A key account is one of your company's most valuable customers. These customers demonstrate value in a few ways:
- They represent a disproportionate percentage of revenue,
- they refer new prospects to your company, and
- they give your business credibility in their industry.
However, "value" is subjective, and your organization needs a strict way to define and execute key account management.
In this comprehensive guide to key account management, you'll learn:
- What Key Account Management is
- The Role of a Key Account Manager (Including a Job Description Template)
- Key Account Management Strategy (Including a Free Template)
- How to Identify Key Accounts
- Key Account Management Best Practices
What is Key Account Management?
Key account management is a business strategy where an organization provides personnel and resources to valuable clients in order to develop a mutually beneficial relationship. The goal of key account management is to sustain or grow profits from these large accounts.
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Businesses that use key account management strategy reap great sales volume and long-lasting strategic relationships. Not to mention, they have a better opportunity to grow revenue from these accounts through upselling and cross-selling.
However, professional services firm BTS points out, key account programs can lead to increased costs and lower margins. That's the inevitable outcome of giving a customer greater resources and often your best discounts.
But don't be discouraged, the key to successful key account management is in the longevity of the clients, not the profit margins. Their tenure with your businesses (and the money that comes from it) more than makes up for the discounts here and there. This strategy is a perfect example of the Pareto Principle where 20% of the inputs bring in 80% of the results.
The benefits of key account management are only realized when you have the right staff in place. Let's look at the role of the key account manager and how they interact with the rest of the team.
Key Account Manager
A key account manager (KAM) is responsible for being a representative of the business to its most valuable clients. KAMs manage the key account, build strong relationships with the client, identify challenges or opportunities, and find ways to maintain success within the account.
Not only do KAMs find ways to address the client's challenges and opportunities, but they also create and present reports about the client's progress to key stakeholders.
Key Account Management Skills
- Get to know the customer.
- Cross-functional collaboration to benefit the customer.
- Effective leadership of the key account team.
- Coordination and planning of activities for complex accounts.
- Strong business acumen.
- Ability to use analytical skills to support a variety of clients.
- Clear written and verbal communication skills.
Some companies assign their reps as key account managers to one or two customers. This setup isn’t ideal because selling and account management require different mindsets, skills, and objectives. Unless your team is prohibitively small, separate the sales and account manager roles.
A key account manager is focused on becoming critical to her customer's operations — not winning a deal.
Here are several unique skills critical to a key account manager's success:
1. Get to know the customer.
A key account manager must have an intimate, sophisticated understanding of her account's strategy, market position, finances, products, and organizational structure. Then, they’ll use this knowledge to make business cases showing how price changes, customization, and add-ons will add value.
2. Cross-functional collaboration to benefit the customer.
Key accounts don't usually buy off-the-shelf: They want a custom blend of products and services tailored to their needs. With that in mind, it's crucial a KAM can work across the organization to develop these offerings.
3. Effective leadership of the key account team.
A KAM needs leadership abilities to guide her team members (which might include a salesperson, marketer, technical support, implementation, and/or onboarding specialist).
4. Coordination and planning of activities for complex accounts.
Key account programs have a lot of moving parts. To be successful, KAMs should be capable of planning short-term and long-term plays, carrying them out, analyzing the outcomes, and applying those takeaways to their future strategies.
5. Strong business acumen.
A KAM should develop dynamic business acumen — an understanding of how a company makes money — to tell how its customers make money or keep tabs on any business changes.
With this knowledge, they'll be able to solidify their position as a trusted resource and advisor for their clients.
6. Ability to use analytical skills to support a variety of clients.
In addition to having business acumen, key account managers should have an analytical mindset. Their analytic skills will help them create and present business cases. They need to be able to think quickly and apply their knowledge to various clients and markets and be confident when presenting the information.
7. Clear written and verbal communication skills.
Key account managers are responsible for keeping clients and other stakeholders updated about any issues. Sometimes, these account managers are required to make oral presentations. As such, they need to be able to write and speak clearly.
Key Account Manager Job Description
Use this Key Account Manager job description to find and attract the most qualified candidates.
Key Account Manager vs. Account Manager
It's important to note, though, that key account managers differ from account managers. Account managers manage non-key clients that bring in less revenue or may not be an ideal product fit. Key account managers focus on only the most valuable clients of a business.
The relationship between account managers and key account managers is not hierarchical as account managers do not report to KAMs, but KAMs may sit in more senior-level roles on the same team or an adjacent team.
The Difference Between Key Account Management and Selling
Key account management and selling are very different. While a salesperson focuses on the short term — by necessity — a key account manager (KAM) prioritizes the future.
Sales reps also zero in on specific opportunities, while KAMs have broader goals, including collaborating with the customer on mutually beneficial projects, helping the customer meet their objectives, and making sure the customer is getting the necessary support.
If you're hiring a key account manager for the first time, one of the first duties they perform may be selecting the key accounts that they'll serve. There are many factors to consider when carrying out this task, but below, we get you started with some of the most common criteria.
How to Identify Key Accounts
SBI recommends choosing three to five selection criteria when identifying key accounts. This limitation allows your new KAM to focus on business need and impact.
Here is a list of 10 to choose from when identifying key accounts for your business:
- Product Fit: The size of the target market that this client has access to who would use the product or service your company sells.
- Average Transaction Size: The amount of money the account spends with your business, on average.
- Revenue Potential: The amount of money the account could spend with your business in the future.
- Purchasing Process: The process by which the client purchases your product. ie: Do they purchase with just one decision maker? Is there a group who decides what to purchase? How long does payment processing take?
- Partner History & Potential: Are they currently or were they formerly a partner with your company? Do they have the potential to be a partner in the future?
- Customer Tenure: The amount of time the account has been a client of your business.
- Solvency: The account's financial ability to pay their debts.
- Existing Relationships: The relationships the account has with other businesses that could potentially become your clients.
- Cultural Fit: Alignment between the way in which the account treats their own customers, and staff as well as your staff.
- Geographic Alignment: If applicable, the physical proximity to your business's headquarters or service centers.
Out of context, these metrics won't lead to a great list of key accounts. You'll want to develop a formula that weighs each criterion based on importance to your organization. Then, calculate how much potential there is to expand each account.
You can use a key account scoring matrix to identify your key accounts across these criteria. Simply evaluate each account based on the criteria you select and assign them a score from 1 to 10 in each category. The accounts with the highest scores will be your key accounts.
While it's tempting to label many customers as "key accounts" at once to alter your company’s trajectory significantly, it’s better to be conservative. You can't tell a key account they've been demoted, but you can tell a traditional buyer you're promoting them.
In addition, you don't want to overcommit yourself. Starting a KAM program requires organization-wide change, support from the C-suite, hiring and training employees, and implementing new processes. Starting small allows you to focus your efforts.
Key Account Management Strategy
- Set objectives.
- Deliver exceptional products and services.
- Measure account growth outcomes.
- Anticipate future account needs.
You've got a short list of your key accounts, and you've hired the right folks to be key account managers. Now, it's time to execute the strategy. But how do you do that?
This four-step process will guide you through a key account management strategy.
1. Set objectives.
Before you can share the great news with your customers that they're being promoted to key account status, you need to level-set expectations internally and externally. The way to do that is by setting key account management objectives.
This process works just like it would for any other strategy. Using the why, how, what objective-setting framework, you can get to the root motivation of having a key account management strategy and come out the other side with measurable results.
2. Deliver exceptional products and services.
Next, you've got to act on the objectives you've set by outlining how you'll deliver on those promises.
Whether you're selling physical products like clothing and accessories, or a pioneer of a new software-as-a-service, you want to have a sure way to deliver those products to your key accounts consistently.
Your key account manager is responsible for ensuring this happens and that the account is delighted every single time. This means they'll need to work closely with sales, service, and operations teams to get everyone on the same page for the key account.
It could also be worthwhile to set up key account-specific processes and procedures so that the client knows what to expect and your team knows how to deliver.
3. Measure account growth outcomes.
Over time, the end goal of a key account management strategy is to grow the account in terms of revenue and client-business relationship. This should be straightforward to measure because you can use the metrics that correlate to the criteria you used to select the key accounts in the first place.
For more quantitative criteria, like product-market fit, you can look at adoption or usage rate within the account to determine how useful your product or service is to the client.
4. Anticipate future account needs.
The strategy doesn't end with measurement, though. The final step is to bring it full circle by anticipating the future needs of the key account. If they're purchasing more units than they did before, there may not be any more opportunities for volume growth, but it's possible that the average transaction size has room to increase.
Or there may be an opportunity to have the key account beta test a new product or offering that would align closely with their target market.
The takeaway here is to keep the account engaged, even beyond monetary transactions. Remember, key account management is all about building and maintaining mutually beneficial relationships, so be sure to think outside of the invoice when looking for ways to strengthen the relationship.
Key Account Management Plan Template
Is Key Account Management the Right Strategy for Your Business?
Despite the potential benefits of key account management to your bottom line, it's not a good fit for every organization.
Consider the following points before you go all-in on a key account strategy.
1. How transactional your current sales process is.
If your sales cycle is relatively short and your sales reps have minimal interactions with prospects, key account management probably isn't the right choice. Key accounts require consultative selling techniques — and it will be hard to teach your salespeople to adopt entirely new processes for just a few clients.
2. If your product has upsell and cross-sell potential.
There's little point in continuing a relationship with the customer after the sale if they're not going to buy more. (Obviously, you still want to provide excellent customer service and support to promote word-of-mouth marketing and high retention rates.)
3. Your ability to 'land and expand.’
The above rule has an exception: If you can get your foot in the door of the prospect's company and then grow the account by selling to other departments, offices, subsidiaries, etc., a key account strategy may be a good investment.
4. The competitive landscape you're facing.
A key account program can serve as a competitive advantage. For example, imagine your customer has narrowed down their choice of vendor to you and one another company. If you can promise to make them a key account — and your competition can't do the same — you're likely to win the deal.
5. Company capacity and resources.
Successful key account management depends on company-wide support, executive buy-in, and a dedicated key account team. You'll also need enough runway for an investment that might take 12, 24, or 36 months to recoup.
According to RAIN Group, the most significant difference between high-performing companies and everyone else is an effective account planning tool.
A key account plan helps you identify the most significant possibilities for growth, potential roadblocks, threats from the competition, and more.
You can tailor an existing framework to your own needs or create a customized plan.
Whatever option you take, your account plan should include:
- Your relationships within the account
- The customer's current business plan, objectives, and financial health
- Your targets for the account
- Your strategy for hitting those targets
Let's delve into each of those in more detail.
Map out every customer stakeholder. This information will help you figure out which relationships you need to build and maintain — as well as anyone who could potentially derail your plans.
Note each person's title, role in the decision-making process, how much contact you've had within them, and how "friendly" they are.
To provide value to the account and find mutually beneficial opportunities, you need an in-depth, sophisticated understanding of their business.
Stay up-to-date on their key business goals, financial health, and current initiatives. You should also regularly run a SWOT (Strengths, Weaknesses, external Opportunities, external Threats) analysis.
This section should cover how much this account is currently worth, which opportunities you've lost, won, where you see potential revenue growth and your projected value for those opportunities.
It should also outline your short-, mid-term, and long-term goals and the owner of each. For example, maybe your sales engineering team is responsible for getting a meeting with the CTO by January. A less immediate goal might be getting 60% of a new department using the free version of your tool. Your ultimate objective is to transform the entire department into paying users.
This section is arguably the most important. It takes your goals (in other words, your account wishlist) and breaks down the actions you need to take to reach them.
Use the same structure you used for your objectives: Short-term, mid-term, and long-term.
To give you an idea, the key steps you'll take for your January meeting with the CTO might be:
- Strengthen relationship with VP of Engineering
- Develop compelling value proposition for meeting with CTO
- Ask VP to request a meeting with CTO on your behalf
The more specific and actionable these actions are, the better. Strategic account management involves juggling several initiatives, priorities, and campaigns at one time. Without clear direction, your team will go off in a thousand directions. Plus, you can continuously adapt your strategy down the line if something changes.
Wondering how to get the optimal results? Follow these best practices.
Key Account Management Best Practices
- Select the right accounts.
- Build a dedicated team.
- Consistently measure account performance.
- Invest in the right tools.
1. Select the right accounts.
A winning strategy hinges on being selective. Make sure you pick the right key accounts and apply the same criteria to each one.
Regularly review your key accounts to verify they still require additional time, energy, and resources. If they perform as expected to justify the resource allocation, then continue on. However, if for some reason they are underperforming or the account no longer feels like a good use of additional resources, you may want to consider scaling back.
Additionally, keep track of non-key accounts. For example, if a customer is about to experience significant growth, they may qualify as a strategic account. Courting them now will earn you their loyalty before any other company in the space.
Periodically assess your selection criteria. Are your current key accounts generating as much ROI as you anticipated? If not, it could be a sign you're using the wrong measures.
2. Build a dedicated team.
Even the best KAMs can’t get the job done alone. Ideally, the KAM role is not performed by someone who has sales rep duties on their plate simultaneously.
Each account manager should have a cross-functional support team to support the proper execution of deliverables related to the client’s account. These teams should include a range of skills, disciplines, and expertise to serve your clients well.
If possible, name an executive sponsor to each account. They can play a significant role in getting the necessary resources, connecting with the C-suite at the target account, and providing high-level guidance.
3. Consistently measure account performance.
What gets measured gets done, so staying on top of account performance is critical for success. Set a cadence for internal account reviews. Depending on the team size, account’s value, and the relationship’s dynamic, these might be weekly, monthly, or quarterly.
Consistently measure the account's engagement and loyalty. Both should trend upward. From here, you should also schedule recurring check-ins with the client to get their feedback, address any issues, and find areas for improvement.
4. Invest in the right tools.
Having the right tools in place can make the job of a KAM a lot easier and more effective. For example, use a CRM to keep track of your communication with the account stakeholders, give everyone on the account team visibility into what's happening, and minimize duplication of effort across the team.
If you are having a hard time getting responses to your emails, implementing an email tracking and notification tool can help. This type of tool will let you know precisely when your recipients open your emails and click any links.
Eliminate back-and-forth emails about meeting scheduling by using a meetings tool to make the process seamless for the attendees.
You can also try investing in a video platform such as Loom so you can create personalized videos for prospecting and relationship-building.
Grow Your Business With a Key Account Management Strategy
A well-planned, comprehensive key account management strategy won't just keep your best customers satisfied — it will also provide opportunities to grow the relationship exponentially. As a result, your retention rates and bottom line will both benefit.
Editor's note: This post was originally published in March 2020 and has been updated for comprehensiveness.