With a globalised and increasingly competitive business world, sales teams have progressively understood the value of major accounts. What may have once been a significant local account can now be a substantial global account. A few major accounts can easily contribute to 60-80% of the company turnover. These accounts are hard to retain and even harder to replace. The retention and growth of major customers often makes the difference in the success of the business.
The implementation of a Key Account Management (KAM) program will probably not be easy if the full potential is to be realised. Here are some of the common challenges and pitfalls of KAM that I commonly see:
Lack of senior management support
KAM is implemented as a sales initiative but it does not have the understanding and support of senior management. There is insufficient commitment of time and resources that will be needed for it to work. Expectations for a quick return on investment are unrealistic.
Too many accounts
Key Accounts are often selected on one criteria – the $ value of the account. This will usually be revenue, or occasionally profit. For many companies a typical approach will be to set a revenue limit (say $1m), and then label all customers who generate more than $1m p.a. as key customers. The Key Account Manager is then typically allocated 20, 30 or even more ‘key customers’ to look after. This is nonsense.
If key customers really are key, then getting into double figures is probably too many for one Key Account Manager. It is not possible to gain the extent of knowledge, develop the necessary relationships and integrate the resources of the supplier to deliver business results with more than a dozen key accounts.
Selection of key accounts should be rigorous. As well as revenue, other factors should be considered. How the client buys, growth potential, market position, global coverage, market influence, criticality for production plant loading and customer dependency on supply may all be relevant. Selection of key accounts should be done on a strategic basis.
The consequence of having too many accounts is that the Key Account Manager is ineffective. The clients see nothing different from the supplier than they did when they were looked after by a local account manager. In some cases it is less. Sure they may get someone with more authority in the hour of need, but from a long term business growth perspective, not much happens!
The chosen key customers don’t want it
From the customer’s perspective in many cases the seller is not a key supplier, so why should they commit the time, resources and levels of access the seller is asking for? Just as suppliers have limited capacity to truly manage key accounts, so do buyers have limited capacity to manage key suppliers and allow them to integrate with their business.
This is one of the biggest challenges of KAM that will be encountered. It stems from poor selection of key accounts. Announce to these customers that they are a key customer and the glazed ‘so what’ or ‘that’s nice’ look will be common.
Lack of organisational alignment
The organisation is not sufficiently well aligned to deliver the full value of solutions to the client, and manage the raised expectations. This can be more evident in organisations with a funnel or silo functional structure. If the whole company is not able to see past departmental objectives and embrace the concept of helping clients succeed, then it is perhaps best not to start with KAM.
Some degree of resentment and lack of ownership from regional sales people can also become apparent. The situation arises when a national client is moved into the key account portfolio. The regional sales people consider they have lost their local account to a national Key Account Manager and no longer support the local branch of the customer. In these situations, account management responsibility and incentives need to be carefully managed.
Companies with autonomous lines of business and separate sales teams can encounter difficulty when a client is selected as a key account by one line of business but not the other. From the buyers perspective very mixed and confusing messages can be received from the representatives of the seller. These will be to the detriment of the efforts of the Key Account Manager.
Customer facing support people struggle.
Other people in the organisation can be placed well and truly out of their depth when asked to join meetings with the customer. Any customer facing person should be given adequate awareness training on the sales methodology and develop the skills to be credible and add value in client meetings. You may even need to start with the Chief Executive!
KAM can be challenging and can have significant impact on the way you do business with your clients. It must be more than a sales initiative. By making it a company wide long term business strategy, being realistic with the selection of key accounts and using the right people in the role the rewards can be worth it.