If you’re new to Key Account Management, one of the first steps you’ll need to take is to identify which accounts are Key Accounts—in other words, to segment your customer base.
Segmentation is critical because KAM should be distinct from sales. Key Account Management requires dedicated resources in the form of people, process, and technology. A traditional sales approach supported by CRM is not enough to realize the full potential of Key Accounts.
In this post, we’ll talk more about how to identify 2-3 key customers for your KAM pilot program. You’ll want to look at all your customers through 3 filters:
- Profitability vs revenue
- Strategic vs transactional
- Alignment with your own growth strategy
Filter 1: Profitability vs Revenue
Start by gathering basic information on all your accounts. You’ll need to know:
- Annual revenue for the last 3 years
- Annual cost of servicing the account over the last 3 years
- Growth potential for the account over the next 3 years
The goal here (as is probably obvious) is to determine profitability vs revenue. Revenue is distracting—it can make an account seem like a key account, when in fact, the actual cost of serving that client means they aren’t really a source of sustainable growth. Remember, the kind of relationship you’re building through key account management is a 2-way street: You want strategic, sustainable partnerships. If you’re constantly eating costs or discounting services to keep a cranky client happy, maybe they aren’t a key account after all—even if surface-level billing suggests they are.
That said, it’s important to ask: Is the reason they’re cranky because you haven’t been able to give them the attention they deserve? Maybe their main contact at your organization is working on 5 other projects, and simply doesn’t have the bandwidth to understand this customer’s needs and expectations. If you think a dedicated Account Manager with time and space to listen to their feedback and proactively address their satisfaction might turn this customer around and increase profitability, keep them on the list of potential Key Accounts.
Filter 2: Strategic vs Transactional
Once you’ve gathered all your accounts, you’ll want to flag them as either strategic or transactional.
Strategic accounts are those with real growth potential. Maybe they’re a government entity, a large corporation, or a fast-growing company. Their needs are recurring and complex, and you know there’s more business to be had at that organization, both in terms of volume and diversity. Use your judgement to determine the trajectory of your customers.
A transactional account is one where they really only need one product or service from you, and there’s not much room to grow. There’s nothing wrong with transactional clients—it’s just that they don’t really need Key Account Management.
Filter 3: Your Own Growth Strategy
Once you’ve analyzed your client base, it’s time to look at your own growth strategy. What are you trying to achieve over the next 5 years? What kinds of products and services are you most interested in providing? What is your own growth strategy?
When you find a customer with potential to grow using the kinds of products and services you’re most interested in providing, you know you’ve found an interesting match. Because we believe strongly that a customer-centric approach is the way to achieve stability and success over the long term—but that doesn’t mean your own interests don’t matter. In fact, your customers will be much more engaged if you are, too. Customer-centricity is not pure altruism—it’s an approach that builds mutual success (the best kind).
Seek out customers whose needs, goals, and strategy align with your own, so you set both parties up for success. You’ll be able to pursue work that’s engaging and meaningful for your team, and they’ll perform better as a result. Their improved performance leads to meaningful gains for your customer, which creates ongoing room for growth in the partnership itself.
Don’t Get Distracted
A common mistake in identifying key accounts is to focus on revenue alone. As we’ve outlined above, the goal is to identify customers who are clearly worth a long-term investment. They offer room to grow, in line with your own growth strategy, and plenty of ongoing opportunities for interesting, mutually beneficial work.
It takes good judgement and team input to identify those customers, and it means looking beyond the dollar signs on the surface. It also takes discipline to invest resources in those customers, rather than spreading your team too thin chasing shiny new clients and contracts.
Start Your Pilot
Implementing a KAM program is just like any exercise in change management: You need to start small, with easy wins. Challenge yourself to select 2-3 Key Accounts to begin with, and really focus on making those work. Even if your portfolio analysis identified 5-10 Key Accounts, start small and scale up, so you have success stories to build buy-in as you expand. You’ll also learn what’s working and what’s not, and you can apply what you’ve learned to hone your process as you add more accounts to the Key Account group.
Remember: Good Key Account Management takes more than intention. It takes infrastructure. You need a person or a team whose job it is to manage the clients you’ve selected. They need an established process to follow. And they need technology to support them in their efforts.
An easy mistake to make is this: You’ve done your portfolio analysis. You’ve selected your 2-3 accounts. But you’re wary of investing too much, so you ask someone whose plate is already full to do some KAM on top of what they’re already doing. You’re vague about what that means, and you don’t offer any tech support.
We’ve seen this before, and it doesn’t work. The goal of KAM is to build strong, lasting relationships—if you’re not putting in the effort, your clients will know it, and they won’t, either. And it will be business as usual, without having really given KAM a try.
If you’re ready to start Key Account Management in your organization, Kapta can help. Our KAM Process gives you a roadmap for Key Account Management, supported by our intuitive technology. And our services are designed to help you make a smooth transition.
We can assess your current situation and make a rollout plan that works for you. Schedule a personal demo today to talk through your company’s goals, the accounts you think might be a good fit for a pilot, and any questions you have about how Kapta can help.