Investing in Key Account Management Is More Profitable Than Investing in New Sales

Revenue and profit growth is an important part of your prolonged success (and viability) as a company. If your business were to stay stagnant and not experience any new growth or build more revenue, it would be difficult to succeed in the long run and stay competitive. There are many strategies that a B2B company can adopt to promote growth, but let’s focus on customer-oriented strategies.

Growth and Revenue Building Strategies

Is it better to invest in building a larger sales team or growing existing customer accounts? The larger your sales team, the more they can seek out and sell to new customers. By growing your customer base, even with one-off customers, you will increase your revenues over time.

But, focusing on growing existing customer accounts can be a more effective and economical option for your business. The Pareto principle states that 80% of value comes from 20% of inputs. This statistic applies to your customer accounts in most cases, with a few top customers earning the large majority of your revenues. Using a Key Account Management (KAM) strategy that focuses on the most important customers allows you to pull as much value as possible from current accounts instead of looking for new ones.

The difference between sales and KAM can be illustrated by hunting and farming. Selling, like hunting, can be exciting and challenging. Sometimes, there may be long gaps between significant sales, while others may slip away after you think you’ve settled the deal already. KAM, like farming, helps you reap the benefits of seeds you sow into your current top accounts. It takes longer to make profits from this strategy, but the benefits usually far exceed those of extra sales efforts.

Why Key Account Management Is More Profitable Than New Sales

Here are a few reasons why KAM may prove to be a better investment for your bottom line than investing in building new sales teams:

1. Existing Customers Are More Likely to Buy Again

Sales is difficult because of how reluctant many new customer can be when faced with making a purchase. They may compare all other options and go back and forth a few times. All the efforts of selling may end up not leading to new profits. Key accounts are already existing customers who are likely to continue buying from you. By investing in these accounts, you’ll have a better chance of continuing to sell current and new products that fit the needs of those customers.

2. Existing Customers Spend More Than New Customers

It’s also been shown through research that existing clients are likely to spend more than new clients. The reason is simple: they trust you already. Since they have already tried your product or service and know that it’s good, they will feel more confident spending more with your business in the future.

This is called the future potential of an account, and it should be considered when you’re segmenting your key accounts from other accounts. Key accounts should be those that have a lot of future potential for expanding their account with your company.

3. Relationship-Building Creates Long-Term Revenue Streams

KAM is a long-term strategy. You shouldn’t expect to see a lot of benefits until after the first year of working with your key accounts. With the right amount of buy-in from both sides, KAM allows you to develop a long-term revenue stream by steadily increasing the revenues you’re making from every key account. Once the strategic partnership is well established, your profits from each key account should begin increasing.

4. Retain Your Best Customers

Creating loyalty in your key accounts keeps your main revenue sources from abandoning your company for one of your competitors. KAM creates a strong personal connection with each of your key accounts, ensuring that they won’t look elsewhere for the same services. This is the ultimate key customer retention strategy, and it generally proves to be mutually beneficial.

Sales teams do not focus enough on retaining customers. Even if your sales department does have a customer retention plan, it’s likely a one-size-fits-all model that’s not ideal for highly dynamic, complex companies that may demand more service from you.

5. Better Understanding of Target Customers

As you gather more data from key accounts and understand how your business and theirs work together, you can pass that understanding on to the sales and marketing departments. This helps them to create a better profile for the ideal target customer so they can focus on finding the best customers to focus efforts on in the future. With the right new customers, you may be able to gain new key accounts and dramatically increase your revenues.

6. Effective Word-of-Mouth Marketing

The more your key accounts like your services, the more likely they are to recommend you to other business connections that may need your services. This shouldn’t be your only way of marketing for new customers, but it’s one of the ways that KAM can prove the be a better investment in the long-run than new sales teams.

7. Get the Most Out of Important Customers

After you’ve segmented your customers and identified your key accounts, KAM is the strategy that’s going to help you get the most out of those customers. By focusing on understanding your key account customer’s challenges and helping them meet strategic goals, your company stands to gain as your customers do.

The key is promoting mutual growth. Each key account requires a unique strategy that will assist that specific company to grow and increase their own revenues. As their revenues increase, your ROI will increase through larger margins and potential upselling.

Key Account Management is certainly an investment, but the ROI for your company makes it a better investment than increasing your sales team. While a larger number of sales may also raise your revenues, it’s a short-term strategy that won’t get the biggest returns from your clients. You may end up sacrificing the future potential of key accounts by focusing only on potential new sales.

Curious to see how you can take your Key Account Management skills to the next level? Download this helpful ebook on how to create powerful engagement plans for your key accounts or sign up for a demo of Kapta.

Christine Smith

Christine is a content specialist for Kapta. She graduated from Radford University with a BBA in Management, concentrating in Entrepreneurship.