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Key account management: A strategic imperative

Key Account Management (KAM) is a system where an organisation categorises its customers with a view of identifying those that contribute more business and giving them closer attention. More specifically and according to MacDonald, Millman and Rogers, “Key account management is a natural development of customer focus and relationship marketing in business‐to‐business markets. It offers critical benefits and opportunities for profit enhancement to both sides of the seller/buyer dyad.”

marketing insights with ELLIOT SHONIWA

Unpacking the above definition reveals certain imperatives that need to be understood. The first one is that KAM is aimed at customer focus i.e. creating long-term relationships. The second one is that in KAM, you are dealing with B2B customers. The third one is that KAM offers opportunities for profit enhancement on both sides of the business relationship. Finally, there are two sides to a KAM relationship, that is the seller and the buyer.

Clearly, from the above, one finds that KAM is not an ordinary marketing activity. KAM is thus a strategic activity that is integrated into the overall business strategy! The focus is on building profitable long-term business relationships. A key account is represented by a person or a group of people to which your business has built more than a standard business relationship. There is a high degree of trust and accountability between the two organisations. Ideally, the dynamic of the relationship has changed from that of vendor-buyer to much more of a partnership. You’re no longer selling to that organisation only — you are that organisation’s partner in continuously helping their company succeed.

Key accounts require special treatment due to their key role in the success of your business. In simple terms, key accounts are customers the organisation cannot afford to lose!

It is widely believed in the field of marketing that KAM means far more than just selling products to big customers. It revolves around how the customers who play a strategic role in the growth of an organisation are handled.

The issue is no longer about a supplier and a customer. The relationship is much deeper than that. In KAM, the survival of both organisations depends on the solid relationship between the two organisations. The supplier and the customer see each other as “partners”. In this relationship, a lot of confidential information is shared that would ordinarily not be shared with any other stakeholder. Cost build-ups and strategic direction are known by the partners though they are governed by strict confidentiality agreements. In view of the fact that KAM by its nature is strategic, it therefore follows that senior management — including the top most executive in the organisation — are an integral part of the process.

The main reason why KAM is becoming a buzz word, is that big customers are getting bigger, therefore, they require special attention and focus. Using the Pareto principle, one needs to know the 20% of their customers that give them 80% of business. These customers need to be given customised service. If you are going to increase the “share of the wallet” or the average deal size then seriously consider KAM. The “one jacket fits all” syndrome doesn’t work in the current business landscape.

The second reason is that some organisations are rationalising their supplier base. Instead of dealing with many suppliers, some organisations feel that for a certain type of good/service, dealing with one organisation is the way to go. By so doing, both organisations become “value partners”.

The third reason is that customers have become more sophisticated. Because of this, they require sophisticated and tailor-made service. They require close attention and special focus. This may be 24/7! Far-sighted organisations have even gone to the point of appointing key accounts managers. The Key Result Area (KRA) for this person is managing the key account and addressing the customer’s concerns proactively with the guidance of senior management.

The fourth reason is that some customers want tailor-made solutions. They demand a service level that is unique to them. All the “Ps” of marketing — whether they are four or six or eight — should be tailor-made for the specific customer! Through this strategy you increase customer loyalty, retention and advocacy!

The fifth reason is that because of globalisation and the ease with which information can be obtained these days, customers are now more demanding. You don’t want a scenario where your customer is more knowledgeable about your product than you. Imagine in the automotive industry, where a sales manager is trying to introduce a new brand to a potential customer! The sales manager will be required to know his/her product very well. He/she needs to know what’s available from the competition within that segment and how best he/she can get the order! One needs to go beyond the issue of features and benefits! In fact, in this example, the product goes beyond the physical product to include after-sales support. This can be a deal-breaker if it’s not well-articulated!

How do you categorise your customer base?

As explained, the starting point is the Pareto Principle. Start by identifying the 20% of your customers that give you 80% of your business. Once you isolate this 20%, engage them and agree on customised solutions. This is a two-way street with the customer being given more time to articulate their concerns and expectations. The key account manager needs to be a good listener.

Issues to look at include turnover, profitability, value-added and potential. With the latter, you need to be far-sighted i.e. someone may be small today but with potential to grow in the not-so-distant future! You need to keep this customer under your radar and be part of their growth strategy.

Understanding customer needs

Needs depend on the type of strategic customer being targeted. As an organisation, you need to understand your key accounts. You must know the known needs, unknown needs, competitor-driven needs and personal needs of your customers.

Besides the above industry, knowledge is a must. Understand its dynamics and the direction things are taking. Use the internet to look for clues, talk to experts and talk to industry gurus! Above all, be well-networked! Your network is your net-worth! Plain and simple.

You need to have a good grasp of competitor knowledge. At the same time, constantly look at deficiencies in existing solutions. Finally, have a good understanding of metrics that represent value to the customer. At the end of the day, everything boils down to “dollars and cents”. Being a marketer doesn’t stop you from understanding the financial impact of certain decisions. Where possible, build a case by looking at the numbers and facts. As they say, facts are stubborn!

What is a good key account manager?

A key account manager needs far more skills than an ordinary sales manager. Key account management requires someone who is interested in more than a “short-term “sale. One who looks at the bigger picture and adopts a “holistic” or “bird’s eye view” of matters.

It also requires someone who sees the customer as strategic to their own success, as well as both organisations. As mentioned above, both organisations are seeking mutual survival in KAM. There is no taking advantage of each other in this relationship. Thirdly, a good key account manager needs to be a person who is willing to input time and effort without immediate financial compensation. Key account managers help customers make the right decision, ensure deals are profitable to both sides and should be able to read people and connect with different personalities.

Key account management is a wide area in which books have been written while some are still to be written! It is, however, of strategic importance that organisations look at their customer base and come up with some criteria that they use to look after their customers.

Reference:

Macdonald M., Millman T., Rogers, B. Key Account Management: Theory, Practice & Challenges (2010)

Elliot Shoniwa is a thought leader in the field of marketing. He writes in his personal capacity though he works for a market leader in the automotive industry in an executive capacity. He can be contacted on the following email address, eshoniwa2000@yahoo.com.

*This article was contributed on behalf the Marketers Association of Zimbabwe, a leading body of marketing professionals promoting professionalism to the highest standards for the benefit of the industry and the economy at large. For any further information, kindly contact mazmembership@mazim.co.zw or visit the website on www.maz.co.zw. This month the focus will be on Customer Experience Management.

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