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Thursday Dec 12, 2024
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“Account management is the process of maximising the return on your investment in a customer by defining and actioning appropriate plans that will enable you to build on the present, to manage the future”
An account manager is a person in a business who is responsible for the management of the sales and relationship with particular customers. They are usually allocated particular customer accounts, especially key accounts that provide the most business.
What is Key Account Management (KAM)?
KAM is an approach which indulges developing long term relationships with strategic customers whose needs you to understand in depth, and for whom you develop a special offer with a differential advantage over the offers of competitors.
Who creates the need for KAM?
nMarket conditions – downturns typically result in less new customers and a need to offset the reductions through existing customers, i.e., Strategic/Key relationships
nSwitched on management – customers have cycles – both in terms of business and employees – KAM reduces the likelihood of a solution being removed by a competitor at a later date.
The problem solving approach to KAM
Purpose of Key Account Management
Account management is usually considered to be a part of the marketing department in business organisations, but it is a fact that account management is so much more than just selling something. It involves building a strategic partnership with a customer who can bring immense profits to the business, so its importance can never be argued against.
Business analysts say that around 20% of any organisation’s customers bring 80% of their revenue, so it is very important to ensure that this 20% is happy and satisfied. This will ensure that they always come back to the organisation for further business. Some other studies also show that retaining around 10% of one’s customers will boost profits by anything between 20 - 30%, so the primary focus of key account management is to increase the profitability of the business.
Customer retention is something that every organisation strives for, since this is what keeps a company ahead of its competitors. Key account management works towards improving customer retention and increasing their loyalty, and this is done by building many barriers to keep rivals out.
This can either be done by making sure that the lowest prices and the highest quality is offered to the customer, and it can also be achieved by taking care of any other needs and meeting any other demands that the customer may have at any point in time.
An account manager, by default, needs to be someone who exudes charm and hospitality and possesses other account management skills, and shows a willing desire to take care of the customer, no matter what.
There are several other strategic tools that key account managers make use of in order to ensure that their customers never feel let down. At the end of the day, the organisation that understands what is key account management the clearest and serves its high worth customers the best, will retain them and reap higher profits in the future. This is the underlying truth about key account management, and this is what ultimately makes the difference between a successful organisation and a mediocre one.
When building our Key Account Management program the single most important step is selecting those accounts that should be part of the program. Selecting the wrong Key Accounts will cost you millions and that doesn’t include the lost opportunity impact.
I’ll get into the detail but the common selection mistakes are: “they provide the most revenue in my portfolio therefore they must be a Key Account”. “I’ll just pick my top 50 accounts and they’ll be my Key Accounts”. “They’re the biggest fish in my market, so I’ll pursue them as a Key Account” (no current revenue).
Three critical steps in selecting Key Accounts
1.Conduct a portfolio analysis
2.Tie your company’s overall strategy to the selection analysis
3.Start with a pilot (two to three accounts) then expand
Portfolio analysis
One of the sales techniques utilised by sales consulting firms is the Customer Value Matrix job aid. Utilising this job aid or approach; plot the existing customers accordingly. The portfolio analysis process involves:
1.Review the last three years of actual volume or revenue in addition to the actual cost to support these clients (In many cases this reveals you’re actually losing money on those accounts you thought were Key Accounts)
2.Determine the cost and growth potential for these accounts for the next three years
3.Define the type of buyer either strategic or transactional. Remember just because you want them to be a Key Account doesn’t mean they should, it’s a two way street
Company strategy to portfolio analysis
Tie your company’s strategy to the Key Account Management selection criteria. The common mistake here is to select too many criteria (we want it all), limit the Key Account selection criteria to between three and five. The following are just a few examples of the possibilities:
Key Account or Strategic Account Implementation
Start with no more than two or three Key or Strategic Accounts. Selecting more accounts is a recipe for disaster. The reason behind a pilot is obvious; work out the kinks early and set yourself up for success by being extremely focused. The critical success factor during implementation is promise nothing you cannot deliver. I’m sure none of your sales reps have ever done that, keep in mind talent management is always a key success metric.
The question we most often hear is: How long will the Key Account Management program take to be implemented? Unfortunately the answer is; it depends. A typical program implementation takes between 12 and 24 months prior to expanding the program.
We’ve selected our key accounts utilising our defined selection criteria and determined our measurements of success.
What clients want
What do clients want firms to do to grow their relationship? Here are a few of the most commonly expressed suggestions:
What many of these suggestions have in common is that they are about expending serious effort on getting to know the client’s business and industry in great depth. Some of this exertion can take place in the professional firm’s “back room” (conducting studies, benchmarking, etc.).
However, much will require greater contact with the client. It is notable that while clients want more contact, they want it to be in settings that allow mutual discussion and exploration of the issues.
It is also clear that clients want a business partner, not a friend. The good news is that clients clearly do want to be brought new ideas: they want a relationship.
Summary
The most important fact to note about key account management is that it is an investment activity for everyone involved. While it is relatively easy to define the roles and responsibilities of the key account manager, ways must be found to convince and reassure other team members that participation in the key account program is a valid, recognised firm activity, even when it is not billable.
It is for this reason that some firms allow the key account manager to “buy” the time of other personnel for what would otherwise be non-billable activities, thereby allowing those helpers to get “full billable credit” for their participation. Significant (non-billable) budgets must be set aside, and the program should be launched with a longer-term perspective than the traditional “fee credits” or “bookings” systems usually allow.
The best news is that key account management is in everyone’s interests. Clients want it, and it benefits the firm by growing relationships and generating new fees. Done properly, it can provide career-enhancing opportunities for every professional involved. Studies in many industries have proven the economic benefit of creating customer loyalty, and my own work with professional firms over the last 15 to 20 years have convinced me that there is a clear link between profitability and success in nurturing key accounts. It’s hard work, but it’s a clear path to economic success.
(The writer is the Managing Director & CEO, McQuire Rens & Jones (Pvt) Ltd. He has held Regional Responsibilities of two Multinational Companies of which one, Smithkline Beecham International, was a Fortune 500 company before merging to become GSK. He carries out consultancy assignments and management training in Dubai, India, Maldives, Singapore, Malaysia, Indonesia and Bangladesh. Nalin has been consultant to assignments in the CEB, Airport & Aviation Services and setting up the PUCSL. He is a much sought-after business consultant and corporate management trainer in Sri Lanka. He has won special commendation from the UN Headquarters in New York for his record speed in re-profiling and re-structuring the UNDP. He has lead consultancy assignments for the World Bank and the ADB. Nalin is an executive coach to top teams of several multinational and blue chip companies. He is a Director on the Board of Entrust Securities Plc.)
