Key account management (KAM) is one of the most important changes in selling that has emerged during the past two decades. KAM is a radically different organizational process used by business-to-business suppliers to manage their relationships with strategically-important customers, and it produces measurable business benefits.
Not surprisingly, smart suppliers are keen to implement KAM. But, sadly, many KAM implementations fail and are abandoned. In other cases, suppliers find that they have to make big changes to the KAM programs to get them to function.
The good news is that many of these failures are unnecessary. KAM is a major change, but the chances of success can be dramatically increased by following the seven steps described here:
Step One: Recognize that KAM is an organizational change, not a sales technique. KAM implementations take years, not months. The companies which have implemented KAM most successfully have been those who thought of it as a change in the way they did business, not as something that is confined to the Sales department. Suppliers who fail at KAM tend to think of it as being an initiative within the sales department. This approach is doomed to failure. KAM is a commitment to work differently with certain priority customers and, to fulfill this promise, other supplier divisions have to understand and support KAM. One obvious example is supply chain management. If a key account is promised priority access to urgent products or services, it is Operations who can provide that, not Sales. Best-practice companies choose to train their operations and supply chain people in KAM as well as their sales people.
Step Two: Get high-level buy-in. An organizational change of this magnitude requires high-level sponsorship, preferably C-suite. The best companies, such as Rolls-Royce and Siemens, have high-level sponsors for each of their key accounts. Members of the main board of Siemens, including the CEO, each sponsor a number of key accounts and visit them regularly.
Step Three: Appoint a KAM champion. Once the organization has accepted that it is embarking on a major change, and senior managers understand what KAM is and have bought in to it, the next step is to find someone who is going to champion the KAM program and drive the implementation. Usually, this will be someone high up the organization, and it helps if they report directly to the top management, at least for the duration of the project. That way, KAM gets onto the top team agenda and the champion gets the support they need to make changes. Your KAM champion should be passionate about KAM and needs to have good influencing skills and great energy levels. Tetrapak has two KAM champions who travel the world to ‘sell’ the message about KAM within the company.
Step Four: Identify your key accounts — carefully. To get the KAM program started, you need to identify some key accounts, and you need to develop an offer that differentiates them from the rest of the customer base. Good advice here is to start small. It is easier to add customers to your KAM program than it is to ‘demote’ customers once you have told them they are key accounts. Generally, the number of key accounts should be small. Our rule of thumb is somewhere between 5 and 25 key accounts. Even major corporations like Xerox keep the number of true key accounts below 100, and they have far greater resources than most and have been practicing KAM for years. Be clear about what defines a key account and stick to that. Don’t give in to pressure to add certain customers to your key account program just because they have been customers a long while, or they are golfing buddies with the CEO.
Step Five: Appoint and train your key account managers. Many organizations make the mistake of simply moving their best sales people into key account manager roles. That’s a mistake, because KAM is about changing the way people work — it is not just a sales technique. Converting your best sales people into key account managers might mean you’ve put a bunch of people into a role they are not really comfortable with, and you have just lost your best sales people as a result. In fact, there are technical people and project managers who can make great KAMs. You need to think about what the role requires (a broad range of skills, including financial, consultative, planning, interpersonal and influencing skills) and then pick the right person for the role. Don’t forget to train them: Very few people come into a KAM role with all the skills they need.
Step Six: Set the right metrics. What gets measured gets managed. If you have tasked your key account managers to build long-term relationships with their customers, don’t carry on rewarding them as though they were doing a standard sales job. Traditional sales metrics — such as the amount of time spent with the customer — are irrelevant to KAM. Many key account managers spend much of their time inside the supplier company, managing things on behalf of the customer. If you pay your key account managers for top line revenue, expect them to focus on short-term sales and not on building longer-term value. The right metric for a key account manager is the lifetime value of their customer (the customer bottom line), not top-line revenues. This is an important point: Key account managers typically work on bigger deals for bigger clients. Some of these deals can be big enough that there would be real damage to the supplier company if they went sour. So, the key account manager needs to understand the cost to serve and not just the top line.
Step Seven: Benchmark and build. Your key account program should not be static over time. Instead, you should keep it refreshed. One way is by moving new key accounts into the program (and occasionally moving former key accounts out if they no longer match up). Another way is by actively seeking best practice, both within and outside your company. Hewlett Packard continually reviews its relationship with customers, reflecting changes in what is important to them. PwC has an internal committee that actively benchmarks its own and other KAM programs in a search for best practice. Remember, you don’t have to be ill to get better.
KAM can have a profound effect on the performance of the supplier organization. But to get there requires a different way of working. These seven steps will help your organization make the transition to KAM successfully. It won’t be easy, but it will be worth it.