what-is-key-account-management

What is key account management (KAM)?

Key Account Management is a company’s strategy to produce business benefits by building a strong relationship with key customers. This relationship can benefit your company by helping you gain an advantage over competitors, reducing the issue of price (because of the value you provide) and encouraging customer loyalty. KAM is more than just selling products to important customers, it is a business-to-business approach based on good communication and trust. A win-win situation as both customers and suppliers can and should benefit from it.

Did you know? It is easier and cheaper to sell to existing customers than to go out and find new ones? It costs 6–7 times more to acquire a new customer than retain an existing one, according to Bain & Company. KAM is precisely what can help your company retain existing customers and increase your sales while reducing the spend.

What do I need to do?

If most businesses see innovation as a key to success, they often fail to include KAM as an alternative to growth. So, here’s what you need to do:

1. Choose the right team

Key Account Management must be seen as a change in the way  you do business, not as something that is confined to the Sales department. Converting your best sales people into key account managers is not the best option as they might not feel comfortable with their new role. In fact, the role requires more than sales skills – it also requires a range of skills including interpersonal, consultative, financial, planning, and influencing skills. Good key account managers are often technical people or project managers. Some companies choose to train their operations and supply chain people in KAM as well as their own sales people. A champion of the KAM programme can also be designated to lead and drive the implementation.

2. Identify key customers

Identify your most valuable customers, those who can create most profit for your business. Best-practice companies choose a small number of key accounts- somewhere between 5 and 25 key customers. The choice of key customers is said to play a critical role in key account management success. These customers will have a strategic role to play in the growth of your company.  Key customers need to be chosen carefully and must have the potential to make the cost of the exercise worthwhile.

3. Make sure the chosen key customers want it

Customers and suppliers must both understand the process and have the desire to participate, otherwise it won’t work. Like the buyers, suppliers have limited capacity to truly manage key accounts, which affects the way they integrate it into their business.

4. Build a strong relationship

Key account management success depends on the relationship you have with your customer. Once your key accounts are chosen, you can begin your KAM strategy by proposing an offer which will make them stand out from the rest of your customer base. Maybe you can talk to your customers face to face or give them advice and tips that could help them. Make them feel appreciated – why not send a thank you note, gifts, vouchers, or other tokens of appreciation for staying with your company? Or by introducing added incentives like a loyalty programme which would entice customers to return?

5. Understand their needs and limits

A good understanding of each other’s needs and limits is fundamental if you want to achieve good KAM. Try to get a full understanding of the customer: the size of their  business, their vision of the future, their success, their corporate personality, culture, values, and needs. Who are the true decision makers and influencers of the company? Who are their competitors? What is their place in the market? This is an ongoing and dynamic process because customer personnel assignments change, new relationships can be created, and new information can be gathered.

6. Develop a broad strategic plan:

Develop, assign and monitor tactical plans for chosen customers. If you want to build a significant relationship with a customer, it will take time, tenacity, and consistency in movement toward objectives.

But what if the key customers you choose don’t speak your native language – will they be suitable for KAM? Yes, but only if you manage to break down linguistic or cultural barriers. Is there anyone in your team who can speak the target language? If not, it might be wise to keep it simple or ask for help from external language services.

Any examples of international success?

International Key Account Management is also called Global Account Management. There are firms that have successfully implemented GAM strategies, such as IBM and MasterCard, who focused on key customers and integrated resources across product lines and across country subsidiaries. Whilst providing solutions to key customers, they collected first-hand information about the markets they were moving in to.

When doing business in different markets, some companies have to adapt their products and services to different environments. For example, Creo Americas, a graphic printing company, found that its accounts (Fortune 1000 ad agencies, publishers, and designers) were facing extreme margin pressure and were struggling to decide whether to adopt or reject certain technological innovations. To respond to the needs of their global accounts, the company decided to initiate new solutions in order to standardise customers’ colour processes and customise printing options when necessary. Because they managed to adapt their existing programmes to their key customer’s needs, the accounts rewarded the company with strong margins and limited discounts.

A few things to keep in mind:

  • Winning new customers is more expensive than selling more to existing customers
  • KAM is a commitment to work differently with certain priority customers
  • Implementing KAM take years, not months
  • The most valuable customers are those who can create the most profit for your business
  • It is easier to add customers to your KAM programme than it is to ‘demote’ customers (once they have been told they are key accounts)
  • The number of key accounts should be small: somewhere between 5 and 25 key accounts
  • Don’t give in to pressure to add more accounts

And most importantly, make sure you don’t go static over time. Try to keep things fresh. Establish benchmarks which can help you set goals for expansion and improvement.  Actively seek best practice: both within and outside your company. The implementation of a successful KAM strategy takes time. It won’t be easy, but it is definitely worth your while!

Is your company thinking of implementing a Key Account Management strategy? Share your experience with us.

 

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  • Nik Andreev

    Very interesting article, I’d really like to see more example of companies that have implemented key account management. Do you by any chance have more? Thanks

    • Tony Casteleyn

      Sure Nik! During my research, I found an interesting example of a company whose KAM strategy changed its whole organisation. Mariott International, Inc, an American diversified hospitality company, chose to build networks around their accounts by assigning specialists and experts from various functions. The company unified its three functions (namely SAMA which is inside the US, the worldwide sales offices which are outside the US, travel industry sales and marketing) into one Global Account Management strategy. This new organisation allowed members to have a greater access to global resources and dedicated support. There was also more flexibility to adapt to customer’s local demands. Thus, a local representative could arrange a meeting with a local customer and access global statistics. Meanwhile, this local representative could understand and meet the customer’s culturally influenced demands.

  • Tony Casteleyn

    I received feedback from Account Managers on LinkedIn. According to them, we can succeed a KAM strategy by:

    • Believing in KAM as a strategic element for success
    • Understanding a KAM strategy is a business strategy not a sales programme. It is a company initiative not a sales initiative
    • Creating a culture within the business, that would permeate all you do
    • Knowing your team
    • Building a platform of good service
    • Building a strong & solid integrated partnership and by taking care of it and nurturing
    • Running the KAM strategy like a marathon, not like a sprint
    • Having targeted customer(s) who want to be treated as a Key Account
    • Allocating enough resources that would show to Key Accounts that we are serious about helping the account.
    • Having a deep understanding of customers and what drives their success.
    • Taking into account criteria other than revenue: if the company has a short term or long term vision/strategy, if it is global or regional, the approach it has from the competitors, what works/ doesn’t work well within sales and service towards these customers, if a relation mapping has already taken place …
    • Segmenting: To avoid over spending on accounts who do not desire KAM and underspending on accounts who do