While many companies may show interest in Key Account Management (KAM) or acknowledge a need for it, there’s still some debate over the results this practice brings to the table. What makes KAM a better approach than traditional sales strategies? Is the potential revenue growth enough to compensate for the extra resources needed to do effective KAM?
It’s easy to assume that the more clients you have, the more money your business will make. This is why business growth, marketing, and competitive sales strategies are critical to the success of many B2B companies today. But, adding additional clients is not the only way to improve your revenue stream, nor is it the most effective way in most cases.
Research has shown that retaining customers is not just cheaper than creating new ones, it’s also more profitable. KAM is the next step up from customer retention. Instead of simply keeping your key accounts connected to your company, you’ll be actively helping them to grow in their field. As their company grows, so will your revenues. This is because the strategic partnership created between you and that key account will expand as they have need for more of your services at a higher level.
By showing your key accounts that you are invested in their success, you will create a high level of trust within your relationship. This will lead to a more consistent and profitable customer relationship that allows you to sell more comfortably to each company. If you understand the needs of your key account fully, you will be able to tailor your products and services to fit those needs well.
According to Paul Farris’ book Marketing Metrics, businesses have a 60 – 70% chance of selling to existing customers versus a 5 – 20% chance of selling to new customers. While this is directed more at B2C companies, the concept is true also for B2B companies. The other relevant fact to know is that statistically, existing customers are likely to spend 67% more than new customers.
Your key accounts already know you offer a good product or service, which is why they’re such important customers. What KAM does is strengthens the trust even more by turning a normal customer retention relationship into a strategic partnership. By building this trust and showing your key accounts that you’re invested in helping them grow their business, they will be more inclined to turn to you for solutions to their problems, which will expand their existing contract with you and create more revenue.
While the numbers are compelling, it’s important that you don’t treat KAM like an upgraded sales plan. To build a strategic partnership with your key accounts, you’ll need a lot more time and effort from every level of your business, not just the sales department. Buy-in must come from all these departments as well, depending on your type of business:
KAM goes above and beyond regular Customer Success processes. With KAM, your company will create an in-depth, unique engagement plan for every key account separately. You should implement good sales and Customer Success practices to improve your short-term revenue, but plan to do KAM as a long-term strategy.
Every business needs to have long-term growth and revenue goals. Keeping a long-term focus makes it easier to be prepared for future success or challenges. With a long-term KAM strategy, your company will be more prepared to handle growth and expansion since you will see it coming ahead of time. If you focus on expanding your customer base with new customers, you may not be prepared to handle the rapid growth, leading to a poor long-term outlook for your company.
But, if you can’t survive in the short-term then long-term doesn’t matter. So, while KAM is a great way to grow your company’s revenues and plan for a stronger future, you need to combine it with an effective marketing and sales department to bring new clients into the mix for sustained revenues. New clients may also become new key accounts, giving your company an even stronger long-term KAM focus.
Key Account Management can be costly in the short-term, as you will use a lot more resources to create and maintain the strategic partnership. But, the benefits of retaining, growing, and expanding key accounts should outweigh these short-term costs by a substantial amount. If a key account partnership is not turning profitable after more than a year or two or has no potential to do so, you may need to re-evaluate your process for separating key accounts from regular customers.
To unlock the future potential of your most important existing clients, you need a great KAM strategy. In addition to the potential long-term benefits, an effective KAM strategy may help your company by:
It may sound counter-intuitive, but by focusing strongly on key accounts you may actually create new customers as well. Word-of-mouth advertising is one of the most effective forms of marketing, but it’s difficult to do unless you have clients that are highly satisfied with your service and keep returning to your company, such as your key accounts.
Part of KAM is learning everything you can about your key account customers. You can compile all your data on your key accounts and find out what they have in common. This may help your marketing department to make an accurate target customer profile so they can focus on finding and acquiring the type of customers your business really wants.
To be successful at KAM, you’ll need to thoroughly understand what’s going on in your customers’ industries as well as your own. This will also assist you in forecasting for the future and help protect you from unexpected catastrophes.
Key Account Management isn’t an overly expensive Customer Success strategy. It’s a long-term revenue growth strategy that could end up more than doubling key account spending, increasing your revenue exponentially without you ever having to marketing to new customers. Instead of focusing all your efforts on finding new short-term customers, grow your key accounts into strong long-term partnerships that benefit you both. When your key accounts grow, so will your bottom line.
To learn more about growing your revenue, download our ebook on building Action Plans for Key Accounts, or take a tour of Kapta’s Key Account Management platform.