Are You Managing Your Key Accounts – Sales Training
By Colly Graham of salesxcellence
“Key Account Management is the process of maximising the return on your investment in a customer by defining and actioning appropriate plans that will enable you to build on the present, to manage the future” (Peter Cheverton)
Key account management is one of the most important changes in selling that has emerged during the past two decades. Key Account Management (KAM) is an organisational process used by business-to-business suppliers to manage their relationships with strategically-important customers, and it producing measurable business benefits.
Business theories based on Pareto’s law tell us 20% of customers generally produce 80% of revenues, so losing such key accounts is expensive and damaging to the bottom line. Proper key account management maximises the chance of keeping these key accounts. Research shows that structured and resourced account strategies and plans deliver consistently higher revenues and margins, lead to higher customer satisfaction levels and hence to lower customer attrition rates.
Key account management helps companies gain the status of strategic rather than commodity supplier to their major customers, guarding margins and improving security of retention. Retaining 5% more customers boosts profits between 25% and 85%. Key Account Management is a strategic planning approach that goes beyond traditional selling to tackle today’s customer issues. It reaches inside both seller and buyer organisations.
The top 10% of customers by revenue will be regularly running at a loss due to the increasing level of support they require and because 4 out of 10 firms cannot track profitability accurately. Key account management concentrates on how to develop profitable customers.
A focused approach to key account management dramatically increases both opportunity costs and direct costs of sale and leads to a major fall in the win ratio. A fundamental part of good key account management is a structured and prioritised qualification and bid process.
Have you identified who your key accounts are? Management often fall into the trap of identifying their top 20% accounts by revenue as opposed to profit.
Who are the top 20% key accounts by profitability?
How attractive are these accounts by size, growth potential, financial stability?
What is the closeness of existing relationship?
Do they value your offer and is it relevant to their needs
Having decided who you key accounts are you need to farm the accounts to grow their potential. You may be familiar with the terms hunter and farmer salespeople. The hunter type salesperson is like the woolly mammoth hunters who hunter is responsible for killing fresh meat and bringing it back to the tribe. The hunter sales person makes one off sales, brings it back to the office and goes off hunting again.
The hunter requires aggressiveness, confidence, and the capacity to make an impressive impact. Once the hunter has initiated the first piece of business a different set of skills is required, they are those of the farmer.
Some of your existing accounts require as much active selling as the new business to develop and grow the business within that account. Many sales people wrongfully assume that there is more business to be had from new rather than existing customers. Value-creating businesses recognise that the bulk of their present and future revenues come from the accounts you already have.
The skills of the farmer are not all that far removed from the hunter, they both require equal skills in questioning and problem solving. With the farmer concept, you look upon your accounts the way a farmer would look at his land. The farmer cultivates, prepares, plants, seeds, waters, fertilises, weeds, protects, grows, develops crops, harvests and then starts the cycle all over again.
Key Account Management provides an opportunity to grow your business financially and exponentially through developing and adding value to your key account customers. Specifically, you have discovered that if you can maintain your current customer retention levels and provide additional, value added services to this customer base, you will achieve some important objectives.
First, you will be able to increase revenue levels and subsequently bottom line profits by having existing customers introduce more product lines. Moreover, you will increase your competitiveness in the market place that they are the preferred supplier in their sector by gaining the competitive advantage.
Second, you will have the opportunity to gain a larger share of your key customers’ wallet. This will also cement the relationship with the customer ensuring long-term retention of their business.
Third, assist and train the key account managers, the farmers, to measure the potential of the key accounts to yield growth in your organisation’s overall profit.
The question now is “how will you grow your key accounts?”
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