Key Account Management (KAM) is more than a business strategy; it is a transformative approach to building long-term, mutually beneficial relationships with a company’s most valuable customers.
Organisations rarely make the effort to adopt KAM unless there is some kind of powerful driver behind it. Indeed, research shows that very few companies make any changes in how they operate when they are doing well, but then they feel they cannot afford to make changes when they are doing poorly – Catch 22!
So, when there is any change, it is often triggered by a specific event or stimulus, and that certainly seems to apply to the adoption of key account management. However, that trigger can be a symptom of an underlying trend or need, which should have been acknowledged, but has not gained credibility or urgency until the event drew attention to it.
Quite frequently, organisations contain an unofficial champion for KAM who has observed an opportunity or a worrying trend and is convinced that KAM is the route to dealing with it. Indeed, companies are recommended to formally appoint a KAM champion, since specifying and developing a new KAM programme and winning hearts and minds to back it, is a big job, requiring:
Stamina and consistency of purpose
Seniority/authority to push the project through
Time to take on the extra work to keep the initiative alive
Ideally, this would be someone at Board level, though not always the Sales Director, with at least one well-informed and well-embedded supporter.
More often, unfortunately, KAM is kicked off in a less purposeful and organised fashion by someone in the organisation, often in middle management, who sees the potential for KAM but has not gained the attention and support of the company to take action. Lacking the authority to carry a KAM initiative through, such champions grasp the root cause or opportunity to make their point. The more effectively they can wield this weapon, the more likely an organisation is to respond with KAM, and the more likely it is to stay on track.
Of course, it may be dangerous to the individual to goad their organisation with a ‘sharp stick’ in this way, but it can be extremely effective, sometimes more so than carefully reasoned, longer-term arguments.
Our research found that ‘sharp sticks’ can consist of a wide variety of untoward events. It may be the loss of a major contract, a public brawl between companies, non-compliance with regulations or other adverse publicity, or unexpectedly bad results — or many other unfortunate situations. But in addition, ‘sharp sticks’ can be fashioned out of more positive and forward-looking drivers like high ambitions, customer demands, or the need to reach critical mass or another stage of security.
The drivers for KAM may be divided into those that are positive or negative and also originate from inside or outside the organisation. While it seems that the most powerful drivers are often the negative ones, particularly the external drivers, there are also positive drivers that may be leveraged to promote the initiative or to make it possible.
Desire for growth
Capitalising on broad offering
Multiple channels to the same customers
Fashionable/useful bandwagon?
Better MIS systems
Customer demand — one company, less time, spent better
Customer demand for strategic partnership
Globalising/cross-boundary customers
Pressure on margins
Pressure on resources
Organisational change/low internal cohesion
Need for cover for a failing offer
Mature market
Embarrassment in the marketplace
Customer loss/potential loss/pre-loss feedback
A tool to grow business
Tool to maintain business
Aligning the customer with our strategy
Increasing contact points for customer retention
Contingency plan for loss
Cross-silo
Structured approach
More focused on the customer
New & joint opportunity identification
Adding value to the customer
Innovation
Investment
Magic wand
Cure-all for problems
Reactive
Customer ‘liking’ (e.g., old boys’ club)
Automated system or process
Regular sales process
Free
The hearts and minds of senior management will have to be won over, but to what? KAM champions are often not entirely frank with senior management in explaining what KAM is and the extent of the changes in the company required to implement it. Quite frequently, KAM advocates have admitted that they described an intermediate, transition stage of KAM. That may or may not be a deliberate strategy not to ‘spook’ senior managers and generate an adverse reaction. Quite often, even KAM champions are not really clear about what KAM in the company will finally look like.
Nevertheless, the KAM champion or core team will need to:
Articulate what KAM is and how it differs from existing approaches
Agree KAM’s priority versus other initiatives
Specify the effort and supporting action required from senior managers
By whatever means, senior management support and engagement must be gained for sustainable KAM:
For cross-functional support
For major change
For serious investment, of time and money
Suppliers really need to understand that key customers expect innovation in a strategic relationship, which is one of the elements that will require investment. Indeed, investment is probably the most important difference between key account management and account management, which many companies already operate: being prepared to invest in customer relationships is a key indicator of KAM. Investment implies funding the customer relationship over and above the on-going cost to serve, where there may not be a direct or immediate recovery of costs.
Suppliers are often uncomfortable with the idea of investing in customers, even when they are doing it, but if they don’t, there will be an impact on the development of the relationship and the business it encompasses. Nevertheless, the term ‘investment’ implies that such funding has a deferred return. Investment would involve spending on things like:
Extra people on the account
Specific market development
Customisation
Infrastructure
IT systems, e.g., an extranet, stock management system, or tailored information provision
Entertainment expenses and normal sales attention do not qualify as investment in a customer, and anything that is funded specifically by the customer is effectively bought and paid for by them, so is not an investment either.
Initially, the supplier organisation will have either no concept or understanding of KAM, or it will contain several different interpretations of it. Champions should make sure at an early stage that there is a wide understanding of what KAM is and can do, and what it is not, and cannot achieve. Most particularly, KAM does not compensate for an unacceptably poor offer to the market, which is instantly detectable to important customers. The basics of quality and service need to be in place at least.
While KAM may deliver some early financially worthwhile responses from selected customers, the approach overall expects to deliver better medium- and long-term results rather than short-term hits, and therefore, any evaluations of the overall programme need to take place over a suitable timeframe. Too many organisations expect instant success in terms of increased profits and are disappointed and destructive of KAM if they perceive it is not delivering as they wanted.
The following table describes KAM by listing what it is through its purpose and requirements: it also lists misconceptions, in terms of what KAM is not.
| Positive | Negative | Internal | External |
|---|---|---|---|
| Desire for growth | Pressure on margins | Capitalising on broad offering | Embarrassment in the marketplace |
| Customer demand | Pressure on resources | Multiple channels to same customers | Customer loss or potential loss |
In most cases, fully implemented key account management is a sound and rewarding business strategy. Unfortunately, in many cases, it is not fully implemented and is therefore a great deal less rewarding than it might be.
Clearly, a good approach is to start out with a clear idea of what KAM is and what it can achieve in the supplier’s specific circumstances, and why it is needed. Constant reminders will not go amiss. The appointment of a KAM champion with senior authority in the organisation is highly recommended, but there is often a ‘chicken or egg’ question here. The need for KAM might be identified at a lower level in the organisation and struggle to convey the message to the highest levels where it needs to be heard. But however an organisation is persuaded to embark on KAM, it should not start if it is not fully committed to continuing. So, one way or another, the initiative needs to be fully owned by the whole of the highest level in the organisation.
Dr Diana Woodburn, January 2018