We can be very proud of having a key account management (KAM) programme in place, but:
How do we know if we are succeeding or not?
KAM implementation requires the investment of resources that are specific to a customer relationship and, often, more costly than those allocated to customers that do not get the ‘key account’ status. There is evidence that one of the major risks of KAM implementation for a supplier firm is not being able to capture the value of the relationship. For example, a supplier company may invest in a KAM programme with a specific customer but fail in being able to charge a premium price to obtain higher profits. Therefore, measuring performance is a critical step in the key account management implementation journey.
A major challenge is to select the right measures of KAM performance, as they need to be SMART: specific, measurable, achievable, relevant, and time-bound. In addition, the metrics of KAM performance need to connect with the long-term perspective of building and nurturing customers relationships.
Supplier companies in their assessment of KAM performance, should answer the following questions:
- WHAT: which aspects of performance should be assessed?
- HOW: how should the selected aspects of performance be measured?
- WHO: who should be involved in providing the inputs for the measurements?
- WHEN: how frequently should each performance metric be assessed?
Measuring KAM performance can be difficult, given the complexity of the processes involved in the practice of key account management. Firstly, KAM is about planning, developing, managing, and evaluating customer relationships, and a number of factors at different stages influence how good or bad the implementation of a KAM programme can be. Secondly, KAM requires the right balance between short-term accomplishments and long-term goals, which often seem contradictory. Thirdly, performance needs to be measured at three levels: the supplier company, the customer, and the interaction between these two.
We propose a framework on how to assess KAM performance at the account level, which includes the following metrics:
- Financial performance: revenue growth, profitability, and customer lifetime value
- Relational performance: customer satisfaction, customer loyalty, and relationship quality
- Delivery to customer: product/service mix, solution development, and cost to serve
- Co-development with customer: co-creation of value, information sharing, and shared investment
- Customer experience: pre-purchase, purchase, and post-purchase
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.
- Develop Customer Relationships - I want you to be my partner for life
- Adopting KAM – Choose me and I will choose you
- The Key Account Management Framework
- International Key Account Management – The World is (or Could Be) Your Oyster
- Why many companies get key account management hopelessly wrong