Customers expect their key account managers (KAMs) to know them and what they are experiencing. Research shows that 55% of clients expect reps to understand their business, situation, and needs. And another study showed that educating clients with new ideas and perspectives gave KAMs the ability to influence their clients’ decisions.
With a recession rapidly approaching, it’s essential for KAMs to know what an economic downturn means for their most valuable clients. Understanding the ramifications of a recession and how it affects their customers enables them to effectively support their clients with new solutions during difficult times. These abilities facilitate reaching trusted advisor status where the value clients receive makes retention inevitable.
How does an economic downturn impact your clients?
A recession is an economic downturn through two consecutive financial quarters. When the gross domestic product (GDP) declines, unemployment rises, economic growth declines, sales decrease, and industrial production drops. This leaves businesses looking for ways to reduce costs and adapt business processes. Businesses that are unprepared may panic at the onset of a recession with no plan to ride out the downturn and rise with the tide during recovery.
Your most valuable clients experience the following challenges during a downturn. Your customers can effectively navigate the recession when they prepare for these issues. Familiarize your KAMs with these problems so your reps can help their key clients prepare for and successfully survive the recession.
Reduced demand for products and services while costs remain unchanged reduces profits. Businesses that don’t have a well-thought-out plan in place may panic when this happens instead of approaching the issue methodically.
Clients may even lower prices to retain their market share, creating a downward spiral that further reduces profits due to price wars with competitors in the marketplace. Further aggravating the situation, it can take years for a business to restore pricing when demand rises again during the recovery period following a recession.
Tighter credit requirements
During an economic downturn, lenders often implement stricter criteria for creditworthiness. This can lead to increased lending costs and reduced availability of credit.
For businesses who finance their inventory purchases with a revolving line of credit, this can become a problem, limiting their ability to maintain inventory levels.
Restricted cash flow
Lower sales, reduced pricing, price wars, and tighter credit requirements all negatively impact cash flow. Businesses need to get creative to help their customers pay invoices. For example, offering an early payment discount to repeat customers can be a win-win. This is a potential temporary solution for KAMs to implement in support of their key accounts to help with their cash-flow issues as well.
Lower stock prices and dividends
Public companies can encounter cash-flow issues during a recession due to declining stock prices in response to lower-than-anticipated earnings results. Since this is a significant source of income for public companies, dividend payments to shareholders are often reduced, making shareholders uneasy pushing stock prices even lower.
Decline in product or service quality
Cutting corners to reduce costs and boost profitability as the demand for products and services drops is a losing proposition often employed by unprepared businesses. In this scenario, the quality of the materials or the service is reduced while the price charged remains the same. This harms the reputation of the business and opens the door for competitors to steal their customers.
Employee layoffs or benefit reductions
Reduced demand, sales, profits, and cash flow often lead to layoffs and/or benefit reductions. KAMs can be prepared for this by maintaining relationships within their client organizations that are broad and deep. Developing contacts across the customer’s business and at various levels is essential, especially if your executive sponsor leaves. This enables KAMs to continue supporting their clients’ goals and adjust plans as the customer reorganizes. Plus, prepared KAMs can get a new day-to-day contact up to speed without missing a beat if their original contact departs.
Economic downturns drive businesses to do more with less, often leading to strategic shifts or pivots as they adapt to evolving market conditions. KAMs who develop deep relationships and proactive plans with their clients are positioned to easily adjust to changing goals and plans. They remain continually engaged with their key accounts, helping them weather the economic storm.
Get ahead of these challenges by preparing your KAMs for a recession. Proper training, technology, and tools are essential for account managers to work effectively and efficiently with their clients and recognize issues before they develop. This enables KAMs to reach trusted advisor status, increase customer retention, and support their most valuable clients throughout the economic downturn.
Give your KAMs the training they need. Register your reps for KAMGenius, the only online video course taught by KAM experts in easy-to-consume bite-sized videos full of actionable tips.