Rethink your selling strategy and shift it to a value-based KAM business model
We all know that we are operating in an increasingly complex and competitive marketplace. As such, it is imperative for suppliers to adapt their sales strategies to maintain relevance in order to drive growth. The traditional sales models that once fuelled success are rapidly becoming obsolete.
Today, I write to you to advocate for the evolution of your sales function towards a value-based key account management (KAM) business model. This transition is not merely a strategic recommendation but a necessity for your sustainable success.
The changing sales landscape
The sales landscape has undergone significant transformation over the past decade. Customers are more informed, discerning, and demanding. They seek not just products or services, but comprehensive solutions that add tangible value to their operations. The era of transactional selling has given way to consultative sales, where understanding and addressing customer needs holistically is paramount.
And yet there can still be issues with these new sales techniques. Often, they focus on short-term gains, individual transactions, and are still structured to advance wins for the supplier. The damage of this approach can lead to an erosion of customer trust and loyalty, which inevitably results in reduced sales and, potentially, losing the customer altogether.
In contrast, a key account management approach emphasises long-term relationships, strategic partnerships, and the delivery of consistent value to key accounts. Suppliers select the customers that have potential to provide long-term value, and they harness increased resources and effort to build a unique offer for each strategic customer. By this definition, KAM is strategy – customer by customer.
However, while this is compelling, the success rates of organisations implementing a KAM business model is low. Gartner¹ studies suggest nearly four out of five sales organisations experience the frustrating cycle of rebuilding their key account programmes every few years to address consistent underperformance. Organisations struggle to implement an effective KAM business model. Simply put, implementing a KAM programme is difficult. It could also mean that organisations have unrealistic growth expectations when they anoint a customer as being “key”.
To compound this scenario, and looking forwards, KAM also needs to evolve. Customers are facing increasingly aggressive markets and need to constantly adapt the value propositions that they take to their markets.
If you want to build sustainable business with your strategic customers, you need to help them prosper and meet their goals by adding even more value. My observation, having worked with many supplier industries and thousands of key account managers over a 15-year period, is that they find the development of these innovative customer value propositions challenging.
The essence of value-based KAM
I argue here that KAM needs to evolve to stay relevant to customers and to provide the results that suppliers need. KAM needs to focus on adding value to the customer and the supplier.
Value-based key account management is built around creating and delivering tailored solutions that address the specific needs and challenges of strategic customers. It involves a deep understanding of the customer’s business, strategic goals, and industry dynamics. By aligning your offerings with their unique requirements, you position your company as an indispensable partner rather than just another supplier.
The game is shifting, and suppliers must constantly respond to rapidly shifting customer business needs with value-adding offers. This is very different to selling, and an evolution of KAM.
Why you (the CEO) must champion this transition
Figure 1 below is a “quick and dirty” model² that you can use to assess where your business development efforts sit. The left-hand side is the traditional sales approach, whilst the righthand side is more focused on a value-based KAM approach. Neither side is right – the “tension” is that you need both.
However, if you are firmly on the left hand side, with pay structures focusing on monthly or quarterly “sales” targets, salespeople working in isolation, an operational focus driven by your CRM system, messaging to customers based around your product and brand value propositions, and a stubborn approach mindset that “this has worked in the past and we will continue to work this way”, then maybe you are leading your business down a pathway that is not evolving with the needs of your most strategic and valuable customers.
What is the number one reason why organisations stay locked to the left-hand side of these tensions? Leadership fails to understand the need to change and so maintains a sales-focused culture and business model.
What can you do to get started?
The transformation to value-based KAM is complex (and beyond the scope of this article). If you are reading this and wondering if you need to start putting value-based KAM on your agenda, these three considerations are a good start:
- Value-based KAM is a strategic initiative.
- It is a different business model.
- Value-based KAM requires a change in your commercial operations and culture.
As a leader, you should start by establishing the urgency to act.
Establish if you have a burning bridge. Ask your team two questions:
1) Does our business need a value-based KAM approach?
2) Do we have the capability to work this way?
If your leadership team is saying that you don’t need value-based KAM, seriously have the debate, why not? Use the Tensions model in Figure 1. If you and your leadership team do not see the need to work in a value-based way, or consider that what you have is adequate, then you will struggle at the first hurdle. There will simply be no compelling belief to change.
Get the voice of the customer. When you build a value-based KAM business you are building a competitive edge. Competitiveness is relative to two things:
1) Are you meeting the needs of your customer, and
2) Are you better than your competitor in meeting those needs?
A few honest conversations with customers across the decision-making unit will provide valuable insights that might provide the justification and reasoning for you to adapt.
Look at your competitors. Linked to this, watch your competitors. If they are building strategic relationships, and following up with compelling value propositions, they will be hard to beat. If they are not, this is your chance.
Get started now and build your value-based KAM organisation. It might just give you that competitive advantage that you have been looking for!
The commercial evidence to adopt a value-based KAM business model
Of course, as CEO you might be asking “what is the payback from all of this extra effort?”
The reality is that this varies by organisation. Universally, there is always a lag between implementing a KAM programme and achieving commercial results. This lag can be twelve to twenty-four months and occurs because it takes time to research the customer, develop innovative value propositions, engage and sell these new ideas, ramp up the new offerings and then capture results. Patience is a requisite from both supplier leadership and the customer.
To minimise risk (and secure in your own mind that a value-based KAM approach works), I always advise that organisations adopt my top tip:
Don’t go flat out training all of your key account managers at once; rather choose a few customers that you consider to be “key” and take those pilot teams through an intense period of focus.
The secret to success? Build your own value-based KAM programmes and develop your blueprint and case studies. Don’t invest in programmes for ten to fifteen customers until you have a proven model for one customer. Then follow that beacon.
Once you have developed a few of your own success stories then you can widen the implementation to your other key accounts. This is leadership, and it starts at the top, so start and then write your own benefit analysis.
Your version of value-based KAM will provide you with a competitive edge that is virtually impossible to copy. Get started building your new business model. You won’t regret it!
References
¹ Gartner, “(Re)building Key Account Management Programs for Growth”, 2021.
² Davies, M, Bloomsbury, Infinite Value Accelerating Profitable Growth Through Value-Based Selling, 2016.
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This article was first published in The International Journal of Sales Transformation
