Key account management is a popular practice in sales and marketing. Key Account Management (KAM) involves identifying high-volume, high-growth customers that would require special attention from an organization and developing a sales and marketing organization to meet the needs of these customers.
Many organizations have identified such accounts and have developed ways to meet the requirements of these customers. These customers demand special attention in the design of supply and service. These types of accounts are very common in business-to-business or business-to-institution marketing.
Relations with these accounts are very gradual. They don’t happen overnight. Quite a few theoretical models have been developed, but these accounts begin with the vendor and vendor becoming familiar with each other and understanding their cultures and business methods. Here, both supplier and buyer are often quite large and have pre-existing cultures that will require adjustment.
Both organizations must also understand each other’s long-term goals, as the relationship may be a long-term partnership that requires a significant amount of time and capital from both. It is an investment that needs to be carefully examined. Each party must ensure that there is a good basis for the relationship between them and that it is mutually beneficial in the short and long term.
What are the main characteristics of a Key Account?
1 These Accounts are generally large volumes of the product produced by suppliers.
2. They are in a dominant position in the market with a good image.
3. They have a history of stable financial performance
4. They demand special attention but because of the special attention they retain salespeople
5. They are willing to share their technical and business plans with their vendors and thus allow the vendor to develop with them.
What are the main requirements that the supplier organization must meet? (I would prefer to call these vendors key vendors or vendors.)
1. The provider must be able to identify an account manager who can build the relationship between the two organizations.
2. Provider must be willing to commit resources to service this account
3. The provider must be willing to make a long-term commitment to remain a provider for these accounts.
4. The provider must also be willing to invest in any technical development required by these accounts.
What are the main benefits of having key accounts?
1. They provide consistent and predictable captive business.
2. These accounts can generate margin for the development of new products.
3. These customers can help maintain profitability due to economies of scale in marketing.
4. These high profile accounts can function as testimonials for key vendors.
Are there risks associated with key accounts?
1. The main risk is the trading status of the key account. If there is any decrease, it would have an impact on key suppliers.
2. Significant assets and resources will be tied to the key account, therefore any reduction in activity can lead to under-utilization of assets and resources unless there is sufficient flexibility built into the system.
3. Revenue inflows can also decline with a slowdown in key account activity
Key account impact on the sales organization
1.These accounts need dedicated people to coordinate the activity.
2.These Accounts need the participation of the entire organization from both sides. All the people involved must be committed.
3. Such Accounts should not be viewed as a threat by vendors handling other accounts.
4. If there are an adequate number of such accounts, an independent organization would be needed to manage these accounts.
5. Additional, separate storage and transportation may be required.
6. Dedicated Key Account Managers must be appointed and the skills must be developed
Key accounts are a necessity for most industrial vendors and institutional providers. Given the change in retail structure, key accounts are also becoming important in retail. It is necessary to develop adequate skills and systems in organizations to manage these accounts.