Without the right tools, you can’t be nearly as effective, efficient, and successful. Whether you’re building a house or a relationship, you can’t be your best if your tools of choice aren’t correct. In the account management world, all too often we see that companies would rather jerry-rig their CRM platform to do high-level account […]
Out of all the strategies to help propel your company to success, Key Account Management seems to be one of the most resource intensive. So, why is it worth considering above other similar strategies? What makes Key Account Management a good option to strengthen your company’s competitive position and bring in higher revenues?
You as the CEO of your company have forward progress in mind. Key Account Management offers a solid plan to reach lofty goals and bring in better profit margins without having to reach out to new clients at all. In this article, we’ll be exploring the ins and outs of Key Account Management as a business strategy, from the point of view of a company CEO.
What is Key Account Management Really About?
In most industries, competition is strong. To differentiate yourself, you may need to go above and beyond what your competitors are doing. This is especially true in industries where barriers to switching services are relatively low. To retain your most important customers, you must become more important to them by providing a higher level of direct service.
Key Account Management is all about gaining a competitive advantage by segmenting your top customers (key accounts) and creating strategic partnerships between your company and theirs. This doesn’t just work towards retaining key accounts, but also gives more opportunities for your company to expand key accounts through close partnership and trust-building.
How Key Account Management Grows Your Business
The goal of the Key Account Management department is to help your top clients succeed using your products and services. By assisting these important customers to increase their profits, you are put in a strong position to upsell that account and grow your own company revenues.
Research throughout the years has shown that retaining the right customers also increases your profits more than a strong focus on new customers. Fred Reichheld of Bain & Company showed that retaining the right customers can lead to profit increases of 25% or more in some industries. This is credited to two facts:
1) Existing customers are willing to buy more from you.
Customers who have already paid for your products or services at least once and had a good experience are more likely to pay more in their next purchase or buy a larger package. This is true for B2B companies as well, in that existing clients are more willing to stick to your services and expand if you offer something else that gives them value.
By using strategic Key Account Management, you will dissuade your key accounts from switching to competitors even if an attractive short-term offer is put on the table. A solid history of good relations and excellent value is usually worth more to business clients than short-term benefits.
2) Loyal customers provide word-of-mouth advertising.
Customers who have a history of good experiences with your business are more likely to recommend you to peers in their industries and other business connections. Key Account Management allows you to position yourself as a strategic, long-term partner with your key account customers in mind. This is attractive to clients, and may cause them to recommend you enthusiastically.
Long and Short-Term Benefits of Key Account Management
Unlike some sales or marketing strategies, Key Account Management is not going to produce results right away. It’s not about sales or marketing, so the focus is on providing long-term value and benefit to both involved parties. Some short-term benefits like lower customer turnover may exist, but they may be overshadowed by the costs of running an extensive Key Account Management program.
The costs and resources involved in Key Account Management are likely to produce a strong ROI for your company. In the long-term you can find that a successful strategy gives you:
Strategic resource investment in high-value returns
Key account customers should be those with potential to grow with your company. This makes investing in their success a profitable move, because your revenues are set to grow as they succeed more with your help. The more you can show your value to their company, the more they will be willing to spend on your company. A history of good results will encourage your key customers to grow their accounts with you over time, especially when you show commitment to them.
In contrast, sales and marketing can be very costly ways to generate new revenues. Although they sometimes yield results quickly, the long-term profits from a heavy focus on new customers versus customer retention and growth will not be as high. You will reduce your investment into lower-value customers and focus more on high-value customers.
Strong customer relationships with key accounts
Key accounts will become more loyal and stronger customers if you put more resources into developing your relationship with them. Loyal customers are more likely to create more revenue for your company, recommend you to their peers, and continue working with your company on a long-term basis.
Competitive advantage in your industry
When your company works closely with specific customers, you can gain advantages of both economies of scale and scope. Higher levels of collaboration needed for a strong strategic partnership will give you an advantage over other competitors and creates a more loyal customer base for you to work with to keep improving your service.
Larger key account revenues
As you work to create as much value as possible for your key accounts, they will be less inclined to jump to one of your competitors based on price differences. The higher value they perceive to gain from your services, the less your key account customers will care about price in general.
Data for improved sales targeting and forecasting
Understanding your key accounts better will allow you to create more accurate picture of what to look for in future marketing and sales efforts. By getting a thorough idea of what makes your key accounts a better fit, you’ll be able to form a more complete profile for your target customers in future marketing campaigns.
Feedback for organizational improvement
Being heavily involved with a few key customers gives you a direct source of high-quality feedback on your products and services. You normally wouldn’t get this level of feedback from the average customer. Take advantage of it by making changes where necessary to improve the customer experience with your company.
Reduced customer turnover and increased loyalty
The biggest benefit of Key Account Management is increased retention of high value customers. Key accounts are more likely to stick with you for the long-run, because you are providing them the highest level of value. That loyalty will help to stabilize your revenue stream and make you less dependent on one-off sales or new customer outreach.
Make no mistake; Key Account Management is geared towards the future and meant to provide lasting benefits for you and your key account customers. You may not see useful returns on your company’s efforts until at least one year after you’ve started working with this strategy. Don’t begin a Key Account Management strategy in your company and expect to see your efforts significantly rewarded early on.
Critical Aspects of Key Account Management
To make this type of strategy work, a few things are crucial. Key Account Management cannot be successful without the right environment, resources, access, or support.
These are the non-negotiable parts that are critical for success in Key Account Management:
1) Customer segmentation
In order to engage with your key accounts, you have to first know who they are. This will require evaluation of what makes a customer more valuable to your company and segmentation between the top most valuable customers and all others. Only the very top-most customers will become your key accounts, because you need a narrower focus to be able to provide the right type of business partnership.
Key accounts should be those who are not only valuable now to your business, but also show some potential for growth and expansion.
2) Organizational Change
Key Account Management is not just a new department or a strategy to implement in your sales or account management departments. It must be an organizational strategy, which is why you as the CEO need to be aware of it and supportive. Many levels of organizational input will be needed to develop a strong and lasting partnership with key accounts. This requires a change in the mindset of your organization.
3) Strategic partnerships
You cannot reasonably expect a typical business-customer relationship to lead to the benefits mentioned before. Your company needs to create strong, strategic partnerships with each key account in order to unlock the full potential over the years. To do this, you will need to begin building trust and reach out about your intent to form a stronger bond with their company.
Partnerships take time to form, because your customers must become convinced that it is worth the risk on their part. You must demonstrate commitment to help them achieve their goals and willingness to provide high level, priority service from your company.
4) Customer focus for mutual benefits
To remain relevant to a customer, you must put your focus on what’s important to them. Your company, especially Key Account Managers and their support team, will need to research and understand the complexities of each key account. Create goals that keep the customer in focus, but provide mutual benefits for your company and theirs.
5) Executive Buy-In
This is where you as the CEO become a very important asset to Key Account Management. Your involvement in the efforts to create and maintain a strategic partnership will greatly impact the results. Jason M. Lemkin, one of the founders of SaaStr Fund, encourages CEOs to visit with key accounts, mentioning that his own company never lost a single company that he as CEO visited.
When high-level executives like you get involved in the partnership efforts by visiting key account customers and being a regular part of the team, you show a higher level of commitment. It builds trust for your organization and shows your key accounts that your company is truly interested in seeing them benefit from the partnership.
6) Data Collection and Upkeep
Key Account Management cannot survive without the right data and information tracking systems. You will need data from your account, your key account customers, and from the partnership. Your company will also find it useful to keep track of industry trends around your key accounts, in order to create better forecasts for the partnership.
How CEOs Can Be More Involved in Key Account Management
As the CEO, you have an important part to play in managing key accounts. Even if you’re supportive of the efforts, it’s good to be directly involved when necessary to strengthen the relationships with key accounts even further.
Regular communication with key account contacts (such as the CEOs of their companies), attendance at quarterly business review (QBR) meetings, or visits to key account companies can have a high impact on the partnership. Talking with other CEOs at your key account companies will help you to get by some of the bureaucratic process and forge a stronger partnership more quickly.
You also need to be actively supporting the Key Account Management efforts of your own company. Do this by encouraging your company culture to change to a customer-centric model. The whole organization needs to be on board with this strategy to help it bring the most success.
With your help, your company can shift focus to become a more customer-centric organization practicing a Key Account Management strategy. The benefits take time to show, but in the long-term this strategy could set you apart for your competitors and give your company the edge in the industry.