Key Account

Management

Abhishek | Deepti | Dheeraj | Sumit
Concept
In any business organization, sales is the department that (may be easily mapped on generated
results) generates revenue. Key Account Management (KAM) is far more than just selling products
to big customers, its dealing with those customers who have a strategic role to play in the growth of a
supplier.
Today, the roles of Key Account Management are:
Builds strategic relationships with major customers
Drives alignment within the whole organization
Is a central, pivotal point of activity
Delivers value to customers
Evolution of Key Account Management
The first generation key account management was based on geographical spread, vertical segmentation
and sales data. Most of the key account management approach was opportunity driven and done
through a lot of paperwork. The success of important business deals was depended highly on the
personal commitment of the key account manager and his willingness to find the right support within
the organization. Training focused on Professional Selling Skills (PSS). The growing awareness of the
importance of strategic accounts gradually increased the sophistication of the key account management
practice and its integration into the companys organization. The emergence of the portable PC in 1994
enabled easy availability of strategic account data through Access, independent from heavy mainframe
queries. Companies like SAP and Siebel Systems proposed enterprise sales management systems as
important investments. [1]
Importance and Challenges
The most important goal of any salesperson is to create and keep customers by rewarding them for their
behavior. Customers will only exchange their money for two rewards, when they get a good feeling from
the purchase and other it is solution to their problem. In an ideal sale both conditions will be met.
Key Account management needs are created by market conditions and customers. Market conditions
when they are down, typically result in lesser new customer and there is a need to offset the reductions
through existing customers with the help of key relationships and strategy. Also sometimes the size and
nature of the customer may require the allocation of Key account management to manage and ensure
customer satisfaction.
Hence the goal of any Key Account Manager is to keep customers feeling glad about their relationship
including any purchase by ensuring that a state of cognitive consonance dominates and also by
identifying and solving past, current and future problems. This goal is achieved by developing a strategy
that reflects the different types of strategic customer that exist, agreeing which to target and how,
based on time, resources and money available to target each type.
Increasing complexity and the accelerating pace of changes in global and local markets urged companies
to rapidly adapt their account management to new power and demands from their customers. Global
trends and similar worldwide industry patterns have revolutionized the customer/supplier relationship
overnight. Factors like customer power, globalization, and commoditization are making it difficult to
create a definite set of selling values and differentiating it.

Difference between B2B and B2C Key account Management
While the primary aim of KAM is to improvise on sales while focusing on the key accounts of a company,
there are some characteristic differences in the strategies adopted in approach in the case of B-2-C and
B-2-B
B2C is all about the end user, in other words, its all about the target group (TG) of the strong brand. The
strategy of B2C revolves around the nature of the product and its perception on the TG. For example,
the placement of Surf by HUL and introduction of flankers, Wheel and Rin, by HUL to counter Nirma
threat. The whole strategy was around positioning the products in the mind of TG. In B2C marketing,
mass media like TV, radio, outdoors and print plays a big role. The B2C marketing is wide spread and
reaches out to masses. B2C KAM is a product-based strategy.
On the other hand, B2B KAM is a consumer-based strategy. Twenty percent of customers give sixty
percent of sales. The foremost is to identify these key twenty percent accounts. The product remains
the bases and the strategy is developed to understand the six keys of the customer, key person, key
needs, key times, key events, key concerns and key disadvantages [2]. Actions include special discounts
or pricing, customized products with services and often development of relationship on an
organizational level etc. An example of selling of Automated Attendance Systems involves B2B
strategy for the administration in charge, procurement officer as well as the CEO of the company. At
three levels the system development teams will customize their relationship for maximum output.
An example for a combination of both KAM is the case of Blue Star Refrigeration system, the B2B KAM
strategy was developed to position Blue Star Air Conditioners as pioneer in office cooling system and
then the organization extended the campaign to TV and Print to reach out to masses in order to position
the brand.


Identification models
Managerial Implications
Limitations
Last Part Sample Flow Chart
References
[1] Strategic Key Account Management Management Centre Europe
[2] YouTube: [Link]


Development of Key Account-

A lot of organizations appreciate the importance of key account management but fail to identify
their key accounts in a strategic fashion. This is simply because of a common misconception that
big (company size) is also key, and that offering special treatment costs more. In this series
of articles, I will highlight the importance and steps for identification of key accounts, an
approach to segmentation and categorization of accounts, and steps for developing a key account
management strategy.
Why big is not always key?

Most companies try to include big companies in their customer portfolio and it is a good
strategy (unless you choose to serve only small customers for strategic reasons). Serving a
fragmented base of customers generally raises the cost of doing business and customer turnover
can cause severe fluctuations. However, serving big companies too has its challenges:
Require more attention and typically do not pay for it.
Leverage their scale and market power to negotiate lower prices and often exploit
suppliers by creating conditions for price wars.
Use small suppliers by giving them small orders and getting the lowest possible prices to
squeeze their larger suppliers.
Salespeople learn only the hard way that many big companies rarely give them the business that
they deserve based on the effort that they put in. Therefore, it is important to clearly identify
what customers are key to your business and then serving them using a well thought out plan.


Customer segmentation approach to identifying key accounts

Identification of key accounts should be a quantitative exercise rather than an emotional one
based on personal preferences. The recommended approach is suggested below.
Step 1: Group your customers into three (or more categories) by sales. For instance, more than
$1 million (A accounts), $100,000 to $1 million (B accounts), and less than $100,000 (C
accounts).
Step 2: Include contribution margins and direct profit (or any other financial metrics that make
sense for your business).
Step 3: Identify key accounts based on the accounts that have the highest impact on company
financials.
In my analysis, I have found that for vast majority of companies, the 80/20 rule applies. In other
words, approximately 20% of their accounts create 80% of the value for the enterprise. This set
of accounts that you identify in step 3 are your key accounts.











Once you have accomplished the enormous task of implementing a key account management program, it is very
tempting to use it beyond the domain for which it was originally developed. In this article, I will discuss three major
topics:
What you should not do while developing a key account management program for a multinational
corporation (MNC).
How to develop a program for each domain that you do business in, and
How to make the program evolve on its own so that it grows with your needs and better adapts to the needs
of your customers and employees.
What not to do?
Do not define a business domain by language. It is important to appreciate that customers are
different, based on their culture, language, economic structure, etc. The language is probably the
trickiest one. I have learned over the years that doing business in the UK, Australia, Singapore,
Canada, New Zealand, Hong Kong, and India is not the same despite the fact that people you are
dealing with people who speak English fluently.
Do not imitate even a successful program without customizing it to local environment. What
works in one domain may be used as a model for other domains but a belief that a successful
model is perfect for all situations is a recipe for disaster.
Do not act global. In a world where the terms such as global village and globalization are used
without much thought, it is important to understand that business environments are evolving with
local flavors. It may be a good idea to build a global organization, when it comes to your
customers, think local. (Related article: How to globalize your business?)
How to develop a key account management program for an MNC?

An MNC is an enterprise that does business in multiple nations and a key account management strategy for an
MNC consists of two components:
A basic framework for key account management that is built on company mission, values, and
business model. This provides the basis for all customer interactions.
A tactical key account management program designed for each domain. I am making a distinction
between a domain and nation since it is simply stupid to believe that doing business in West
Bengal is the same as Punjab (two states in India) or doing business in Texas is the same as
California.









Now that we know who our key accounts are, we have to have a strategy to manage them so
that not only will they stay with us, remain as key, but also grow in value for us. This is
accomplished through a strategic plan, the main steps for which are shown below.

Customer needs assessment: Since I believe in basing your business model on unmet customer
needs, the initial approach to a key account management strategy has to start with a
comprehensive understanding of customer needs. The simplest way is to interview your
customers, rather than rely on published reports or advice from outside agencies. Only your
customer can tell you what they need from you.
Skills & Capabilities Development: Once you have an understanding of what your key accounts
need, you must do an inventory of your in-house skills and capabilities. That would enable you
to identify the gaps that you have. The result is a good list of what you need to develop through
training, hiring, partnering, outsourcing, etc. Generally, these skills and capabilities can be
divided into three distinct groups:
Products and services portfolio: This is the most basic requirement in order to serve a customer. You must have the
right products and services in your portfolio to present the right solution. In many cases you may not have
everything in-house, but as long as it is clear to the customer that you can be trusted to deliver it, they dont care if
you outsource it. Having said that, it is very important that if you plan to outsource or subcontract a specific product
or service, it is your responsibility to make sure that your customers needs are met. There is no room to pass on the
buck to another vendor.
Support and service: It is very ironical and frustrating to suppliers that they may receive no praise for excellent
products but get into a lot of trouble for poor service and support. On the other hand, customers can be a lot more
patient with not-so-good products as long as your service/support is unmatched. In summary, there is simply no
room for compromising on support and service. With your key accounts, the best approach is to provide a single
point of contact (with a backup) to them for all kinds of support and let this person coordinate internally how to gear
up appropriate resources as and when needed. (Related article: How to improve customer service?)
Customer value creation: While I have shown it at the bottom, it is probably the most important skill that you may
need. In order to maintain your business relationship with the key account, you have to meet the requirements of the
contract and provide necessary support and service, but what will really differentiate you from your competitors and
shield you from future competition is how you create value for your customer. Let me explain. In todays world, not
many companies have offerings that only they, and no one else, can provide. Both direct and indirect competition is
everywhere, but by creating value for your customers, you can differentiate yourself, and hopefully, expect long-
term business and higher prices. Let me take one example to highlight how you can create value for your customer.
When I worked at packaging solutions provider, we provided packaging equipment and materials to our customers.
In doing so for thousands of companies worldwide, we accumulated vast amount of knowledge about packaging
systems, package design, and inventory management. While we kept our promise to deliver highest quality
equipment and material and backed it up with support and services, for our key accounts, we started offering
package design to reduce the overall cost of packaging and packaging systems redesign to streamline their
operations. We often saved millions of dollars for our customers by sharing our knowledge. In no time, customers
valued that part of our offering more than our equipment and material. Indirectly, this goodwill helped us in our core
business. (Related article: Customer service outsourcing)
Delivery of solution: The final step in key account management is delivering on the promise that
you make to your customer. What can you do different for your key accounts then?
Exceed expectations: Your customer will have certain expectations, and in most cases, it will be clearly spelled out
in a legal document. As an account manager, that is something that you need to keep an eye on, but what will endear
you to your customer is when you exceed her/his expectation. While it is tempting to adopt an under-promise and
over-delivery strategy, a better approach is to truly demonstrate to your customer that you exceeded her/his wildest
expectations because most customers are pretty sharp to figure out that you under-promised and over-delivered.
Such a strategy produces enormous dividends through word-of-mouth marketing. When you exceed a customers
expectation, your behavior leads to stories and anecdotes in the marketplace exactly what you want.
Help them grow sales and income: You may want to think that your job is to deliver what the customers wants and
grow your sales and income, the reality is somewhat different. Remember that you exist because of your
customers. In other words, when your customers prosper, so will you. By helping your customers grow their
business and become more profitable, not only are you endearing yourself to them, you are also creating value for
your business.
Be a partner, not just a supplier: Building on my previous argument, almost anyone can be a supplier, but with
your key accounts, you have to be their partner. Once you start to help them grow, share the risks, and create value
for them, you have become successful in creating customer delight the biggest achievement of a key account
management strategy.
Conclusion

Reluctance to putting in place a key account management program can have disastrous
consequences in the long run for any enterprise. While creating all that extra value can be costly
and require a lot of hard work in an environment where everyone appears to be buying on price
alone, enterprises that do not provide special considerations to their key accounts, eventually die,
since someone replaced them by offering a lower price.












Identifying the key account-





Most important step in the key account management to identifying the key accounts. First we need to
identify the opportunity which can be cash for the company and then access the potential of the same.
Customers are full of opportunities. For example, opportunities to:
Develop more business
Learn about the marketplace
Discover new information
Meet influential people
Lets discover how to locate opportunities and then focus on opportunities that can be found from
looking at business objectives, their (and your) competitors and sales figures.


Locating the opportunity- In defining key account the first important step is to locate the
opportunity-
The simplest way to find opportunities is to ... ASK customers...
How they think so a manager can win new business with them, improve service, get closer to their
subsidiaries, etc.
Be a detective and look for opportunities:
At trade fairs
In the trade press
By talking to your key accounts customers and other suppliers
In market research reports

DISCOVERING OPPORTUNITIES
VIA Customers OBJECTIVES
Ask your customers:
What are your organizations targets and goals for the next year/five years? (This information must
be from internal sources of the customer because customers annual reports for this information mostly
say the same)
What do you need to help achieve those objectives?
List what you can do to help them achieve their objectives.

VIA YOUR COMPETITORS
Ask your customers:
What do you think of my competitors?
What do you think of our strengths, weaknesses, opportunities and threats, Compared with those of
our competitors?
EXERCISE
List the strengths, weaknesses, opportunities and threats of each of your competitors.
List the opportunities you have with which to differentiate yourself from your competitors.

VIA SALES INFORMATION
Think about:
Sales figures - Are they going up (or down) and why? Are you responding appropriately? Is your
competition hot on your tail?
Past successes - Why did you succeed? Was your service quality best? Were your financial terms
unbeatable? Luck?
Past failures - Dont be bashful - admit to past failures! Was your proposal lousy?
Was your relationship with the decision makers not up to scratch?
Tip if your sales pitch fails, always ask customers the reasons why.
Learn from your failures.
List the reasons for successes and failures over the past year.
what can be learn from past sales successes and failures?
Ask customer how you can increase sales.

VIA GROUPING & PRIORITISING
Group opportunities into those that will help you:
- increase usage or sell more of existing product/service
- win new business, e.g.: sales to new parts of customers organization
- improve service levels
- build strong relationships
prioritize the opportunities by thinking about what you will need in terms of:
- Time, staff and money to achieve each
- What the return/profit will be from each



Use gateway criteria to define a key account- in this method we look for the specific characteristic of the
relationship with customer
Turnover
Profitability
Potential
- Lifetime Value
- Type of relationship (partnership Potential)
- Growth Rate
Strategic Importance (Relationship Benefits)
Access to key stakeholders
Others: Industry specific (E.g.- System Compatibility, Risk etc.)

So company first need to use bottom up approach to narrow down the top 15 or top 20 customer (in
volume/revenue generated). It is very important for the company to decide the number of key account
in accordance to the capacity of company (because it require special attention and additional resources
for them) because these are critical decision with respect to brand image and marketing strategy.


Now company needs to prioritize the some of the criteria over others (Like chose a company with high
strategic importance with low profitability over a company with high profitability but no strategic
importance) and select an optimal number of key account portfolio.