Spotting Your Key Customers An article on Key Account Management
Characteristically, a key account is that valuable customer of your’ s whose loss would have a significant impact on your organization’s profits. Hence, Key account management (KAM) isn’t just about winning new business from your customers but changing the very complexion of how you do business with those customers. A robust KAM framework gets its credence from the pro-activity it offers in its approach of winning and retaining those strategically significant customers.
As KAM seeks to grow your organization’s profit margins via the formation of collaborative relationships with customers that represent great business potential over the long term, a KAM strategy is quite differentiated from a purely sales-driven strategy.
But the question is “what is it exactly that characterizes a high-value (key) customer?”
Defining Your Key Customers
Let’s look at 3 simple rules of thumb to define your key customers
Growth Potential: Every business that is big today started off small at some point of time in the past which is why it’s important to look at growth potential in your key account selection criteria. Some of the areas where account managers would need to do research pertaining to the above are, what is the potential volume of future sales? Is their trend going up, down or staying level? Have they made any interesting acquisitions? Are they expanding into new markets? Is their brand becoming unique? All these need to be considered.
Attractiveness: Your customer may be huge but if they show low number of indicators of “account attractiveness” or are genuinely difficult to do business with, then you may want to reconsider, investing your resources in them for the longer term? For example, how much of the industry’s work do they represent? Have they got budgets for your products/services? How much of this customer’s potential volume can you realistically capture? How strong is competition? What is their willingness to collaborate with you? How much access to their decision-makers and influencers do you have? Can your company work with their systems and processes? All these questions are important to be answered.
Position: Typically, values and culture may not be aspects that you would look at from a sales point of view but when it comes to KAM, they are also very strong indicators in key account selection. Where are you positioned in the customer’s mind-space vis-à-vis your competitors, will determine, whether both teams will be able to work well together or not. For instance, a good current position would mean that you have a good relationship with the customer, but more growth of the account is possible, perhaps through cross-selling products/services or by penetrating other divisions. A strong current position would mean that you are well entrenched with the customer and are maximizing the value from and to them. Limited current position would mean that you have been selling to them for some time but have only limited penetration of the account and future growth is unlikely unless conditions change.
As account managers do not have an infinite amount of time available to grow and protect their existing accounts while developing new business opportunities, alongside, they must make sure that they are applying cogent and uniform guidelines in assessing these new opportunities when they arise.
Four vital questions that can help key account managers in this regard are:
How real is this opportunity?
Developing an in-depth understanding of the customer’s business, their key customers and competitors is an important stage of this part of the process. As time and resources are limited it is important to determine that whether the opportunity presenting itself can potentially deliver enough volumes and/or profitability to justify the proposed investment of such resources.
Can we compete?
Providing a solution to the customer is only one part of whether you can be competitive in a sales campaign. Firstly, you must know how your company and your solution relate to the specific sales opportunity, as this can be a key ingredient in winning the deal. Secondly being able to realistically contrast that information with that of your key competitors is an important factor in assessing your answer to this second question.
Can we win?
This question is the one most overlooked in sales campaigns because everyone can be initially ‘blinded’ by the opportunity. It is critical because many opportunities are lost even if the key account manager has the best solution, best delivery and back-up and even the best terms and conditions. Why? Because it depends on how well the key account manager works within the customer company’s structure and can win the inside support necessary to win the deal is paramount. Contrasting your ability here with that of your competitors can have a significant impact on your decision to continue to pursue the sales opportunity.
Is it worth winning?
All key account managers would agree that every sales opportunity is not necessarily worth winning. It is critical to assess the profitability of the deal as well as both the short- and long-range potential of the deal either in terms of revenues or strategic importance for your company with this customer or in this industry segment.
The discipline imposed in answering the four key questions and the underlying criteria that they raise should help you to determine whether a sales opportunity is in fact real and valid and thus worth all the resource necessary in order to win it.
Our Key Account Management framework enables you to develop that thought and rigor that is quintessential for KAM.