Key Account Management Programme
In recent years, Key Account Management (KAM) has become a crucial issue for many companies. Driven by some form of 80/20 rule - 80% of current or potential revenues come from 20% of customers - many companies have come to realise that these customers must be treated somewhat differently from the average customer.
However, it is one thing to recognise that these accounts should be treated differently, it is quite another to figure out exactly what to do.
Many companies are struggling to deal with these questions on a national or regional basis. Managing key accounts is a complex and difficult business.
Koru employs an 8 facet programme which focuses on the most effective ways to recruit, protect, and develop critical customer relationships:
More and more companies are focusing their sales effort on a smaller group of targets and customers. This has many benefits, in terms of revenue and profit generation, customer satisfaction and loyalty, effective use of sales resources, and organisational alignment.
Clearly, you can make points with key customers just by giving them additional attention. But Key Account Management implies you will work with customers on their terms. For example, maybe you have industry-leading security support, but one of your key accounts has a security expert on staff, doesn't need your support, and doesn't want to pay for it. However, they do want special delivery terms, and also want to talk about a unique financing arrangement. Some considerations:
• Do you understand the customer's culture, do you have similar values?
• How much do they spend on the things you have to sell?
• Will they be as important to you in the future as they are today?
• Do you know and understand their strategy?
• Do you know your competitors' strengths in selected accounts?
• Most importantly, how does your customer view you?
At the lowest level of the buy-sell hierarchy, the customer sees you as a commodity vendor, competing purely on price. At this level you will need to continue price competition unless you can move up the buy-sell hierarchy.
If you move to the right in the table above, the customer may then recognise you as differentiating on product or service quality. Given the emphasis on product and service quality in the last 20 years, in many markets quality is the price of entry. If product and service quality offer a way to differentiate, in many cases, the differentiation is short-lived. If your Key Account Manager, however, can truly start helping your accounts with business and organisational issues — helping their revenues grow, minimising their costs, positioning them more effectively in their marketplace - the relationship can change dramatically.
Few companies make it to the two rightmost columns. But those who do find their customers treat them as "trusted advisors.” As difficult as these levels are to achieve, at this level of relationship, competition is almost nonexistent and value flows freely in both directions.
Unfortunately some customers would never allow this business/organisation level of relationship. They tend to see suppliers purely as vendors. If one of your ‘perceived' key accounts does not see the value in your increased investments, or thanks you for them and asks for deep discounts, it may make little sense to keep defining them as key or to invest more in the relationship. It is a very hard lesson for some companies but some customers just want a good product at a good price - nothing more.
At the heart of Key Account Management is Account Planning. Not only is it a tool for understanding, documenting and sales strategy setting it, provides a quantitative approach to key account selection, a business monitoring and management tool and done correctly, it focuses the sellers company on the Key Customer. For more on Account Planning click here.