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| Tuesday, 14 September 2004 |
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Key Account Management by Prasanna Perera, Management and Marketing Consultant, Chartered Marketer, CIM, UK
Key Accounts in Marketing are referred to as key customers or groups of key customers. In a competitive environment the ability to manage key customers, is a vital ingredient for success. When managing key accounts, the entire marketing mix comes into the play. The product has to be tailor-made to meet specific customer requirements, pricing has to be need based and promotions customised in terms of specific key account characteristics. Key Account Management is a specialised activity, carried out as an integral component of effective marketing. When managing key account the golden rule to remember is that the most profitable customers are not necessarily the largest. Therefore, it is important to manage customers in order to satisfy their needs in a profitable manner and not bother if they are large or small players. What is Key Account Management? Key Account Management is aimed at building a portfolio of loyal key accounts by offering them, on a counting basis, a product/service package tailored to their individual needs. Success depends partly on the degree of receptivity demonstrated by the customer to a partnership approach. To coordinate day-to-day interaction under the umbrella of long-term relationship, selling companies typically from dedicated teams headed up by a "key account manager." This definition dwells on the key dimensions of Key Account Management, namely loyalty building, focusing on individual needs long term basis and dedication/commitment. As such, key account management is not a quick fix activity and should never be viewed in this manner. Building relationship is a key purpose of managing key accounts. In addition, key account management integrates contact between all parties involved in the process (specially the buyer and supplier). Further emphasis is placed on mutual benefits of all parties i.e. it must achieve a win-win situation for everyone. Since individual customer needs are the focus of key account management, product and service offerings are customised to a very large extent. The final most important aspect is the openness and sharing of all relevant information, between all parties. This is the ultimate ambition in a key account management program. Transparency between a supplier and buyer can only be reached based on trust, respect and mutual understanding. Key Stages in Account Development In developing key accounts, the first stage is to identify the trade channels through which the product will be distributed. Secondly, you must identify the key accounts in each trade channel selected. Thirdly, profiles of the key accounts should be developed. This is an important step in order to understand clearly the needs of individual key accounts. The fourth step is to have regular communication with the key accounts identified. This is an integral part of networking and communications should be carried out at all levels in the customer/key account organisation. The fifth step is to establish mutual objectives, between the buyer and the supplier. An understanding of the goals of each party, will lead to each party empathising with each other. A final step is to service the key accounts identified, through your key account servicing structure. (Sales force). This coverage is the support needed for relationship development and nurturing. The overriding factor in the key account development process, is the supplier and buyer, both focusing on "building relationships" into the longer term. Influences on Key Account Management There are many pressures internal and external, that have an impact on the key account management process. Let us examine them briefly. * The growing power of customers - The customer or the buyer is provided with many options in terms of suppliers. As such, the buyer is in a strong bargaining position and this exerts pressure on key account management. * International dimensions - Today all businesses are global businesses. Globalisation of markets, is the name of the game. Globalisation brings with it, a fair share of pressure from global forces. * Pace of change - changes in the external environment are taking place, at an electrifying speed. Technological changes, social and economic changes. These changes have a definite impact on the key account management process. * Maturity of markets - In mature markets the emphasis is on customer retention. This is achieved by focusing on key customers and managing them effectively. Customers in mature markets also demand greater product benefits and value additions, which a key account management structure is well placed to deliver. * Process changes - This relates to ordering and invoicing processes, delivery or order fulfilment process. The development of IT has led to major changes in process, relating to the management of key accounts. Impact of "Negotiation Skills" towards Effective Key Account Management The ability to be an astute negotiator, is crucial element in key account management success. When negotiating with key customers it is important to separate, people and personalities, from the problem. Often problems are compounded by people and their personalities. It is also important to be Patient, A good listener, Willing to give and take, Creative, A good communicator, A positive thinker. If this criteria are possessed, effective management of key accounts can be carried through excellent negotiations. The art of negotiation, is to show people, how to get what they want, while getting what you want. This applies greatly to key account management as well. Essentials for Effective Key Account Management * Match the person with the key account. The person serving the key account must have experience, skill and personality, to match up with the expectations of the customer. * The customer should be the focal point in all activities. This is basic, but often forgotten in the humdrum of the business world. * Teamwork for success at all items. The knowledge and services of specialists are required, to offer solutions to customers. * Key account managers should be well informed about their customers needs, expectations and also about their own businesses. * Develop a principal contact in the supplier and customer organisations. This will help in better key account management, communication and co-ordination. * Key account Management is a way of conducting business, and not an isolated business process. It should be treated as an integrative method of delighting customers. What do key accounts (customers) expect from suppliers? It is always useful as a supplier, to get into the customers shoes, so that you are able to recognise and understand, their needs better. Every single customer, irrespective of whether they are small or large, expects to be treated as special. They also expect excellent service at all times and do not hesitate to delist suppliers who fail in this regard. Suppliers are required to continuously add value through the exchange process. This value addition could be in terms of margins, credit facilities and promotional support. The supply of good quality products and the frequent availability of products, are expectations of key customers. Finally, easy access and conductibility to the supplier is also an expectation of customers. Key account management (KAM) requires different customers and customer groups, to be approached, on a special basis. This requires a supplier organisation to have the right customers orientation and service mentality. The ability to understand the culture of your customers organisation and align yourself accordingly, is a key element for success, which suppliers should always keep in mind. "We do not require any old customers. We require profitable customers". |
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