What’s in a name? Defining key and strategic account management - Talking KAM Newsletter

Account management comes in many forms these days. We hear terms like key account management, strategic account management, national account management, and more. To add to this growing list of labels, the emergence of disciplines such as customer success management and customer partnerships add to the confusion. Are they the same? Should you care?

How to define the account management hierarchy

The fundamentals of account management support supplier/customer relationships, whether more ‘transactional’, or at the highest levels of strategic importance. Regular contact, strong processes, services that meet the needs of the customer, are all essential to every account management relationship. So, what makes a customer key or strategic?

We see three specific identifiers that differentiate higher level accounts from those that sit within the general customer portfolio:

• The value of the customer – how much profit does it and could it generate?
• How strategically important is the customer to the supplier??
• How much resource does it require to manage? Key and strategic accounts are highly complex, resource hungry entities, so by their nature must be far fewer in number.

A standard account is much simpler to service. It requires an account manager as a point of contact and well-designed support services to ensure that the relationship remains on track. The account manager will have a larger customer portfolio that can be segmented territorially, by industry sector, or in other ways that best suit the supplier business.

The key account requires deeply considered investment and integration into the supplier business to maximise the probability of success. These accounts provide a complex range of issues that may touch all parts of the supplier business. The relationship will be headed by a key account manager who requires a broader range of skills from relationship building to strategic perspective. Being a skilful problem-solver is essential. What must be considered is the customer’s view of your business. The selection of key accounts must be a mutual process. As a supplier, you have to be seen as of equal strategic importance to your customer as they are to you. Strategic discussions should be held with your customer before officially including them in your key account portfolio, ensuring two-way communication is established, and that both parties see the relationship in the same way.

Considerations for selecting key accounts

There are several areas for consideration when you are selecting a portfolio of key accounts:

• Identify accounts that are demonstrating rapid growth and predicted to continue in a similar vein in the near future.
• How important is the product or service you provide to the customer? Does this customer offer opportunities to develop together to extend your commercial advantage?
• The account is asking for more engagement. Stakeholders from both sides are becoming increasingly involved. Joint workstreams are developing.
• The customer recognises you as a strategic supplier to their business.

Strategic v key customers

‘Strategic’ means different things to different people, but what everyone agrees is that the title adds gravitas to those accounts it is applied to. What must be emphasised is that strategic accounts should be few and far between. A key customer is complex, can be high growth, of strategic importance and more. The strategic account moves up another level; it is vital to the success of your business in achieving key objectives and actualising your corporate strategy. These are customers that the Board is fully engaged in and should be reviewing quarterly.

Boards, however, do not always have the strategic account management competencies to develop and maximise the potential of their most important customers. Identifying them and defining their meaning to the business is a good starting point. It is recommended that as the scale of customers justifies moving into key and strategic categories of account management, embrace the toolkit that exists around KAM. If necessary, recruit a practitioner who can help inculcate the skills and values required to develop KAM across your business. This is an essential step in working effectively with your strategic accounts.

Clarifying KAM with your customers

Terminology differs among suppliers; this is not terribly important. What is of more concern is that your understanding of KAM and what you expect to deliver as a result, is aligned with your customer’s view of KAM and their expectations of delivery. It can be easy to disappoint key customers by employing the wrong personnel, setting unrealistic objectives and by letting them know they hold key account status only to treat them as one of many. Ensure you have the right people managing that key customer, engage at all levels, collaborate on strategic objectives and keep regular and open lines of communication.

Define exactly what you want from each category of account manager based on the types of account they will be managing. There are people skilled in business development, sales management and excellent project managers. Match the dominant skillset with customers that will benefit most, based on their requirements. Ultimately, the customer must understand what the role and objectives of the account manager are to ensure they align with their expectations.

Conclusion

KAM remains a poorly defined business discipline and can be understood in different ways across various industry sectors. It is essential for any organisation employing KAM or considering implementing it, to become as familiar as possible with best practice and how it can be applied to their business. Ask the most important of questions: what are we trying to achieve?

There will be a hierarchy of accounts in every business. Being able to define what each layer looks like helps immensely in deciding who sits in the regular account portfolio, who is a key account, and who are the few among many who can be called strategic customers. At the highest level, you should be able to achieve the ultimate level of partnership, as active in your customer’s corporate strategy as they are in yours. The level of return and reciprocation must be strong to justify the investment in time, money, and resource needed to meet objectives.

Strategic account management moves away from the typical relationship, transactional, with a view to selling the customer more. Strategic customers are those you can truly work together with, where you are serving your customer’s customers and influencing their supply chain. These are great opportunities to develop mutually beneficial products and services and to streamline your business processes.

It is a major investment, but give it the focus, resource and commitment it needs, managing your key and strategic accounts effectively can be the making of your organisation.