Key Account Management

Do you have a small number of customers or clients who account for a large part of your business? Are these so important that losing any one of them could have serious consequences? If so, are you treating them in a way that respects their importance? You need to consider Key Account Management.

Key Account Management (KAM) isn’t the solution to everything. But it is a useful tool for building and protecting long-term commercial relationships.

Why Do We Need Key Account Management?

You may not need it. So start with two questions:

1. Do you have any strategic commercial relationships that you can’t afford to lose?
2. Do you have any commercial relationships with the potential to grow to a strategic scale?

Key Account Management is a programme that can address these questions. It can defend strong relationships, and it can develop and deepen shallow ones.

What are the Typical Benefits of Key Account Management

If you do it right, Key Account Management can deliver big benefits. I shan’t quote figures, because they come from different sectors. But in all places, you find the following benefits:

• Shorter, simpler buying processes
• …that mean lower costs for both parties
• Improved customer satisfaction
• More sales close
• …and with shorter decision times
• Greater transaction volume

All this also adds up to a downward pressure on prices for the Key Account customer, which can erode margins. But, if you get it right, volumes and process savings should more than make up for this.

What is Key Account Management?

Key Account Management has three principle objectives:

1. Connect. To build relationships throughout the client organisation
2. Grow. To expand the number and scale of sales opportunities, and improve closure rates
3. Defend. To increase customer loyalty, so they have less desire to buy from your competitors

A Definition of Key Account Management

As you’d expect, everyone has their own definition. And it’s not just the businesses that run Key Account. It’s also the sales trainers and consultants that advise them.

Here’s our definition:

Key Account Management is…

a process for managing your relationships with your most important customers.

Its goals are to…

 – understand the customer in depth

– turn regular buyers into committed business partners

 – maximise the value of the relationship to both parties

When to Use Key Account Management…
and when not to

Don’t just use Key Account Management as a way to appease big customers. There are some clear reason to use it, and also some time when it isn’t appropriate.

Relationship Spending

The main time to use KAM is when your customer links their spending to the depth of your relationship with them. This is often termed ‘relationship spending’. Customers make buying decisions because of:

• their trust for you
• your understanding of their business and its needs
• added convenience

Other reasons to consider Key Account Management

Consider Key Account Management when:

• Your business provides products or services that are strategic to your client
• The customer is part of a larger organisation
• …or it has partner organisations with whom you can build relationships
• Your products and services offer up-sell or cross-sales opportunities
• KAM can help you create a meaningful differentiation from your competitors

But, let’s also look at:

Reasons not to use Key Account Management

Key Account Management is likely to be of little value when:

• Your products and services are highly commoditised. Then, your client’s procurement team is likely to seek the lowest price. Relationships won’t matter.
• Cost of KAM activities exceeds the margin. Some customers need a lot of work, but give little in return. Some even abuse relationships and cost money to serve.
• Your products or services are low value with small margins already.
• The customer’s management have a highly short-term and transactional focus. In this case, long-term relationships will mean little to them. They will always be chasing the ‘best deal’.

Key Account Management as an Investment

Your Key Accounts are assets. They have a long term value that will appreciate if looked after. You have made a historic investment to secure and care for them. So the way to protect them is to continue to invest in them.

Key Account Management takes time and costs money. And it won’t always pay off. But, like all investments, you need to choose your portfolio with care, and invest in it wisely. If you do so, the overall programme will yield good returns.

How to Build and Run a Key Account Management Programme

So, if you decide that KAM is for you, how would you go about it. Here, in outline, are the steps to take.

Step 1: Create a KAM Programme

Think of this as organisational change. You’ll need to research and plan it, and engage the right people. You’ll also need to ensure your stakeholders are informed and on-board. These will principally be people like product managers, marketers, salespeople and commercial teams.

You’ll need to appoint a sponsor, or champion with enough organisational heft. And early on, you’ll also need a definition of what a Key Account is for your business.

Step 2: Select Your Key Accounts

Using your definition, examine all candidate customers. Start as small as you can, by being cautious. It’s easy to add a new Key Account to your programme. It’s tougher to remove one.

Step 3: Set up Your Key Account Management Team

Assign Key Account Managers for each KA and ideally each will also need an Executive sponsor. Each may have its own team, or you may prefer a core team on which the KA Manager can draw.  And then train them. All of them: the managers, sponsors and team members.

Step 4: Build Your Key Account Plans

You KA Managers should lead the development of a Key Account Plan for each KA. Steps include:

• Data gathering and understanding the customer in detail
• Build a profile of your customer and their business plans and goals
• Charting existing relationships and known players. Use stakeholder mapping tools and populate your CRM (Customer Relationship Management) tool.
• Determine your KAM goals – start modestly
• …and create your strategy to achieve your goals
• Flesh out your strategy with specific timed actions
• Determine the metrics you will gather to evaluate your KAM progress
• Set up your internal review cycle

Step 5: Relationship Building

Now activate your plan. Build relationships and use your CRM tool to help you. Extend your influence step by step. Your target is to get to know everyone with a buying role. And also everyone who influences those buyers.

The key skills will therefore be listening and questioning. Key Account Management is not about selling. Respond to questions about your business and its products and services. but do not open conversations with them.

Step 6: Build Maturity

In a mature Key Account relationship, the two sides collaborate for mutual advantage. Look for your first small opportunity to do this. And be prepared to make this a partial investment. You don’t have to score a big win early. but neither must you obviously ‘buy the relationship’ by giving far more than you gain. This will set up the wrong expectations for the long-term relationship.

What is Your experience of Key Account Management?

We’d love to hear your experiences, ideas, and questions. Please leave them in the comments below.

To learn more…

The Key Account Manager’s Pocketbook is full of tips, techniques, and tools to help you keep and develop business with important customers.