Many companies who are struggling, ask us about key account management, also referred to as strategic account management. They ask what it is and how can it help them grow their sales and profitability. So we asked Brian Smith to provide a little more in-depth perspective on the topic and he has graciously agreed to write a series of articles for this blog.
Brian is a seasoned expert on leadership, sales and vendor management and overall in General Management. He leads the Key Account Management and Client Development program at York University’s Schulich School of Business in Toronto where he has taught over 5,000 professionals from across North America, Europe and Southeast Asia who have attended his seminars.
Brian has coached large multi-nationals and small clients in growing their businesses through Strategic Account Management, Improving Sales Effectiveness, Strategic Thinking Work-Outs and Ongoing Coaching. Through his extensive career, Brian has also held several Finance and Strategic Management Positions at General Electric and led the turnaround of Exide Electronics as Vice President & General Manager.
This is a really important question, because this is what differentiates key account management from regular account management or sales. In key account management, you want to develop in depth relationships. As a rule of thumb, about 5% of your total accounts, which generally account for about 50% of the total business volume, is about as many accounts as you can have in a key account management program.
Don’t Bite Off More Than You Can Chew
So what does that mean? That means that if you have 1,000 accounts, you can't have any more than 50 in a key account category. That's probably even too much for a lot of organizations to administer. It would likely be in the order of 10 to 20 key accounts.
Key account management, based on surveys found that key account managers can manage about 60 relationships. So that means that if you have 15 relationships in each key account to be managed, the account manager can only have 4 accounts. Expecting account managers to manage more than 60 in-depth relationships will position the manager for failure. They won't be able to devote enough time to get to know those people to the level that is required to keep them on side.
It’s About Getting Up Close and Personal With Your Key Accounts
Key account management is about developing in-depth knowledge of each account and becoming a trusted advisor to the account. You can't become a trusted advisor if you don't spend the time with the people you're working with to understand their priorities and how they see you as a supplier.
Can Someone Else Other Than the Key Account Manager Be the Trusted Advisor within an Account? I don't believe so. That person has to be seen as a trusted advisor. It doesn't mean that he or she has to personally have the expertise to advise the client on what to do, but they have to be seen as a person who can bring the competent experts from your company to fill that advisory role. That's how you get the in-depth knowledge necessary to make things work.
If an account manager is spread too thinly, the account will recognize this and supplier credibility can suffer. The account knows if you are committed to them or not. Account managers must be senior people who make decisions. Key customers don't want account managers that have to run back and get permission to do different things. They want people in front of them that can make decisions on the spot.
Key Account Management Is a Business Strategy, Not a Sales Strategy
How can you solve some of these issues with respect to numbers? First of all, the key account manager needs to educate his own organization on the benefits of key account management and point out the key success factors. It's really important that you get your own organization to understand what makes it work. It is absolutely essential that you get C-level executives involved who believe in key account management and are committed to the process. It is a significant strategy that can be very successful but it is a waste of resources if it is not well executed. All C-level executive reviews, once you get this going, should have key account management as a subject. Key account management is a business strategy, not a sales strategy.