Key Account Management is a popular practice in Sales and Marketing. Key Account Management (KAM) involves the identification of high volume and growth customers that would require special attention of an organization and developing a marketing and sales organization to meet the needs of these customers.
Many organizations have identified such accounts and developed ways to meet the requirements of these customers. These customers demand special attention in designing supplying and servicing. Such accounts are very common in the business to business marketing or business to institution marketing.
The relationships with these accounts are very gradual. They do not happen overnight. Quite a few theoretical models have been developed but the these accounts start with supplier and vendor getting familiar with each other and understanding their cultures and business methods. Here both the supplier and the buyer are usually quite large and have preexisting cultures which will require adjustments.
Both organizations must also understand the long term goals of each other as the relationship can be long term association demanding considerable time and capital from both. It is an investment that needs to be carefully examined. Each party needs to make sure that there is a good basis for relationship between them and it will be mutually beneficial in the short and long term.
What are the major characteristics of a Key Account?
1 These Accounts are generally large volumes of the product that the suppliers produce.
2. They are in a commanding position in the market with a good image.
3. They have a history of stable financial performance
4. They demand special attention but given the special attention they retain the vendors
5. They are willing to share their technical and business plans with their vendors and thus enable the vendor to develop with them
What are the chief requirements to be met by the supplier’s organization? (I would prefer to call these suppliers as key suppliers or vendors).
1. The supplier must be able to identify an account manager who can build the relationship between the two organizations
2. The supplier must be willing to commit resources to service these account
3. The supplier must be willing to make long term commitment to stay as supplier to these accounts
4. The supplier must also be ready to invest in any technical development required by these accounts
What are the main benefits in having key accounts?
1.They provide a steady predictable captive business.
2. These accounts can generate scope for developing new products.
3. These customers can help maintain profitability due to the economies of scale in marketing.
4.These accounts with high image can work as testimonials for key suppliers.
Are there any risks associated with key accounts?
1. The main risk is the business status of the key account. If there is any decline it would have an impact on the key suppliers.
2. Significant assets and resources will be tied to key account therefore any reduction in activity can lead asset and resource under utilization unless there is sufficient flexibility built into the system.
3. Revenue inflows also can slow with a slow down in key account activity
Impact of key Account on Sales Organization
1.These accounts need dedicated persons to coordinate the activity.
2.These Accounts need pan organization involvement from both sides. All involved persons must be committed.
3. Such Accounts must not be viewed as a threat by the sales persons who handle other accounts.
4. If there are adequate number of such accounts an independent organizational set up would be needed to manage these accounts.
5. Additional and independent ware house and transport may be required.
6. Dedicated key Account Managers need to be appointed and the skills need to be developed
Key accounts are a necessity for most industrial sellers and institutional suppliers. Given the change in the retail structure key accounts are becoming important in retailing too. Adequate skills and systems need to be developed in organizations to manage these accounts
Source by Ramk Kasturi