Why is key account management important?
Why is key account management important? Some reasons are obvious, like growing client revenue and retention, but others will surprise you. Why should you care? Well, if you don't have key account management in place, you could leave money on the table, be helpless to competitor threats and put your most valuable clients at risk of defection.
Existing business is cheaper and more profitable than new business. Fact.
But (and it's a big but), account growth, renewals and advocacy are difficult for indirect suppliers because procurement focuses on spend management.
How do you solve this problem?
Key account management to the rescue!
Key account management definition
I like to say key account management is simply optimising the partnership between you and your clients.
But if you want details, this definition from Gartner says it all:
Key account management (KAM) is the process of planning and managing a mutually beneficial partnership between an organisation and its most important customers. Key accounts are significant to an organisation's sustainable, long-term growth and require a substantial investment of both time and resources.
The benefits of key account management?
Key account management is a critical step on the path to differentiation, optimise business results and secure revenue growth.
(I know I said that already but it's worth repeating)
Glad you asked. Here are some surprising benefits of key account management:
- Business growth. Show me the money! Capture more spend away from alternative suppliers. Expand to new divisions, parent or sister companies. Upsell and cross-sell opportunities through a more extensive network of client contacts.
- Strategy. Understand the relationship between objectives, capabilities and change to represent the customer's voice and the organisation viewpoint to identify long-term mutual goals.
- Consistency. Harmonise products, prices and processes across multiple regions or divisions. Reduce conflict and friction for clients by decreasing complexity and monitoring and managing performance.
- Diplomacy. Identify and connect with decision-makers, budget holders and manage complex relationship networks. Prioritise team alignment to bring clarity to each team members role in deepening customer engagement and impact.
- Cost reduction. Reduce cost to serve clients through efficiency, economies of scales, process development and supply chain management, avoiding formal tenders, improved forecasting and value exchange.
- Innovation. Evaluate the clients' priorities and requirements to create solutions that increase account switching costs. The more your clients rely on you, the more difficult it is to change suppliers.
- Customer advocacy. Intercept issues to minimise the risk of client defection. Sustain a competitive advantage to defend clients against competitors. Manage capture plans to avoid RFPs and secure long-term client partnerships and loyalty.
- Credibility and trust. Clients feel secure in the relationship, and information sharing and transparency increase to help everyone make better decisions.
- Change Agent. Push clients to greater performance. Launch, implement and monitor account plans that speed up business results and client satisfaction.
Effective key account management
Successful key account management requires an eco-system of elements that align to deliver successful outcomes for you and your clients.
Simply hiring someone with the title "key account manager" and hoping for the best is a waste of time and money.
So don't do that.
Before you dive right in, consider these when setting up key account management.
- Organisation design and structure. Key account management doesn't operate in a vacuum. It requires the commitment and co-operation of the whole organisation.
- C-level engagement. You need your leadership team's support to enable key account management success, remove organisational silos and fund and resource your initiatives. Otherwise, you'll battle for budget and encounter brick walls and obstacles at every turn.
- Key account selection. We already said key accounts are your most important customers. This means you need a robust method to identify your key accounts based on more than just volume or simple segmentation like small, medium and large. You also need to have a deselection process. If a client no longer meets the criteria for key accounts, what will you do with them?
- Account plan process. Key account plans are your North Star - they're the compass to guide you toward the outcomes you agree with your client, intercept risk and create value. You'll need a structure for your plans. You'll need governance in place to review and recalibrate to maximise results.
- Metrics. What gets measured gets managed. What does key account management success look like for you and your clients? What are the internal KPIs and financials you need to achieve? Decide on the metrics you'll use to determine whether your key account management strategy delivers a return on investment and stays on track.
- Knowledge management. It will be chaos if you don't have policies, procedures, systems and templates in place. Your key account managers will end up creating their own if you don't, and that'll make it impossible to manage performance and lead to an inconsistent client experience. And a lot of wasted time while everyone re-invents the wheel.
- Global alignment. If you're an international company operating in multiple countries, consider how you will align your key account management message and teams. Organisation hierarchies, roles and responsibilities and communication are essential considerations.
The numbers don't lie
Analytics and Advice for B2B Leaders, a 2019 Gallup Poll, found that when B2B companies implement key account management, they have higher levels of revenue, profitability, share of wallet and lower levels of churn.
If you weren't convinced on the importance of key account management, those statistics should motivate you to take another look.
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The reasons why key account management is important are because it shifts clients' focus away from cost control and toward collaboration, from price toward value.
Through good planning, building influential relationships and leveraging expertise, key account managers become trusted advisers to their clients and create mutual growth opportunities.
So what have you got to lose?