The power of key account management
Key account management (KAM) is the process of building long-term relationships with your most valuable accounts. As such, it can have a profound effect on the performance of your organization. While traditional sales reps are largely short-term oriented and hunt down specific opportunities, KAMs are in for the long run and provide sustainable value to your company and your customer. If implemented correctly, key account management can boost sales, increase customer satisfaction, ensure long-term retention, and unlock innovative partnerships. However, before you decide to launch your next key account initiative; make sure you consider the following 5 tips.
#1: Be prepared to transform your organization
Key account management is often labeled as yet another initiative of the sales department. In fact, this could not be further from the truth. KAM is a commitment of the entire organization towards customer centricity and implies a fundamental change in the way your company does business. Realigning the focus on priority customers stipulates that not only sales, but also adjacent functions such as product management, marketing, operations, and customer service all understand, support, and collaborate on KAM. Building dedicated customer structures will not happen overnight though. For long-term organizational changes of this scale to be effective, the buy-in and sponsorship of top management is indispensable. Best-practice companies therefore appoint top management sponsors for all of their key accounts who personally engage in client management. Failing to understand and accept the fact that key account management means embarking on a major organizational change across all ranks is the number one cause of failure of KAM programs.
#2: Choose your key accounts wisely
While key accounts typically represent your largest customers in terms of sales, their nomination should be a direct result of a consistent customer segmentation. Best-practice companies do not only consider financial criteria such as sales volumes and profitability, but also include behavioral criteria such as buying frequency or cross-selling potential. These criteria can be complemented by more strategic considerations such as the geographical spread of the customer or the potential for partnerships. Whatever criteria you choose, be clear about what defines a key account and stick with it. This being said, consider starting small. Creating customized value propositions and offers for your key accounts is far more complex and time-consuming compared to regular accounts. Taking on too many key accounts from scratch might leave your sales organization overwhelmed and unable to serve these crucial customers properly.
#3: Hire the right people for the job
Finding the ideal KAMs can be quite the challenge. Generally, KAMs should be experienced managers with solid project management capabilities, a strong customer focus, and great relationship skills. Instead of moving your top sales people into KAM roles, consider choosing experienced managers with a mix of strategic and operative experience. Once onboarded, train them to build up and improve their sales techniques and technical knowledge. This does not only ensure that your KAMs can successfully liaise with different interfaces at the customer and within your own organization, but also allows you to keep your best sales people on the ground supporting the KAM in doing what they do best. In order for KAMs to best most effective, establish a direct reporting line to top management. This will get key customer topics onto the management agenda and ensure support when needed. If chosen correctly, high-performing KAMs will turn out to be powerful change agents towards customer-centricity within your organization.
#4: Develop a unique value proposition
One of the first items on a newly appointed KAM’s to-do list is the development of an account plan. Typically, account plans cover elements such as an overview of your business with the customer, a thorough analysis of the buying center, as well opportunities and goals for this account. What many organizations forget, however, is the development of a customer-specific value proposition. Best-in-class companies do not only develop value propositions for their products or services but also offer unique solutions and packages to solve their customer’s problems. In fact, your value propositions can be drilled down and refined to address single stakeholders in the buying center. Knowing your customers problems on an individual level is a powerful way of making sure your products and services are helping your counterparts at the customer to achieve their goals. The most powerful partnerships arise, when the value proposition and the underlying business model have been developed jointly with the customer. Symbiotic relationships like these with investments from both parties serve as strategic lock-in and secure customers on new contracts before they go to market asking for bids from competitors.
#5: Set the right goals
As KAMs are working towards long-term value-creation, make sure this is also the perspective you adopt when measuring their performance. Classical sales performance indicators such as topline growth can be counter-productive as they incentivize KAMs to shift their focus from building long-term relationships to more short-term opportunistic sales. Instead of focusing on sales growth, best-in-class companies measure KAM performance through the lifetime value of their customer (CLV). The customer lifetime value is a prediction of the net profit attributed to the entire past and future relationship with a customer. This metric allows KAMs to steer investments in the customer relationship effectively as all efforts (both financially and personally) eventually need to pay off in a higher long-term value of the customer. Moreover, the CLV naturally enforces the KAM’s role in aligning the entire organization towards the customer. A powerful KAM will therefore not only make sure that product management focuses on customer needs, but will also ascertain that marketing provides powerful sales support on the ground and customer service plays an active role as business partner in solving customer problems. This way, KAMs have the potential to become the ultimate customer advocates in your company.
Sources: Digital Sales Lab, Harvard Business Review
Want to learn more?
Key Account management can provide tremendous focus to your company and has the potential to truly bring the customer at the center of your organization. However, getting there requires a whole new way of working. A shift away from functional silos to a globally interconnected organization with a common DNA. Of course, these five tips only cover the surface. If you want to learn more about proven best practices in key account management, new digital solutions for your sales teams, and how DSL can help to make the most out of your KAM program, please reach out to us.