Hello. I'm glad to see you again.
This is your second lesson in the third course,
sales models applied frameworks to support sales planning.
Now, we will talk about key account management,
KAM for short, and its role in the sales organization.
First thing we must understand,
key account management is not a sales technique or a selling model.
A sure way to fail in the implementation of
our KAM initiative is to bring your sales team and say,
"Let's train them to be KAMs."
Check out management has a much more important role in the organization.
It requires the whole company to rebuild itself around KAM philosophy.
What exactly is this philosophy?
There is a very good article published in 2014 by Wang and Brennan.
Part of your reading that I think describes it best,
key account management primarily focus on the management and development of
profitable relationships with strategically important business
to business clients or B2B clients.
Lets examine the concept in depth.
It carries important principles management.
It is not only about doing business with your customers.
Key account managers have a role of actively
supervising and acting upon all matters with their customers.
Again, it is not only about selling,
it is about addressing all issues and opportunities
with our portfolio with each individual customer.
The key account manager is accountable for
360 degrees of his company's products or services.
We could even describe the key account managers as
an ombudsman of the customer inside his own company.
Second concept, development.
Selling in replenishing customers inventories each month is not enough.
The key account managers must foster
the growth of his company's business relationship with the customer
that involves the gross of
the current business and the development of new business opportunities.
To be able to detect these new opportunities
the account manager must live the customer 24/7.
Relationship. That implies the type of business engagement is
not made of one transaction or several transactions in sequence.
Relationship indicates it must be a long term commitment and
there is goodwill from both sides to keep it mutually satisfactory.
It is an association of equals.
Next, profitable.
One mistake that frequently occurs is to think key account management is equal
to customer is king or customer first or the customer is always right.
To make sense, key account management must be profitable for
the supplying company and profitability is not maximizing sales.
key account management goes hand-in-hand with the concept of revenue management which
advocates that what matters is how profitable your customers is for you.
You must subtract from your gross sales to
the customer all cost-to-serve items such as discounts,
rebates, transportation, product return,
customer service, and even the key account managers costs themselves.
Key account management also goes together with customer lifetime value,
CLV and this gives another dimension to
profitable as we have seen in a lesson during course one.
We talk about profitability not in
the current business calendar but in the relationship time span with the customer.
As you remember, customer lifetime value equals the net present value of
the current and future profits to come from this customer in the years to come.
We are assuming cash flow and profits are equal for the sake of simplicity here.
This has an important implication.
You can be not very profitable or even lose money for a while with
a customer if it will result in a higher customer lifetime value.
Next, let's talk about strategically important clients.
Adopting the key account management approach demands want to make choices.
Not every client is a key account.
Key really means most important.
When selecting who you will be consider a key account remember that less is more.
Better have fewer key accounts than too many.
Strategically important is not the same as the biggest customers.
You may have a small customer that is in a position to grow a lot in
the near future and this client could be treated as a key account as well.
We started by saying that adopting a key account management requires a transformation in
the company and this includes breaking the paradigm
that only salespeople can be key account managers.
Key account managers competences are many; consulting,
financial, interpersonal, project management, influencing.
Some people in sales,
we already have or can acquire them but depending on the segment the company operates.
Engineers, techies, consultants can also become great key account managers.
This concludes our discussion
on key account management but there is much more on the topic.
Make sure you check your supplemental readings.
Looking forward talking to you the next time.