Key Account Management- How Has It Evolved?

In mid-April SalesMethods are holding our annual ThinkTank discussion. This year we will focus on how Key Account Management has evolved since it became mainstream in the 1990s. The opportunity is there for a sales transformation of the practice of winning, keeping and growing key customers, yet we still struggle to achieve the outcomes of improved customer satisfaction, loyalty and joint investment.

As a prelude to the event Beth Rogers, who co-wrote the seminal work on Key Account Management that shaped much of today’s thinking, will offer, in a series of weekly blogs, a view of where we have been, where we are now and where we are going. In this first of the series Beth simply considers how you determine a Key Account.

Defining what is “Key”

Beth Rogers, Visiting Fellow Cranfield School of Management.

Key account management is an approach in business to business commerce that involves the application of a supplier’s resources and capabilities to developing and sustaining long term relationships with customers who are strategically important to the company. It relies on understanding their needs in depth, and developing specific value for them and with them, which is superior to competitors’ offers.

(Adapted from: McDonald et al, 1997 (1) and Gueselaga et al, 2018 (2)

Evaluating Strategic Importance

Although early perceptions of the importance of customers focused on the amount of goods or services sold to them, volume of business in the past is no guarantee of volume of business in the future. As with product management and investment management, the resources allocated to maximising the benefits of today’s stars have to be balanced with those needed to develop future stars. Most companies have expanded the number of factors used to evaluate the contribution that customers make to their strategic success, taking care to ensure that factors can be assessed objectively. Everything from four to twenty-four factors have been observed (3). For most companies, six factors to weight and score allows enough breadth and depth without the stakeholders who use the analysis losing sight of the meaning of the process.

How should they be chosen?

The matrix below offers a choice of quantitative and qualitative factors with the time dimension of past and future. A combination seems logical, and may avoid an over-focus on historically valuable business relationships. Relationships between suppliers and customers which have lasted for decades do fall apart, and that risk should always be acknowledged and managed (4).

Factors affecting the strategic value of customers:

Adapted from Macros et al, 2018

Co-creating value with key accounts

Most suppliers in business to business markets have some customers who are targeted “named accounts”. But are they key? The more we know about the nature of key account relationships, the more obvious it becomes that a customer can only be “key” when the customer has the will and the skill to work strategically with the supplier (5). Does the customer see value in this supplier’s solutions?  Do decision-makers at multiple levels in both organisations trust each other? Does the customer have the knowledge and capabilities to work with the supplier to co-create new value from the relationship, and are the decision makers motivated to do so by a perception that this supplier is truly superior to their competitors? Without these factors, an account is not key or strategic. It may still deserve some dedicated resources, but they are unlikely to include any element of innovation.

What’s stopping us?

In order to have a meaningful system for assessing the strategic value of customers, and our strategic value to them, we have to have the right information and the capability to store it, analyse it, use it and manage it. This is where “sales enablement” is so important. To enable sales, a company needs to apply resources to the right opportunities in the right customers at the right time, and so much of that depends on the right knowledge and analysis, available in easy-to-use systems.

Notes:

  1. McDonald, M., Millman, T., & Rogers, B. (1997). Key account management: Theory, practice and challenges. Journal of Marketing Management, 13(8), 737-757.
  2. Guesalaga, R., Gabrielsson, M., Rogers, B., Ryals, L., & Cuevas, J. M. (2018). Which resources and capabilities underpin strategic key account management?. Industrial Marketing Management.
  3. Marcos, J., Davies, M., Gueselaga, R. & Holt, S. (2018). Implementing Key Account Management: Designing Customer-Centric Processes for Mutual Growth, Kogan Page, London.
  4. Piercy, N. F., & Lane, N. (2006). The hidden risks in strategic account management strategy. Journal of Business Strategy, 27(1), 18-26.
  5. Windler, K., Jüttner, U., Michel, S., Maklan, S., & 5. Macdonald, E. K. (2017). Identifying the right solution customers: A managerial methodology. Industrial Marketing Management, 60, 173-186.