Of all the questions we receive at Gartner’s Sales practice, some of the toughest and most frequent revolve around key account management.
- “How do we build a successful key account management program?”
- “How do we find effective key account managers (KAMs)?”
- “How do we equip them to succeed?”
- “How do we know which customers to put into the key account program in the first place?”
Key Account Performance Fails to Generate Outsized Returns
To say sales leaders are generally disappointed with key account program performance would be a huge understatement. After all, these are typically a company’s largest, most strategically important accounts.
Yet, Gartner research shows they often fail to generate the outsized returns their size and investment would logically dictate. That underperformance leads to a high level of disruption within organizations -- not to mention frustration and seemingly endless re-structuring, re-thinking, and re-starting.
In fact, when we surveyed sales leaders on key account performance, a full three quarters told us they expect their key accounts to outperform the rest of the business.
At the same time, a powerful 84% of those same leaders reported having completely rebuilt their key account program at least once across the previous seven years due to program underperformance. Of those, over 40% blew it up and started over at least two or more times in that same seven-year period.
That’s a huge amount of organizational capital expended with extremely little to show for it. As one head of sales put it, “Every time we elevate an account to our KAM program, that’s a $1.5 million investment. When it doesn’t turn out the way we expected, that’s a huge amount of money down the drain.”
KAM Success Isn’t Won or Lost at the Individual Level
So, what’s the best way to address key account program underperformance? The tendency is to look to the individuals running these accounts -- the KAMs -- as the key ingredient to their success or failure.
Everything seems to revolve around finding the right person for the job. And that individual has to be exceptional. A “quarterback,” of sorts, able to manage huge amounts of internal coordination across business units, geographies, and functional silos often with very little official authority to simply dictate specific actions.
They must engage very large, strategic customers on a global scale with the gravitas and skill of a C-suite executive -- all while maintaining control and contact with the very tactical side of the customer’s business. Essentially, they have to be all things to all people.
In the end, as a senior vice president of strategy told us, “The only way we know to make it work right now is to hire GM-types that carry big hammers and act like they can call the CEO whenever they want.”
Not exactly a recipe for goodwill, effective collaboration, or sustained organizational alignment. Yet, the question we hear most often in key accounts is: “How do I get more people who can do that -- act as a sales leader superhero who can make the magic happen. By force, if necessary.”
When we studied KAM success in significant depth (including an analysis of nearly 300 key account managers with at least national responsibility for no more than three accounts each), we found a different recipe for success -- one that relies far less on the individual running the account and far more on the organizational design of the program itself.
Key account management success, in other words, isn’t won or lost at the individual level, but the organizational level.
What makes a successful KAM?
Specifically, Gartner research reveals that while individual KAM skills and attributes do matter for key account performance, far more important are specific organizational and even customer attributes that can ensure or derail the performance of even the world’s best key account managers.
On the supplier company side, two factors in particular stand out as crucial for success: widespread organizational support and understanding of key account objectives, and the provision of high-quality, real-time commercial information to the KAM.
In fact, a lot of our ongoing research into successful KAMs features best practices from organizations that are effectively aligning incentives and information sharing across organizational boundaries.
Which Accounts Should Be Included in Your Key Account Program?
On the customer side, our data uncovered many tough questions around how an account should qualify for a key account program. Our work studied a variety of approaches from leading B2B suppliers to select -- and de-select -- key accounts based on criteria more predictive of success than size alone.
In fact, our data indicates a customer’s willingness to collaborate -- on innovation, for example -- and how transparent they are about expectations is a far stronger indicator of key account success than size or “strategic value” alone.
At the same time, any customer, regardless of size, that assumes a more transactional posture will usually damage key account performance. That raises the scary question, “Should we include businesses in key account programs simply because they’re big?” The data is pretty clear: that’s a recipe for failure.
3 Key Questions to Ensure Key Account Success
So, if we were to boil it down to three key questions that ensure key account success, what would they be?
- Do we, as sales leaders, have a clear understanding of what it means to be a key account? Do we know who qualifies? According to which criteria? Do we agree on which specific “value-add” services, personnel, or resources we’re willing to dedicate to that account as a result?
- Does the rest of our organization have a clear understanding of what it means to be a key account? Does everyone across the organization (geographies, business units, and functions) understand and agree on who qualifies as a key account and why, and what specific resources, time, and attention those accounts merit as a result? Are they willing to provide the support and information necessary to support that vision?
- Do our customers have a clear understanding of what it means to be a key account? Do key account customers see their inclusion in the program solely as a reason to ask for bigger, volume-based discounts (in which case they’re probably a big account, but not necessarily a key account)? Are they willing to collaboratively design and execute a long-term plan of cooperation maximizing value to both supplier and customer? Do they value that kind of relationship? If not, what’s the point?
No question, key accounts represent the life-blood of many B2B organizations. But without a principled understanding of what a key accounts program is designed to do in the first place and what kinds of customers actually constitute “key accounts,” KAM programs are destined to underperform, leaving the individual KAM holding the bag for what’s really the result of organizational underperformance.