A key account is one of your company’s most valuable customers. These customers demonstrate value in a few ways:
- They represent a disproportionate percentage of revenue,
- they refer new prospects to your company, and
- they give your business credibility in their industry.
However, “value” is subjective, and your organization needs a strict way to define and execute key account management. Key account management is a business strategy in which a company provides personnel and resources to valuable clients in order to establish a mutually beneficial relationship. Key account management seeks to maintain or increase profits from these large accounts. Businesses that implement a key account management strategy benefit from increased sales volume and long-term strategic relationships. They also have a better chance of increasing revenue from these accounts through upselling and cross-selling.
According to the professional services firm BTS, key account programs can result in higher costs and lower margins. That’s the unavoidable result of providing a customer with more resources and frequently your best discounts. But don’t be disheartened; the key to successful key account management is client retention, not client acquisition. Their tenure with your company (and the money that comes with it) more than compensates for the occasional discount. This strategy exemplifies the Pareto Principle, which states that 20% of the inputs produce 80% of the results. The benefits of key account management are only realized when the proper personnel is in place. Let’s take a look at the key account manager’s roles and how they interact with the rest of the team.
Who is a Key Account Manager?
A key account manager (KAM) represents the company to its most important customers. KAMs manage the key account, cultivate strong client relationships, identify challenges and opportunities, and devise strategies to maintain success within the account.
KAMs identify solutions to the client’s challenges and opportunities and create and present progress reports to key stakeholders.
Key Account Manager vs. Accounts Manager
However, key account managers are not the same as account managers. Account managers manage non-key clients who generate less revenue or may not fit the product well. Key account managers concentrate on a company’s most valuable customers.
Account managers do not report to key account managers, so their relationship is not hierarchical; however, KAMs may sit in more senior-level roles on the same or an adjacent team.
How to Differentiate Between Key Account Management and Selling?
Selling and key account management are not the same things. A key account manager (KAM) prioritizes the future over the short term, which a salesperson needs.
Sales reps focus on specific opportunities as well, whereas KAMs have broader objectives, such as collaborating with the customer on mutually beneficial projects, assisting the customer in meeting their objectives, and ensuring the customer receives the necessary support.
When you hire a key account manager for the first time, one of the first tasks they may have is to choose which key accounts they will serve. There are numerous factors to consider when completing this task, but we’ll get you started with some of the most common ones below.
How to Identify Key Accounts?
When identifying key accounts, SBI recommends using three to five selection criteria. This constraint allows your new KAM to concentrate on business needs and impact.
Here is a list of ten key accounts to consider when identifying key accounts for your company:
Product Fit: This client’s target market size for the product or service your company sells.
Average Transaction Size: The average amount of money spent by the account with your company.
Revenue Potential: The amount of money the account has the potential to spend with your company in the future.
The process by which a client purchases your product. Do they, for example, make purchases with only one decision-maker? Is there an organization that decides what to buy? How long does it take to process a payment?
Partner History and Potential: Are they current or former partners of your company? Do they have the potential to become a future partner?
Customer Tenure: The length of time an account has been a customer of your company.
Solvency refers to an account’s ability to pay its debts.
Existing Relationships: The account’s relationships with other businesses that may become clients.
Cultural Fit: Alignment between how the account treats their customers, employees, and your employees.
Geographic Alignment: The physical proximity to your company’s headquarters or service centers, if applicable.
These metrics will not yield a good list of key accounts if taken out of context. You should create a formula that ranks each criterion in order of importance to your organization. Then, determine how much room each account has for growth.
A key account scoring matrix can help you identify your key accounts based on these criteria. Simply evaluate each account using the criteria you choose and assign a score from 1 to 10 in each category. Your key accounts will be those with the highest scores.
How to Formulate a Key Account Management Strategy?
You have a short list of key accounts, and you’ve hired the right people to manage them. It is now time to put the strategy into action. But how do you go about doing that?
This four-step procedure will walk you through an important account management strategy.
1. Establish Goals
Before you can tell your customers they’ve been promoted to key account status, you need to set internal and external expectations. Setting key account management objectives is one way to accomplish this.
This procedure operates in the same manner as any other strategy. Using the why, how, and what goal-setting framework, you can get to the heart of why you need a key account management strategy and come out the other side with
2. Provide superior products and services
Next, you must implement your goals by outlining how you intend to keep your promises.
3. Deliver exceptional products and services
Whether you sell physical products such as clothing and accessories or are a pioneer of a new software-as-a-service, you need a reliable way to deliver those products to your key accounts on a consistent basis.
Your key account manager is responsible for ensuring this occurs and the account is consistently delighted. This means they’ll need to collaborate closely with the sales, service, and operations teams to ensure everyone is on the same page when it comes to the key account.
Establishing key account-specific processes and procedures may also be beneficial so that the client knows what to expect and your team knows how to handle it.
3. Account growth outcomes should be measured
A key account management strategy’s ultimate goal is to grow the account in terms of revenue and client-business relationships over time. This should be simple to quantify because you can use metrics that correspond to the criteria you used to select the key accounts in the first place.
For more quantitative criteria, such as product-market fit, you can examine the account’s adoption or usage rate to determine how useful your product or service is to the client.
4. Prepare for future account requirements
However, the strategy does not end with measurement. The final step is to complete the circle by anticipating the key account’s future requirements. If they are purchasing more units than before, there may not be any more opportunities for volume growth, but the average transaction size may have room to increase.
Alternatively, there may be an opportunity to have the key account beta test a new product or offering that is closely aligned with their target market.
The takeaway here is to keep the account engaged in ways other than monetary transactions. Remember that key account management is all about developing and maintaining mutually beneficial relationships, so when looking for ways to save money, think beyond the invoice.
Having the right tools can make a KAM’s job much easier and more effective. Use a CRM, for example, to keep track of your communication with account stakeholders, provide visibility into what’s going on, and reduce duplication of effort across the team. Implementing an email tracking and notification tool can help if you are having trouble getting responses to your emails. This type of tool will notify you when your recipients open your emails and click any links within them.
One should also monitor any changes in your account’s market and industry, strategic shifts, hiring and firing decisions, and more using LinkedIn (either the free version or LinkedIn Navigator). By using a meeting tool, you can eliminate back-and-forth emails about meeting scheduling and make the process more seamless for the attendees.
You could also consider investing in a video platform like Loom, which allows you to create personalized videos for prospecting and relationship-building.
A well-planned, comprehensive key account management strategy will not only keep your best customers happy but will also provide opportunities to exponentially grow the relationship. Your retention rates and bottom line will benefit as a result.