A Guide to Key Account Management

A Guide to Key Account Management

Key account management is a proactive approach to investing and growing mutually beneficial relationships with your most strategically valuable customers over the long term. If done correctly key account management can significantly boost profit margin, reduce costs, optimise the sales and purchasing process and enhance your competitive advantage in the market.

In this article, I want to give you an overview of what key account management is, how it works in practice and the myriad long term benefits it can bring your business.

Why is Key Account Management Strategic in Nature?

Many people incorrectly view key account management as a sales technique. However, it is far more than this. Key account management focuses on generating business from a limited number of customers (what we refer to as key accounts) by achieving a deeper understanding of what motivates them and how this can be achieved through investments in new initiatives, relationship building, collaboration and joint innovation.

Because key account management focuses on creating value for both customer and supplier, it is a far more strategic approach to generating new business. To win this business requires engagement and buy-in over time from a variety of individuals, across various business functions, both within the customer's organisation and your own.

Senior buy-in to your KAM initiatives is crucial if they are to secure ongoing investment and resources. This means that the supplier must be able to demonstrate an understanding of the customer’s needs and how they plan to deliver on these. This is outlined through a value proposition which outlines what is being proposed, how this will be achieved and the data and evidence to support this.

How are Key Accounts Identified?

Assessing which customers are worth investing in and which aren’t is an exercise in defining value. It’s tempting to see size and revenue generated as the key indicators of value here but that is to miss the long term strategic focus of key account management strategy.

Accounts will be deemed to have real value in terms of repeat business, add-on business and the potential for growing long term business relationships, making them both strategically and commercially important to the business and its future direction for growth.

Let’s look at some key features of a key account:

Growth rate and potential

One size certainly doesn’t fit all when it comes to selecting your key accounts. Growth rate and potential is a far more strategic way of looking at value. All businesses start out small, but if they are growing rapidly then they may well represent a real opportunity. Get in early and grow genuine relationships with these customers and you could reap the benefits of their future success.

Loyalty and business practice

All relationships are built on trust and a sense of mutual understanding. Many of your biggest customers may be your least loyal and extremely demanding. Good business practice and mutual trust is therefore essential if you are to build more meaningful relationships with the customer.

Potential for innovation

Good key account management is about doing things differently and this means managing and implementing change. If your customer has no desire to innovate or change the way they do business with you then you may be flogging a dead horse.

Potential for collaboration

Key account management requires an open and collaborative approach that sees the customer supplier relationship more as a partnership. There needs therefore to be a willingness from the customer to work closely with your organisation and open up some of its processes to scrutiny. On top of this there also needs to be a desire to invest in internal processes in order to deliver value and grow the relationship.

Similar business culture and vision

Working with businesses that share your values and culture will always be advantageous. If businesses think the same way, then there is a very good chance they will see value in the same things and be willing to commit to them.

It should be pointed out there, that despite how much a customer may seem to represent a great key account, some businesses will simply not share your perception of value. It is easy to get caught up on points 1 and 2, which tend to focus on the financial potential and the operational side, but without a sense of mutual understanding it’s likely these customers will fall down on points 3, 4 or 5 (or all of them).

Only when both parties are genuinely keen to create a collaborative, mutually beneficial working relationship over the longer term can these customers be deemed key accounts.

Tips for making a Success of Key Account Management

Key account management is a long term organisational change that requires commitment and buy-in from across the business, as well as significant resource investment. Every customer you do business will be different in some way from the next and should be treated as thus. There are however some common rules of thumb in the way you approach key account management strategy in general.

I’ve listed six that I regard as crucial below:

1. Positioning your KAM strategy as a genuine organisational change, rather than confining it to the sales department. This requires time and commitment from other business functions, such as operations and HR. Ultimately, key account management is about changing the way you do business not just how you secure new business.

2. Gaining high-level buy-in from senior internal employees with director level sponsors for each key account. Because KAM is business-wide in scope, it’s crucial you bring the senior leadership with you and that they realise the importance of long term investment where it’s needed.

3. It’s important to appoint a senior key account manager to champion and lead your KAM programme. It’s also important to understand that these individuals will not always be sales managers. Key account managers must have the appropriate skillset to facilitate change management, grow understanding across the business and communicate effectively with different people from different departments. They must also have an intimate understanding of the business and how it operates.

4. What gets measured gets managed, is a famous business idiom, coined by Peter Drucker and in key account management this is especially pertinent. Setting metrics which make sense and relate to what you are trying to achieve is essential if you are to assess success, over the longer term. Benchmarking against competitors and other internal clients will give you a good starting point and will help you contextualise your achievements at an organisational and market level.

5. Constant assessment and review is crucial if you are to make a success of your key account management programme. Not all key accounts will necessarily be a success and a good key account manager will know when to divert investment to other stronger opportunities. Also, customers that didn’t fit your key account selection criteria one year, might make the perfect key account the next, so you should be constantly reviewing your entire customer portfolio for new opportunities.

6. Key account management can be thought of as a business philosophy as much as it is a strategy or technique. It makes no sense to treat all of your customers in the same way. Suppliers need to decide where their leadership time, talented staff, budget and creativity needs to be directed. This means focusing greater levels of effort on your more attractive prospects and reducing effort towards less valuable, or even loss-making, customers.

With the right effort, internal focus and organisation, and an appreciation that the process will take investment, key account management has the potential to deliver high levels of long term growth for your business.



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