Key Account Management: Selection, Analysis, and Implementation

When building your Key Account Management program, the single most important step is selecting those accounts that should be part of this program. Selecting the wrong key accounts will cost you a lot including the lost opportunity impact.

From a thorough personal experience, the common selection mistakes are along these lines of thinking: “They provide the most revenues in my portfolio, therefore they must be a key account”. “I will just pick my top 50 accounts and they will be my key accounts”. “They are the biggest fish in my market, so I will pursue them as a key account, even though they are not a current client of mine”.

Regrettably, many organizations and individuals initially approach this crucial practice in an often laid-back manner. Only later and down the line, it is realized that future decisions are more difficult to make due to this early selection process being handled incorrectly.

I will get into the details of the critical steps in selecting key accounts (the technical part). However, it is imperative to mention that the key to succeed in all the steps of selecting and managing key accounts is the ability of the Key Account Manager to continuously persist to really understand the account (the behavioral part). Without this persistence, little results will be achieved on both the short term and the long term.

This being said, here are the three technical critical steps that I find important in selecting key accounts:

1. Ensure a Strategic Fit: key customers must fit your organizational strategy. This will assist in ensuring that the key account makes a major contribution to your and their achievements. Your key account selection should include these and only these clients. If the selection is weakened by clients with unrelated agendas, the account will not respond favorably to your strategy. You also risk being unable to demonstrate positive returns from the key account management program which would therefore risk its initiative.
Also, try to limit the key account selection process to between three and five criteria. The following are just a few examples of the possibilities:
• Revenue potential (avoid weighing this too heavily)
• Centralized purchasing
• Product fit
• Growth potential
• Existing relationships
• Cultural fit
• Geographical alignment
• Possible channel management partner
2. Conduct a portfolio analysis: One of the sales techniques utilized by sales consulting firms is the Customer Value Matrix Job Aid (see matrix below). Utilizing this Job Aid, plot the existing customers accordingly. The portfolio analysis process involves the following:
• Review the last 3 years of actual volume or revenue in addition to the actual cost to support these clients (in many cases, this may reveal you are actually losing money on those accounts you thought were key accounts).
• Determine the cost and growth potential for these accounts for the next 3 years
• Define the type of buyer, either strategic or transactional. Remember just because you want them to be a key account, does not mean they should. It is a two way street.
3. Key Account Testing and Implementation: It is always recommended to start with a few key accounts (no more than two or three). Selecting more accounts is a recipe for failure. The reason behind this is obvious: fix, amend, and fine-tune things out early by being extremely focused. You do not want to move back and forth with a dozen accounts at one time. You will be jeopardizing your credibility and cause frustration at both ends. The critical success factor during implementation is promise nothing you cannot deliver. Make sure that the key account representatives are trained for doing so!

One of the first decisions that needs to be made is the volume of accounts that can be managed by the key account program, from an individual and company perspective. Regardless of the size of organization, the number of key accounts will likely to be between 15 and 35, but certainly not more than 50.

The above approach will enable you as a supplier to build a far superior view of your customers, and will enable your organization to focus decisions and further expectations about them. This is far more practical and commanding than a standard key customer list that many suppliers continue to use.

Conclusion:

1. Key Account Management (KAM) is a complex process that requires both technical and behavioral competencies.
2. Key Account Management (KAM) is an art and not a formula. It requires discipline, practice, and creativity.
3. Key Account Management is a process of development, not a single action. Also, it is a long term process.
4. KAM involves relationships, not just a mechanical approach.
5. Have management from your organization develop relationships at various levels and in various departments of the client company.
6. Key account selection and qualification success rely heavily on the acute sense of analysis (portfolio analysis, account analysis, strategic fit, etc.)
7. Geographical alignment
8. Possible channel management partner

Recommendations:

1. Keep an up-to-date file on the latest press releases. The more you know, the more likely you are to successfully keep the account and turn it into a true partnership.
2. Create opportunities such as social events and conference invitations to make this happen.
3. Develop detailed forecasts and have monthly key account executive review meetings with your partners.
4. Remember account management is crucial and should be a primary focus of senior management in the company, not just with the person who is the primary “owner” of the account.
5. Each key account should have its own “Account Development Plan”. Do NOT mix all your key accounts in one master key account plan.
6. From the START, make sure to select the criteria based on which you qualify key accounts.
7. KAM can only be done with selected customers, and a company-wide protocol for categorizing accounts. Typically, these categories might be: (a) Key Accounts, (b) Key Development Accounts, (c) Maintenance Accounts, and (d) Cash Cow Type Accounts. Make sure you have measurable criteria behind each category.
8. Put measures in place to monitor compliance within your account management process, and have a single person accountable for developing and updating the company’s account management data base.

References:

Dave Malone, Sales Coach.

Breakthrough Business Development.