Key accounts are the 20% of accounts that generate 80% of your company revenue.
Their sheer financial volume highlights their importance to your business.
Before attempting to develop a key account management strategy, you must know how to identify these key accounts.
Accurate identification will help you avoid rashly categorizing tail accounts as having strategic value.
While it may seem like it from an altruistic perspective, treating all accounts fairly isn’t actually a viable key account strategy and doesn’t guarantee a successful relationship with your top portfolios.
Let’s examine what strategic account management is and the best ways to approach it.
What is strategic account management?
Key account management (KAM), also known as strategic account management, is a concept that first emerged in the 1970s.
As a business discipline, it refers to the process of identifying or targeting key accounts, which have strategic value, and developing a deeper, more meaningful, and mutually beneficial relationship with them.
Key accounts deliver huge revenue and profitability compared to other clients in your business portfolio.
The idea of strategic account management is to increase the customer lifecycle of each key account.
This is achieved by providing actionable solutions for important customers, adding value, and building trust over time.
However, this is sometimes easier said than done, and many sales organizations struggle to develop a strategy that gets real results.
Benefits of implementing successful account management strategies
Successful account management strategies enable you to build win-win alliances with your most significant clients.
Upsides include the following:
Top portfolio retention — a competitive advantage
You don’t want to lose any of your valuable customers, but most importantly, you don’t want to lose your biggest fish.
However, as they’re major earners or have the potential to be, competitors will constantly attempt to lure them out of your pool.
Maintaining a partnership that prioritizes your clients’ best interests increases the chances of keeping your top accounts satisfied, and KAM programs are fundamental to ensuring customer satisfaction among key clients.
Increased revenue
Remember, key accounts are the 20% that bring 80% of your company’s revenue.
Losing any one of them will significantly impact your returns and reduce your income.
KAM measures help you avoid this and prevent top clients from defecting to competitors.
KAM elements such as upselling and cross-selling will also help you earn more from clients.
These mechanisms will grow your revenue from your most important accounts while decreasing key customer retention costs.
Referrals
Accounts often speak for themselves, and top-performing portfolios draw the right kind of attention.
Seeing your results, companies of similar stature will be more inclined to partner with your business.
Successfully managing key accounts also encourages clients to talk about your company, and you can count on them to boast about the positives of their partnership with you.
With KAM, you’ll make your key accounts feel that you’re fully invested in their success, and they’ll reciprocate by recommending you to their peers.
You may then follow up on these referrals with an outbound prospecting strategy to secure additional accounts.
How to identify key accounts
The key account management process always starts with recognizing and prioritizing key accounts.
Let’s explore some pointers to help you identify accounts with strategic value:
Revenue volume
A common metric sales leaders use to determine key accounts is the volume of revenue they generate for the business.
It’s as simple as identifying and shortlisting the accounts that provide a large chunk of your returns.
However, don’t be too quick to assign key recognition to accounts based on revenue volume alone.
An account may generate major volumes now but not have the resources to sustain its spending in the long term.
Revenue potential
After volume, you should consider an account’s revenue potential.
Don’t only look at companies with high financial worth.
A better way to secure your business’s future growth prospects is to prioritize accounts with the potential to bring in higher revenue down the road.
Lifetime value
After examining an account’s revenue potential, delve a little deeper and look at its margin for expansion.
While a company may have immense revenue potential, it may not have systems for sustaining it. More than growth, sustainability is crucial.
User/product fit
Next, consider the accounts that match your product or service.
Primarily, you want to prioritize relationships with clients that meet your ideal customer profile.
Overall strategic value
Another crucial consideration is the account’s overall strategic value to your business.
Look beyond its present or future financial worth, and check for other ways your business could benefit from prioritizing a relationship with the account.
In addition, consider the account’s corporate reputation — is it good for yours?
Examine their long-term vision, in the sense of whether this aligns or conflicts with your own. Can you see a beneficial long-term relationship with the account?
How to grow key accounts
It’s not enough to identify and slap the “key” tag on accounts with strategic values. You must invest time and effort into getting the best out of them.
Below are tips on how to grow key accounts and maximize your returns from them:
- Draft a growth plan to increase key accounts’ strategic values. Though they may excel with no interference, your input could also make a significant difference in their spending.
- Have a growth plan for each account. These plans must factor in each account’s uniqueness to maximize strengths and manage weaknesses.
- Notify the leadership team and account owners of your plans. It’s crucial you bring these parties up to speed and get their approval before implementing your strategy. This way, everyone involved will be aware of the process and won’t do anything that may sabotage or hinder it.
- Evaluate the process and adjust your strategy as necessary. Test and ascertain the effectiveness of your plans regularly. Compare results with the KPIs specified. Then recalibrate as necessary depending on your strategy’s performance.
- While working on account growth, maintain a solid strategic relationship with account owners. It’s paramount that account managers maintain a good rapport with clients.
- Take advantage of account management tools, such as customer relationship management (CRM) platforms. We won’t delve into the question of what is CRM and its use here, but these platforms are excellent for managing relationships with clients.
How to succeed at key account management
The right strategies play a crucial role in key account management, but they’re not enough to guarantee the results you desire. You must also know what to look for and how to handle key accounts.
Here, we provide an eight-step guide that will put you on the path to KAM success.
1. Formalize key account management
The CSO Insights 2017 Sales Enablement Optimization Study found that only 33.1% of organizations use a formal approach to key account management, where they require their salespeople to develop strategic account plans.
More than 10% do no account planning whatsoever.
Moreover, almost a quarter (24.8%) take a random approach, leaving the planning up to individual salespeople, despite the fact that this eads to a 7.7% decline in win rates.
The only way to achieve real success is to adopt a formal plan, where KAM is a necessity, rather than an option.
2. Define what key accounts are
To achieve KAM success, it’s also necessary to come up with a precise definition of what constitutes a key account.
Crucially, all key accounts should have strategic value. While these will often be the accounts that spend the most, it’s vital that strategic worth and financial worth are not treated as the same.
In the words of Olivier Riviere, “True key accounts have a special strategic meaning for the company, beyond their size.
Make a clear distinction between large accounts and key accounts.”
3. Start small and expand KAM later
When you first start to implement a key account management strategy, don’t be afraid to start small.
Remember, it’s easier to classify additional accounts as key accounts in the future than to downgrade accounts that have previously been identified as having strategic value.
It may well be best practice to identify a small number of key accounts and develop a comprehensive management strategy around these, before casting the net wider down the line.
4. Understand the full context of key accounts
Of course, key account management requires your organization and sales reps to go further than merely identifying key accounts.
You need to go above and beyond to try and understand the context of each account, so you can pinpoint the best way to provide value to them.
Using sales training, teach reps to understand each key account’s industry, current performance, short-term and long-term goals, strengths, weaknesses, challenges, and competitors.
5. Don’t push products, sell solutions
Next, it’ is important that salespeople adopt a shared account strategy, based on mutual benefit.
In particular, aimlessly pushing products on key accounts is a poor approach.
Instead, sales training should encourage reps to try a more conceptual strategy, where they listen to problems or objectives and sell solutions.
According to Tamara Schenk, Research Director for CSO Insights, “A shared account strategy begins with the customer’s goals and ends with how you can help them to achieve these.”
6. Meet with key accounts regularly
The management in key account management is paramount, and managing accounts requires regular contact.
Try to meet with accounts regularly, or at least speak to decision-makers on the phone.
This way, you can maintain your relationship, identify areas for account growth, and keep them up to date with your offerings.
By taking an active interest in their business, even when you’re not selling products, and by keeping them informed about your business, you can create a deeper relationship that’s more likely to last.
7. Define sales manager roles properly
As mentioned in the CSO Insights 2017 Sales Manager Enablement Report, most sales organizations have multiple managerial roles, but few of them define their functions correctly.
However, a key account management model can be boosted significantly by clearly identifying the manager in charge.
By defining sales manager roles more clearly, your organization can take the time to assess the skills of various managers and allocate the individual best suited to KAM to the strategic accounts role.
8. Ensure account coaching is provided
Finally, the right long-term strategic account management requires your salespeople to receive specialist account coaching as part of the broader sales coaching that’ is provided.
Unlike more general sales coaching, account coaching should be solely targeted toward developing and maintaining relationships.
Tamara Schenk, explains: “It should focus on the current state of account strategy implementation and next steps, as well as any needed adjustments of the strategic account plan.”
Optimize account control by formulating a KAM strategy
Identifying key accounts is only the first stage in the KAM process; the main work involves formulating and implementing strategies for managing them.
Your key account management strategy must factor in individual account peculiarities.
While you may have an editable template, you mustn’t employ a one-size-fits-all approach for your key accounts.
Instead, consider their strengths, weaknesses, and influence on your overall portfolio in your plans.
Remember that partnerships between accounts and your company must be mutually beneficial for them to work.
Clients will walk away if your strategies don’t favor them, but that doesn’t mean you should short-sell your company to keep an account.
Find a balance point in your strategies, and when you find it, sign in to your PandaDoc account to eSign all relevant contracts.
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Originally published May 7, 2018, updated April 21, 2023
