactions, clients managers fall short when it comes to KAM. Organizations amplify this mistake by transferring the strategic account management to Sales teams. In some cases, a senior executive is appointed to lead strategic account management without management mandate.

CRM and CRM Software

There is a widely held notion that a Customer Relationship Management program is enough to manage customers. Strategic Accounts are complex. Sometimes, as complex as an organization. A CRM / CRM Software cannot be expected to scale to the level of complexity required to manage Key Accounts. CRM focuses on winning new accounts, not growing them. That calls for Key Account Management.

Difference between KAM and Sales

While ‘Sales’ is an overarching process across industries, KAM is specific to existing customers in B2B companies with complex solutions, multiple offerings and long term repetitive engagements. KAM requires a deep understanding of customer domain, situation, challenges and then stitching a solution. In Sales, one would be offering a suite of products already available.

In Sales you ‘sell’, in KAM you help customer ‘buy’.

Key Account Management v/s Normal Account Management

For any organization, managing their key clients is a very complex activity. It involves more time, additional resources, deeper insights, and stronger analysis than that is required for managing the normal accounts. This is because the Key Accounts may be smaller in number, but they contribute to a larger portion of a company’s sales, (remember the 80-20 Pareto principle – which says 80% of your profit comes from 20% of your accounts!)

To understand better, we can equate Key Account Management (KAM) with priority banking. It would require more experienced professionals in handling the key accounts, primarily because of the strategic significance when compared to the normal accounts. This would mean that they require more personal touch and special attention to details.

Precisely, KAM defines the relationship between the organization and its customers. The Key Account Managers need to develop strategic and long-term relationships with their customers, as it is trust, loyalty and engaged relationship building that keeps getting them business. While the regular accounts are transaction-centric, Key Accounts can only be managed with customer centric approach.

It is by learning the difference in both, and handling Key Accounts effectively, that their ultimate potential can be harnessed!

Key Account Management Strategy

KAM is a complex strategic process and involves the entire organization; hence it is imperative that there are pre-calculated objectives and dynamic strategies in place, ensuring its success.

Without understanding the objectives of their clients, the organizations will not be able to help them to attain success.The objectives must be crystal clear and should include personal as well as measurable goals.

From the perspective of long-term planning, it is important to articulate the long-term vision of the company and identify where the client needs help. It is also important to define specific goals like increasing profit margins and percent increase in sales etc. Then, the personal requirements of the client like, whether a hands-on Key Account Manager is needed or not, should also be addressed.

Simultaneously, from a more dynamic perspective, step by step implementation strategy must be in place to ensure continuous progress. Means of communication with the client need to be identified. The client must be educated about every development at each step.

It is important that there should be a constant balance between the long-term and dynamic approach. Only then can a mutually beneficial relationship be established between two companies.

Identifying, Managing and Growing Key Accounts

To achieve growth, an organization needs to have growing customers. That is what makes Key Account identification so significant. An organization needs to identify its Key Accounts much earlier than its competitors; else the effort is of no use.

To identify Key Accounts, it is imperative to understand the client’s business, and it is various aspects like profitability, priorities, and innovations, their industry growth projections, market share, and management, etc.

Once the Key Accounts are identified, an organization must take up only as many Key Accounts as can be handled together. It is often up to the Key Account Managers to ensure that the organization knows the specific needs of a Key Account.

Key Accounts have to be given a five-star treatment. The organization must be an enabler for their Key Accounts so that they look good to their customers. Key Accounts can grow effectively if they are made to respond at a fast pace to their clients and to take care of their customer’s issues. They should be made to stand out from their competition, and new opportunities be created for them.

Time, energy and resources must be effectively invested to grow the account. They must be made to move ahead of their competitors in every way whether it is strategy or innovation. Here, building trust is the key!

KAM implementations take years, not months. By proactively and dedicatedly keeping them engaged and making them constantly move ahead of competitors, Key Account Managers can keep them interested in working with your company for years to come!

7 Companies that rock Strategic Account Management

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.

Key Account Management Business Impact

The correct adoption of Key Account Management by an organization can help in providing long lasting benefits. Following are some of them

Key Account Retention

Losing a client is never good, but losing a Key Account can put a dent in those revenue figures. Not to mention all the cost and effort added for acquiring a new client to make up for the loss of revenue. Key Account Management helps you identify and nurture your most important clients hence ensuring their retention.

Increased revenue

As explained earlier Key Account Management leads to increased revenue. By upselling you help increase customer retainer or subscription cost. By cross-selling you grow revenue from Key Accounts.

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