What is key account management and how does it work?
Key Account Management has evolved since the early 1970s as corporations have recognised that a few customers account for the majority of their sales, profits and growth potential, and that those key customers must be treated differently from the ‘ordinary’ customer.
Initially, KAM was the sole responsibility of the sales department and meant “selling to big customers”. One senior sales person was allocated to one or more large customers to achieve a volume or revenue target, typically engaging with a single point of contact, the Buyer. Although this model was sufficient in the past and is still used by many companies, it is no longer viable in today’s complex commercial environment, which puts intense pressure on price and margin.
Giving away margin in exchange for volume will not enable the supplier's corporate objectives to be achieved. Today the business is required to increase volume and maintain or grow margin whilst simultaneously extending the longevity of the customer relationship. Different levels of customer relationship require different levels of investment, for different types of customer - at the deepest level, the supplier and customer form a mutually dependent ‘partnership’ focusing on value creation.
This approach has profound implications for the supplier in terms of its organisation, structure and operations, some of which are not always recognised by the supplier embarking on a KAM initiative – to be effective, the account strategy must be clearly defined and supported by all departments of the business from the top down. KAM processes, systems, tools and skills must be clealry defined as well as the competitive advantage and value creating model.
Richard Ilsley explains the nature of KAM and its roles and relationships.