Adopting Key Account Management (KAM) requires the commitment of specific resources, changes in the organisational structure and, most likely, a shift in the company’s culture around how to ‘do business’.
Unfortunately, a significant number of companies fail to charge a premium price to customers through KAM, compared to that price which is charged to those customers who are not key accounts. Therefore, supplier firms need to carefully evaluate the convenience of adopting KAM and carefully plan how to do it.
To evaluate the convenience of KAM adoption, supplier companies need to answer the following:
- To what extent is our business concentrated on few customers?
- To what extent do our customers require a KAM approach?
- To what extent can we create competitive advantage and differentiate through KAM?
We suggest some specific assessment criteria which can help to inform the decision of whether or not to adopt KAM, and if so, to what extent. Clearly, strong positive answers to these questions would indicate that your company would benefit from embracing KAM.
Working through a framework for selecting key accounts as a three-stage process which evaluates those potential candidates in order to obtain their key account status, and which focuses on answering the following questions:
- Is this customer a very attractive one?
- Does our company have a strong competitive position to deal with this customer?
- Is this customer willing to co-invest in a partnering relationship with us?
The first two questions are addressed by adapting the GE-McKinsey framework which evaluates a business portfolio and helps to prioritise the investment around different strategic options. For the key account selection, each candidate customer is first assessed in terms of attractiveness factors to give a weighted score of overall attractiveness. Secondly, the competitive position of our company (similar to business strength) is evaluated for each candidate customer, in order to obtain a weighted score of overall competitive position. These two metrics are then combined to highlight the importance of both customer attractiveness and competitive position in selecting key accounts.
The third question is the most novel one for key account selection; it was discovered after interviewing a group of senior executives involved in KAM. Nowadays, effective KAM requires some sort of co-creation, co-development, and co-investment. This is where the notion of choose me and I will choose you becomes so relevant.
Want to find out more? Adopting Key Account Management is covered in more detail in the Kogan Page book Implementing Key Account Management. Take a look to see how to decide on adopting KAM and selecting the right accounts.
Our work in this area is critical to achieving successful key account management programs for organisations looking to succeed at managing key account customers. For the past twenty years, Cranfield has pioneered the development of Key Account Management research in Europe. Working with world leading businesses to adopt new frameworks to fully leverage key relationships and strategies. This new frontier knowledge is continually integrated into our Key Account Management Programme
Blog produced by: Professor Rodrigo Guesalaga, former Programme Director of the Sales Director Programme and KAM & Strategic Sales Forum at Cranfield School of Management. Rodrigo is a Key Account Management expert and is now an Associate Professor at Pontificia Universidad Católica de Chile.
