Key Account Management, or to be more specific, Strategic Account Management, remains unknown from, or neglected by, many executives whereas some of their peers put KAM at the very heart of their company’s strategy and DNA. This articles is intended for business owners, board members and senior executives with the aim to motivate them to take a closer look at the KAM topic.
Key Account Management,
what is it really?
The concept of Key Account Management (KAM) appeared in the 70s, within industrial companies who wanted to build a closer and more stable relationship with their largest customers . In the 80s and 90s, it was picked up by other industries and sectors while evolving with the global economy and the dynamic of all markets.
Today, a variety of companies as diverse as Schneider Electric, Siemens, SKF, DHL, Marriot Hotels, Gallup, and Roche put Key Account Management at the very heart of their strategy and even of their culture. After lagging compared to other industries, the Pharmaceutical and Medical care and equipment sectors , under the pressure of radical changes in their regulatory and business environment, are charging to develop a solid KAM practice.
To organisations, large or small, who are really serious about KAM, the terms « Key » means in fact « Strategic » implying that true Key Accounts have a special strategic meaning for the company, beyond their size. Therefore, these companies make a clear distinction between large accounts and key accounts.
Practicing KAM means selecting a few truly strategic customers in order to develop a privileged relationship with them, often based on a customer-specific value proposition, which, compared to a more transactional buyer-vendor relationship, brings greater benefits to both parties.
Do not confuse Account Management and Key Account Management
Let’s be clear: Account Management and Key Account Management are two different things and they complement each other.
Account Management is the method and set of processes to manage the business relationship and operations with all customers. It is closely linked to the nature of the company’s activity and to the specifics of the exchanges between a vendor and their customers. The Account Management principles, and their practical consequences, are common to all customers although they vary with the size of the customer and the business portfolio. All customer-facing functions (sales, pre-sales, technical support, delivery, …) must know precisely their role and the contribution expected from them in the overall process of Account Management and fully master the fulfilment of their mission.
Do not confuse Key Account Management with Account Management
Key Account Management, is the methodology and set of supporting processes, tools and practice used to manage the relationship with strategic customers. It does not replace the account management processes but rather complements them with the KAM-specific processes. The practices and processes characterising a KAM initiative usually include: the selection and deselection of key accounts, the building and management of (virtual) account teams, goal setting for the short and medium term along multiple dimensions (relationship, influence, opportunities and sometime R&D), resources allocation as well as KAM-specific communication rituals with the customer, such as regular business reviews. More and more, advanced KAM approaches include a collaboration in the field of R&D or of go-to-market models. Companies such as Maersk Line, Marriott Hotels or Hilti, even make such a collaboration a pre-requisite for considering a customer as strategic.
Benefits which can be expected from
a good practice of KAM
What are the ultimate goals pursued by companies who develop and maintain a true KAM practice ?
A survey from the Strategic Account Management Association (SAMA), published in 2012, gives the top 3 motivations of companies who have developed a KAM programme:
- Accelerate growth over time
- Better fulfil the needs of customers for solutions rather than for products
- Strengthen the differentiation and the competitive positioning
As far as the positive impact on growth is concerned, a survey by the Sankt Gallen University, conducted on 560 European companies and released in 2008, concludes that the average growth difference between companies who do not practice KAM and companies who do, is of 28 points (base 100 for the average growth of companies without KAM, average growth of 128 for companies with KAM). This figure is measured over a few years, typically 3 to 5, the timeframe necessary for a KAM programme to reach a sufficient level of maturity. This number of 28 points additional growth alone – not to mention the 75 points growth advantage of the 6% best in class companies – should convince executives to seriously explore if the KAM concept fits with their business.
Beyond the ultimate but backward-looking metric of growth acceleration, the benefits of KAM are multiple and several of them can always be observed simultaneously within organisations who have successfully implemented KAM. The most frequent of these benefits are as listed bellow.
- A sharper analysis of the customer base and of the value of each of them
- An enhanced capacity to articulate and communicate value
- A much higher customer orientation
- More collaboration between functions
- Better processes and systems
- An acceleration of the development and market introduction of new offers
- New career opportunities
- A company more attractive to talents
An example of the positive impact
We have already mentioned that some companies have put Strategic Account Management at the very heart of their strategy and culture. MAERSK Line, the Danish logistics giant is facing, like its competitors, a commoditisation of marine transportation. MAERSK considers as strategic only the customers who want a higher value and, in order to get it, accept to partner with their logistics service provider to co-create it. This approach maintains a competitive advantage and contributes to protecting margin.
KAM is a relevant management tool for companies of all size, and its critical success factors are in fact independent from the company size. In the mid-2000s, Text 100, a Digital Marketing and Public Relations agency operating in more than 20 countries on 3 continents, with a staff of 650, had been selected as one of the two global agencies of reference by a prestigious corporation. The other agency, a more established player, was about 8 times bigger. Well aware of the huge potential of this customer, but also of the potential of its other international customers, all of them representing over 70% of the total revenue, Text 100 implemented 4 key initiatives, each of them complementing the others.
- A KAM/GAM initiative (GAM : Global Account Management) based on a customer segmentation conducted at three levels (global, regional, national), the creation of the Customer Advocatefunction, an energic intensification of the networking and relationship building with customers at ALL levels. The main goal of the networking effort was to develop a much deeper understanding of the business needs of the customers but also to become trusted advisors to key contacts with the aim to bring value to them while selling the most advanced services of the agency.
- The development of the collaboration across virtual teams with, as a pre-requisite, a high focus on intercultural skills.
- The improvement of profitability by better selling the value of advanced services and optimising the pricing.
- An increased focus on customer orientation and service quality relying on customer satisfaction survey (more sophisticated that NPS) and always followed by actions plans at all levels of the organisation.
These four initiatives were under the responsibility of the Client Service Director but the whole leadership team was behind them. An important parameter to highlight; not a single person in the company was dedicated full time to any of these initiatives, not even the Client Service Director who was also a Client Advocate and doing consulting work for various customers. All initiatives and the supporting processes and tools had been design to be embedded into the agency’s life.
Thanks to its KAM practice Text 100 EMEA grew by 65% in 3 years on its top customer whereas the more established competitor lost 50%
In 3 years, Text 100 managed to boost the measured customer satisfaction from 77% to 93%, grow revenue on top customers by 15% year-on-year in a tough market and improve the operational margin by 5 points. In parallel, and it did not happen by chance, the employee satisfaction and the collaboration improved. In Europe, leveraging its networking efforts with its largest customer, while the communications department of customer were cutting their PR budget every year, the agency grew revenue by 65% while their competitor saw a drop of 50%. Most of the growth came from the most advanced services. Last but not least, the function of Client Advocate became the holly grail for the most talented persons in the agency.
The cost of doing nothing
Even while being aware of the concept of KAM, many executives never start acting. There are various kinds of reasons for this. Sometime, it is pure procrastination : « Yes, we should really do something about our strategic customers. But, you know, we have so many other priorities ». Sometime, the execs are no aware of what KAM exactly means; they have an incomplete view of the matter and/or a negative perception based on the fear of a high cost and questionable ROI. Sometime, it is a question of culture and politics and giving-up in front of the challenge of driving change. Whatever the reasons, doing nothing can be a costly mistake, especially if facing competitors who practice KAM and do it smartly: remember the 28 points growth differential of the St Gallen Survey (and 75 points for the best in class).
A major European player of IT services was very well established across Western, Northern and Central Europe. The list of customers was impressive but each country was operating as a kingdom with the service offering being different across countries. No effort was made to offer similar services to large corporations across several or even all countries. A few board members were well aware of the issue and of its meaning in terms of lost opportunities. Unfortunately, they also thought that any attempt to establish a unified approach of a few large customers based on a unified offering would be very badly perceived by the leadership teams of most countries. They were under the impression that the risk of change was too high. The status quo continued, until they were purchase by a competitor, hardly larger than them, and who had a KAM programme.
Doing nothing when the business parameters are in favour or a KAL programme weakens the company against its competitors
A medium-size global engineering company, specialised in very advanced technologies, has built their success on building small but very strong local subsidiaries operating in « commando mode ». For two decades, this model has enabled the company to grow in size and prestige. But the market has changed. It is more competitive and almost saturated. The major customers are almost exclusively global companies seeking to optimize their portfolios of technologies and their industrial investments while being innovative. The time has come where it would be a logical move to engage a few selected customers globally. Some executives and senior managers see the problem. But they also fear the political cost of going against the mentality of the country general managers and other local executives. The clock is ticking. What are the competitors doing? (What would you do in their shoes ? Nobody should say that the answer is simple).
Key Account Management is very often – not always – a very relevant instrument to keep developing a company, to help execute on a strategy and to accelerate growth. It is also a powerful instrument to keep adapting and strengthening a company’s culture and all experience true KAM practitioners are very vocal on its transformational power.
It is the leadership team responsibility to explore and assess the KAM opportunity and, if deemed adequate (which is not automatic), to decide to launch a KAM programme. Those who do it print their mark on their organisation, and, if they execute well, make it fit for the future.
Olivier Rivière, Partner at Powering
+ 33 6 37 04 98 40
A few words about me : I am Dr. Olivier Rivière, Founder of OR Consulting, Partner chez Powering. I am a specialist of the design, deployment, audit and improvement of Key & Global Account Management programmes. I also work on Sales Excellence, Sales Enablemen and on the improvement of B2B Marketing.
Elaborating on my experience of KAM in 4 different companies of various nationalities and in various sectors, I have created the KAM Reloaded™ methodology. Flexible and pragmatic, it puts emphasis on finding an harmony between processes and tools on on side and human skills and behaviours on the other side. Working with selected partners, I help you build and implement a KAM or Sales & Marketing Excellence initiative truly adapted to the specifics of your business.
Read more articles from me on LinkedIn et sur le site Powering
Or contact me : via LinkedIn or via phone: France : +33 6 37 04 98 40 – Germany : +49 173 5731 586