Key Account Management is the essential showcasing approach that gives a successful, useful, and rather basic technique for organizations intrigued in increasing their profits by right customer and relationship management. In organizations in which information is decentralized in specialty units, the execution of a Key Account program goes through the accounts determination issue, and through the execution interaction, that can be perceived like a Knowledge Revelation in Database measure where the objective is to look for accounts under given limitations in the showcasing utility capacity.
Since globalization and the development of business markets have expanded the purchasing force of customers, one of the Strategic Marketing objectives is to recognize suitable advertising apparatuses to examine customer management and advertising tasks. The idea of Key Account Management (KAM) risen up out of the Strategic Marketing determined to give a compelling, viable, and rather a basic strategy for organizations keen on increasing their profits by right customer and relationship management.
Regardless of this methodology has become common in a business-to-business showcasing relationship, most retailers and administration organizations have been enormously benefited from it, fabricating an arrangement of Key Accounts by Key Account Management (KAM) is a characteristic advancement of the customer center and relationship advertising in business-to-business markets. It can offer basic freedoms for benefit upgrade for both the merchant and the purchaser, in case it is made do with uprightness and creative mind. The extent of KAM is extending and simultaneously becoming more mind-boggling. This implies that the abilities of those included, the two at key and functional levels, should be constantly refreshed and created. The requirement for Key Accounts Management (KAM) emerges from the combination of purchasing focuses, in mechanical and retail associations. Inside mechanical and business associations purchasing is turning out to be more expert and concentrated, with worry for more prominent effectiveness in inventory network management, further developed edges, lessening costs, and so on.
WHAT IS KEY ACCOUNT MANAGEMENT?
Key Account Management (KAM) is one of the approaches calling for customer focus of such customers which are strategically important for the organisation. Due to the dividends accrued from the approach, KAM has become one of the most popular and successful approaches used for customer retention and development.
According to Millman, a key account can be defined as: “A customer in a B2B market identified by a selling organisation as of
A customer can be a key customer to an organisation depending on various variables like geographic spread, size of customer, sales turnover, and profitability. However, all the key accounts need not have large geographical
coverage or large turnover. All customers are not equally profitable or important. In some cases, a seller or a vendor may consider a customer key account as key account, not because of their profitability, which may be low, but because of
other considerations such as reference or prestige value or because they permit access to markets or technologies. In the end analysis it can be said that under different circumstances due to different considerations all the key customers are
of strategic importance to the seller.
Key Account Management is an organisational process that assumes that relationships are dynamic and not static and that the relationships evolve over period of time. Each interaction is a consequence of the relationship that exists
between the customer and the supplier. The interaction in turn influences the relationship and growth. Millan and Wilson (1994) have developed a six-stage model that is a useful tool for examining sources of competitive advantage
and characterising managerial behaviour. The six stages of the model are given below:
- Pre-KAM: In the pre-LAM stage it is essential for the firm to identify those accounts that have the potential of moving towards key account status. This is important so that the firm does not waste time and money in those accounts that do not hold this potential. At this stage, the selling strategies are concerned with making basic product or service offering available. At the same time information about the customer is gathered in order to determine whether they have the potential to become a key
account or not.
- Early-KAM: In the early KAM stage, a firm explores opportunities for the collaboration with its customers by examining the motives,
behaviour, culture, strengths and weaknesses of the customers. The firm then highlights the potential benefits that the customers may enjoy as ‘preferred’ customers. A detailed understanding of three aspects is very important at this stage. These are: the decision making process, the nature of the decision making unit and the buyers business and problems.
Internally, the firm will have to look at promoting the importance of the account to the firm as a whole. In addition, the firm will have to promote the importance of benefits such as non-standard offerings to members of their own firms. The focus of the sales effort is on building trust through consistent performance and open communication.
Mid-KAM: As the relationship of a firm with the customers deepens, the level of trust and the range of problems that are addressed increases. The number of contacts between the employees of the firm and the customers also increase to a much higher level. This implies that the sales person’s role in the relationship will increase. The relationship may fall short of exclusivity and the activities of competitors within this account may require constant review.
Partnership KAM: This represents a mature stage of key account development. The supplier is often viewed as an external resource of the customer and the sharing of sensitive commercial information becomes very common. Joint problem solving is the main focus at this stage of relationship development.
Synergistic KAM: At this advanced stage, the key account management goes beyond the partnership level and the two organisations tend to see each other as parts of larger entity creating joint value in the marketplace.
Uncoupling KAM: This is the final stage wherein the partnership comes to an end. Partnerships that are ill convinced or that have outlived their usefulness and served their purpose should not be allowed to continue beyond a certain point. Sometimes short-term relationships might prove to be more profitable than long-term relationships.
OBJECTIVES OF KEY ACCOUNT MANAGEMENT:
Marketing and Sales
● Improved customer insight
● Understanding of customer needs
● Understanding of usage patterns
● Better product knowledge
● Better access to marketing material
● Better competitor information
● Improved performance information
● Measurable goals
● Link between Business Plan strategy and Customer strategy
● Better product information
● Better information on services
● Better understanding of reimbursement
● Better product benefits knowledge
● Ability to raise individual profile
● Increased end users
● Provide resource input
THE STAGES IN KEY ACCOUNT MANAGEMENT
Trade Channel Mapping:
• Collect data on the product category volume purchase/ usage by all customers/ users as low down the volume purchase/ usage tree as possible.
• Identify (ranking as best as possible) the major accounts in terms of volume, purchases or usage (depending on whether the products are for onwards sales and distribution, or for internal consumption as an industrial or commercial input.)
• Clarify which accounts you will treat as key accounts (do not limit yourself only to your current customer base within category purchases/users – at this point you must recognise also those major accounts who are not currently your customers, but who should be classified as key accounts in order to receive the development
attention needed to penetrate and gain trial or distribution). As a guideline only, in many categories we would identify as key
accounts any purchaser/user who absorbed over 1% of the total category purchases or usage.
• Set account objectives; develop specific account development strategies and tactics.
Developing Key Account Profiles:
The objectives in developing key account profiles are to:
• Categorize each key account according to its rating on relevant profile parameters.
• Match key account parameters to your company brand target outlet profiles.
The next stage in formalising an approach to key account management is to develop a profile of each key account. Typically a form such as (the customer/prospect record card) might help in this exercise or, alternatively, a format of a customer record card such as either of those illustrated.
A form of the type illustrated can be used to build a profile of national or territory accounts. In that example we are looking at the various trade channels selling alcoholic beverages either for consumption on the premises (on trade)
or for take home consumption (off trade). The various outlets will have very different customer profiles for parameters that relate to the purchase consumption of individual alcoholic drink brands, such as in terms of location, income social
class, ages, sex. With this kind of customer analysis the supplying company can decide exactly which individual outlets it wishes to target as locations where it would like particular brands distributed and displayed.
Getting to know the buyer:
It is important to develop an in – depth understanding of the buyer, both from the perspective of his or her role in the key account and as a person.
Account Penetration and development:
Establishing Relationships: When working with major accounts the selling relationship is not normally a quick, hard sell, but protected negotiations over a period of time, often supported with substantial figure work and analysis of products. The key account manager must work over time to build an appropriate business rapport and relationship of mutual respect and equality.
Building Relationships within Key Accounts:
The objectives of developing relationships with key accounts are to:
● Build a network of contact throughout the account with persons involved in any aspect of the accounts business, which impacts on the actual potential sales of your products.
● Establish a relationship of trust with key contacts that can be built on in negotiation and influencing the account to take favourable decisions.
What do we mean by a business rapport?
● A process of two-way communications between the account manager and key account, not a monologue situation in meetings nor a demand and respond situation in non-face to face contact.
● An ability to raise contentious issues without rancor, and to discuss them without animosity or conflict, but from a position of mutual respect and a willingness to identify and address issues impacting on the performance
and objectives of either party.
● Personal relations at a satisfactory level where social contacts pass smoothly but are not the dominant aspect of relationships to the point that active and effective account management is inhibited.
● A level of mutual trust demonstrated by the key account through a willingness to discuss his or her business, its performance and issues with the account manager.
BENEFITS OF KEY ACCOUNT MANAGEMENT:
● Increase sales effectiveness by pursuing high potential accounts and opportunities.
● Increase market share and revenue within existing accounts.
● Increase profitability through development of the appropriate product and service offering for the customer.
● Provide opportunities to contribute to the success of the customer.
● Improve customer retention through stronger relationships and increased client satisfaction.
● Facilitate the allocation of marketing and sales resources.
● Key Account Management (KAM) is one of the approaches calling for customer focus of such customers which are strategically important for the organisation. Key Account Management (KAM) is a natural development of customer focus and relationship marketing in business-to-business markets. The need for Key Accounts Management (KAM) arises from the consolidation of buying points, in industrial and retail organisations.
● There are various objectives of Key Account Management like Improved customer insight understanding of customer needs, understanding of usage patterns, better product knowledge, better access to marketing material,
better competitor information, improved performance information, measurable goals, and link between Business plan strategy and customer strategy for sales and marketing organisations. For the customers the
benefits are better product information, better information on services, better understanding of reimbursement, better product benefit knowledge, ability to raise individual profile and increased end users.
● There are six states in key customer management. They are trade channel mapping, developing key account profiles, getting to know the buyer, account penetration and development, setting key account sales objectives
and key account negotiating.
● Compared to the past the changes that are taking place in word economy are happening at mind boggling place. The world is reduced to a seamless market. Therefore, in the past where one country would look to be a large market, today the world looks like a big village. Thanks to the technology which has increased interaction of organisations with their customers,
globalisation of customers, increase in sales, marketing and service efficiencies using automation tools.
● The trends challenging KAM are supplier base reduction, customers focused on buying the same components or parts from fewer suppliers. The second trend is emergence of global customers. The third trend is increased use of the internet. The internet has the potential to redefine interactivity in various stages of buyer-seller transactions. Lastly, recent
advances in the power of computing hardware and software and the availability of communications technologies.
● The benefits of key account management are increase sales effectiveness by pursuing high potential accounts and opportunities, increase market share and revenue within existing accounts, increase profitability
through development of the appropriate product and service offering for the customer, provide opportunities to contribute to the success of the customer, improve customer retention through stronger relationships and increased client satisfaction that facilitate the allocation of marketing and sales resources.
Reference: Bowersox, Logistical Management: The Integrated Supply Chain Process, Calvin, Robert J. Sales Management, Chopra, Supply Chain Management, Ghoshal, World Class in India. Penguin India, Lamba, A.J. The Art of Retailing, Scheuing, Kurtz, Johnson. Sales Management: Concepts, Practices and Cases, Various other sources. Picture Credit: www.lucidchart.com