Why a Clear Definition of Key Accounts is Critical to Success

When helping a new client to get started on KAM or to improve an ailing KAM initiative, I always try to start the engagement by an introductory workshop with the leadership team and the managers in charge of sales methodologies. Very early in the agenda of this workshop, we look at the company’s strategy, at their customer base and we discuss the definition of Key Accounts for them. What drives me to do this?  Because working on KAM without a clear and commonly accepted definition of “Key” means building a tower on sand and weakens the impact of the KAM program.

Sadly, this is a situation encountered at many companies. Therefore, this post is about how important it is to have a clear and shared definition of Key Accounts.

When Key Accounts are Poorly-defined you are in Danger

Before starting writing this post, I spent a moment looking for Key Account Manager job descriptions on some popular job sites and on the web sites of a few Executive Search firms. The open positions I found, ranged from junior standard sales reps positions to assignments for very senior multi-talent practitioners chartered to run the business with a single strategic customer. Between these 2 extremes, there were many different configurations, all influenced by the nature of the business of the hiring company.

The variety of situations under the same label is probably not so surprising in a job search environment. Although a better clarity would help (as an example, just remove the word “Key” from the label of a plain Account Manager job) , this is probably not too much of a problem as the involved parties use their judgment to see what fits or doesn’t fit. But when KAM professionals themselves get confused about the word Key Accounts, the problem is deeper.

I remember participating to a workshop gathering experienced KAM specialists. We had to work in small groups on real-life difficult situations presented by some of us and to come up with a few operational ideas to tackle the presented challenge.  In the 3 sessions I took part into, it was obvious that people around the table had different definitions of Key Accounts. To make a long story short, with “Key Account”, some of us meant all large customers above a certain volume of revenue or margin whereas others meant a small number of truly strategic customers. If we had been a management team chartered to finalise and implement the solution, we might have been in trouble to reach an agreement on what to do and how exactly to implement it.

The point here is not to draw a line between a right definition of Key Accounts  and a wrong one. It is about why clarity matters.


Why Does it Matter?

For the Execs and Directors because it helps drive clarity on resources allocation.

Before investing in a KAM initiative, you need to segmentation your customer base. This segmentation should classify customers according to size (small, medium, large) but also according other criteria such as their growth potential and their strategic value. When working on a KAM initiative, the focus is on the large accounts and on the customers with a high strategic value, the true Key Accounts. Then the leadership team has to make decisions on where to allocate resources and to organize in order to maximize the outcome. A company making 90% of its business with half-a-dozen of strategic mega-customers will find it easy to define Key Accounts. Another company with tens of thousands of customers, 100 large ones representing 50% of the revenue and a few tenth of innovative trendsetting customers, will have to analyze deeper before making a decision on how to best handle its top accounts.

For the team in charge of sales methodologies & tools it is about coherency and consistency and enabling the Key Account Managers.

Whatever the structure and size of a company there is almost always somebody in charge of defining standards, methodologies and tools used to sell and then to manage customers. This team has to ensure that the tools used by all sales reps are coherent and consistent and that their implementation is compatible with the size of the portfolio of each sales rep and Key Account Manager. The goal is to show sales reps and other staff involved into managing the relationship with customers, that there is a logical progression in the depth and breadth of tools used for small, medium, large and Key Accounts. This sounds obvious but is not always the case. I have seen too many cases of Key Account Managers trying to – or being forced to – use the exactly the same tools when managing 2 Key Accounts or 30 large accounts. The negative impact on effectiveness and motivation is easy to guess.

For the Key Account Managers it is about balanced priorities and effectiveness.

Key Account Managers need clarity on what each customer brings to the company (and on which tools to use and with which intensity) in order to balance priorities and allocate time efficiently. The Key Account Management tool, as well as the training and on-the-job coaching people are receiving (in a very favorable environment) must take into account the exact nature of each of their customers.


Get Ready to Act: Simple Tips to Help You!

Here is what executives and senior managers in charge of sales performance and/or Key Account Management can do to check and improve the clarity on the definition of Large & Key Accounts and to drive the pragmatic consequences:

Check your existing commercial segmentation (small, medium, large + growth potential + strategic value): how good is it? How can you improve it step-by-step (this is NOT about boiling the ocean – think and act lean!). Can you draw a clear line between large and Key Accounts? How many of them do you have in each category? What is the true strategic impact of your Key Accounts?

Once you have clarity on the Customer Segmentation, and on large and Key Accounts, taking also into account how you are currently organized, how do you communicate this to the Key Account Managers to give them clear directions that will help them to take action?

Check if your existing sales, account management and Key Account Management method and tools reflect your segmentation and your definitions? You want to avoid the frequent situation where the Key Account Managers are using a one-size-fits-all account plan template and engagement methodology on customers that vary in size and complexity dramatically.

Once you feel sure that tools for the Key Account Managers are adequate, check that they understand how to use the tools properly. This means checking the quality of each account plan and its implementation but also checking that the time investment and workload are properly balanced across the whole customer portfolio. Quite often, this will raise some tough questions on the sizing of the team. Be ready to handle this!

Last but not least, as you have now refined customer categories as described above, start measuring the performance (revenue, margin, growth, strategic impact, satisfaction, loyalty) by customer and by category.

All of the above might require change management and helping people to change their behavior. How will you drive this?