Implementing Key Account Management

Designing Customer-Centric Processes for Mutual Growth

Javier Marcos, Mark Davies, Rodrigo Guesalaga, Sue Holt

• Publisher: Kogan Page
• Year: 2018
• ISBN:
  9780749482763
• Edition: 1
• Topic: Commerce
• Subtopic: Ventes

Implementing Key Account Management is a highly practical handbook that guides readers through the realities of rolling out a functional key account management programme. The book offers an integrated framework for key account management (KAM) that businesses can use to design or further develop strategic customer management programmes, enabling them to overcome the obstacles that organizations often face when rolling out their strategies. Bringing together the experiences of leading experts within this field, Implementing Key Account Management draws on two decades of research and best practice from Cranfield University School of Management, one of the foremost centres for researcher and thought leadership in KAM. Between them, the authors have designed and delivered programmes globally for clients such as Rolls-Royce, Unilever, Vodafone, The Economist and many more. Rigorously researched, well-grounded and practical, this book is - quite simply - the definitive, go-to resource for implementing key account management programmes.

PART ONE

Re-engaging strategic customers

02

Adopting key account management

‘What you choose also chooses you.’

KAMAND KOJOURI

When should we engage in key account management and how do we select the right customers?

Overview

The decision to adopt key account management (KAM) is really a strategic one that brings with it the commitment of specific resources, changes in the organizational structure, and most likely a shift in the company’s culture in how to approach the business. Besides, in spite of the potential for KAM to make a supplier organization more profitable, this is not easy to achieve. There is evidence that a significant number of companies fail to charge a premium price to customers through KAM, compared to the price charged to customers that are not treated as key accounts [1]. Therefore, supplier firms need to carefully evaluate the convenience of adopting KAM and plan on how to do it.

The purpose of this chapter is to help companies assess the need for KAM and guide them in how to initiate the KAM process. A first decision has to do with whether or not a KAM approach to business is justified for a supplier company. Next, if the answer to the previous question is yes, the supplier has to define a mechanism to select key accounts. Once the customers with a ‘key account’ status have been identified, suppliers need to decide the kind and amount of investment they are willing to make in each key account relationship.

The need for KAM

A first question that suppliers need to answer is whether they need to implement KAM in their organization or not and, if yes, to what extent. This is of paramount importance given that adopting KAM typically requires a significant investment in resources that are idiosyncratic to specific customer relationships. Some examples of these are:

• the allocation of dedicated personnel to a key account, usually a key account manager (KAMgr) and a cross-functional team;
• training and skills development for customer-facing executives;
• the commitment of senior management time;
• the design of tailored products, services and solutions;
• the adoption of new technologies and communication channels.

In addition to these investments, KAM adoption normally requires the activation of some organizational changes to facilitate KAM implementation:

• developing a customer-centric culture;
• designing a new organizational structure;
• establishing new communication channels among functional areas;
• redefining performance metrics to incorporate customer-related aspects.

Therefore, suppliers have to make a thorough assessment of whether or not they need a KAM approach and, if yes, to what extent. With this purpose in mind, we propose a framework and a toolkit to inform these decisions. We posit that supplier companies must evaluate the convenience of KAM adoption through the assessment of three questions:

1. To what extent is our business concentrated on a few customers?
2. To what extent do our customers require a KAM approach?
3. To what extent can we create competitive advantages and differentiate through KAM?

Figure 2.1 shows the three main things a supplier company should consider when deciding on the adoption of KAM. These are depicted as thermometers, to highlight the fact that different levels in the measures will determine different actions.

Figure 2.1 Assessing the need for KAM

Assessing the need for KAM

Our business concentrates on a few accounts

A first and very common argument to justify the need for KAM is the fact that the supplier’s sales revenues or profitability is concentrated around a few customers. This is normally known as the Pareto Principle or 80/20 rule, where 80 per cent of the sales come from 20 per cent of the customers [2]. If this is the case, it would make sense to give more attention to those important customers. On the one hand, focusing on a few customers and providing extra care to these could be a sensible strategy to reduce the risk of losing a very important one, threatening the company’s financial welfare. On the other hand, it is very likely that those very important customers will also be targeted as key accounts by other suppliers in the same industry. Therefore, a KAM approach might be the right tool to defend the supplier’s current and future position in the market.

In addition to analysing the current business situation with customers, supplier companies must estimate the future business potential of customer relationships. The rationale for this is that it might be that today some customers are small in terms of the revenues they generate for the supplier, but they have a promising growth poten...