Author: Joshua Seedman
Key accounts oftentimes represent approximately 50 percent of a company's revenue yet are typically under attack, with most key accounts bringing in 5 to 9 percent lower margins than other customers. In addition, key account management (KAM) transformation efforts often fall short because they are too transactional rather than holistic, personalized, and solution oriented. Simply, and according to multiple industry surveys, ~60% of key accounts are dissatisfied with the relationship. In addition, oftentimes companies allocate significant time, resources, and consequently costs to key accounts to combat this dissatisfaction. However, several studies, including a recent survey by McKinsey & Company, illustrate that the optimum time to maximize key account share is around 60-80 hours/customer per annum with small revenue benefits seen beyond this point. Thus, without having a highly focused, strategic, and holistic key account plan and accompanying toolkit, time and costs will continue to increase while revenues decline.
In essence, there is a large “customer experience gap” between what key accounts expect and what they actually receive, equating to a poor customer experience and significant key account value erosion (See Exhibit 2). In large part, this gap is transpiring because key accounts are becoming significantly more sophisticated and digitally oriented while companies, on the other hand, are not investing in distinctive key account capabilities and digital at scale initiatives. By tackling head on the fundamental drivers of distinctive KAM, companies can witness significant margin improvement, sustainable revenue growth, and improved key account satisfaction and long-term viability. To capture these benefits, this article proposes 10 best KAM practices which can be leveraged by any size company in transforming its key account performance.
To be clear, key account management is an organizational change and not merely a sales technique. Simply, KAM transformations are not only about offering more competitive pricing and locking in larger contracts, which in the end can simply lead to a race to the bottom. Instead, KAM is a holistic process that should include several or all of the following: (1) implementing best key account management practices across the enterprise, (2) leading customer experience turnarounds, (3) implementing sales force transformations, (4) improving employee engagement and capability building optimizations, and (5) leading digital at scale transformations. In so doing, enterprises can ensure top-quartile performance across each key accounts.
10 Best Practices
- Key Account Management Transformation -
This article proposes 10 best key account management practices, that when leveraged together can help unlock significant value for both sides and ensure top-quartile KAM (See Exhibit 3). These 10 best practices can help enterprises transform their key account management capabilities by mitigating key account journey pain points and ensuring an optimal customer experience, which ultimately drives greater margins, loyalty, and overall growth. Specifically, this articles proposes the following 10 best practices:
1. Become a Solution Provider
2. Understand Account Economics
3. Conduct Consistent Account Reviews
4. Seize Moments of Truth
5. Codify Learnings & Performance Results
6. Reallocate Sales Coverage
7. Form Cross-Functional Account Teams
8. Improve Negotiation Capabilities
9. Improve Employee Engagement
10. Drive Personalization at a Segment of 1:1
While each best practice alone can be powerful, together, these 10 practices not only foster long-term partnerships but also unlock significant profits for both sides, ensuring key accounts are no longer margin deficient but rather margin healthy.
10 Best Practices Explained
Best Practice 1
- Become a Solution Provider -
Transition from a transactional approach to a solution provider mentality via (1) developing a mindset of making the customer successful by building a deep understanding of their needs, goals, KPIs, and metrics for success, and (2) creating pull via customizing the product and/or services to the end consumer.
Best Practice 2
- Understand Account Economics -
Understand account economics by performing an enterprise needs assessment, including (1) drivers of profitability, (2) customer total cost of ownership (TCO), (3) 100 percent share of wallet breakdown, and (4) key decision-maker and influencer analyses (from the top-down).
BEST PRACTICE 3
- CONDUCT CONSISTENT ACCOUNT REVIEWS -
Conduct regular account reviews based on short-term performance and long-term health of key accounts, ensuring each is receiving “best practice” treatment as well as optimum time of coverage based on account size, economic potential, market shifts, and account complexity. Remember, the optimum time to maximize key account share is around 60-80 hours/customer per annum with small revenue benefits seen beyond this point.
BEST PRACTICE 4
- SEIZE MOMENTS OF TRUTH -
Seize “moments of truth” with each key account to build stronger relationships via (1) understanding the varying inflection points a customer may experience, (2) offering customized support and solutions, and (3) offering predictive insights that will drive a solution versus transactional only approach.
BEST PRACTICE 5
- CODIFY LEARNINGS & PERFORMANCE RESULTS -
Codify experiences and lessons learned by creating and institutionalizing enterprise wide memory, including a win-loss team and robust loss bid analysis. Ensure appropriate dissemination of learnings and insights to both the key account functional leaders and broader organization. Remember, "price not competitive" is never an adequate answer.
BEST PRACTICE 6
- REALLOCATE SALES COVERAGE -
Reallocate inside and outside sales to better align with the changing needs of digitally savvy customers, who have a preference for speed, convenience, and on the spot support. Remember, in the B2B space oftentimes over 50 percent of buyers are millennials who have certain shopping expectations based on digital interactions from disruptors such as Amazon. Finally, bolster sales ops, ensuring they account for 50-60 percent of the total sales team, allowing for greater customer insights, optimized sales toolkits, and improved personalization at a segment of 1:1.
BEST PRACTICE 7
- FORM CROSS-FUNCTIONAL ACCOUNT TEAMS -
Create cross-functional key account teams for driving the most holistic, personalized support. This includes functions not typically associated with key account coverage. Finally, create an enterprise scorecard (KPI’s) to drive key account enterprise alignment via focused company wide incentives. Click HERE to read more on driving cross-functional collaboration.
BEST PRACTICE 8
- IMPROVE NEGOTIATION CAPABILITIES -
Improve negotiation and decision-making capabilities while also strategically building in switching costs. Gaps in key account negotiations and thus poor decision-making can be highly erosive as the pressure to succumb to large key account demands can equate to significant money left on the negotiating table. Remember, key account negotiations should never be based on gut or experience. Instead, the same level of analytical rigor, due diligence, and capability building leveraged across finance, operations, and strategy should also be used across key account negotiations. Read more HERE.
BEST PRACTICE 9
- IMPROVE EMPLOYEE ENGAGEMENT -
Improve employee engagement as customer engagement is highly correlated to employee engagement. Simply, the key to loyal, engaged customers is first to create loyal, engaged employees that are then inspired to drive service excellence and "wow" experiences for customers. Click HERE for additional information on "why" employee engagement is vital to key account success and click HERE for details on "how" to improve employee engagement.
BEST PRACTICE 10
- DRIVE PERSONALIZATION AT A SEGMENT OF 1:1 -
Personalize key account experiences and segment at a level of one as key accounts expect personalized, predictive solutions that help them solve their most pressing problems. Simply, the strategic focus should never be at a broad or even segmented level but rather at an individual program level to maximize NPV.
With key accounts often representing a significant portion of total revenues, enterprises can no longer take a status quo approach to KAM. Indeed, key accounts are generally under attack – seeing on average 5-9 percent lower margins than other accounts while also requiring significantly more time and company resources. Thus, key accounts are often the least profit generating portion of the business. However, this need not be the case as focusing on KAM offers significant low hanging fruit that when implemented properly can drive significant revenue and margin improvements. The proposed 10 best KAM practices (See Exhibit 4) can help any enterprise and sales division optimize key account revenue and margins for both the short and long-term, ensuring key accounts are no longer diluting but rather growing enterprise profits.
ABOUT THE AUTHOR
Joshua Seedman is the founder and chairman of PNI Consulting, a management consulting firm that specializes in global transformations. He has over 20 years of operating and general management experience with expertise in organizational transformations, customer experience, employee engagement, digital transformations, sales & marketing, operational turnarounds, culture/change management, and high-stakes negotiations. His experience includes executive roles within F500 companies, top-tier consulting leadership (McKinsey & Company), over 10 years of global P&L responsibility, and corporate lawyer (Davis Polk & Wardwell). He received his MBA from Kellogg School of Management and his Juris Doctor (cum laude) from Northwestern University School of Law.