What is key account management? (Definition, benefits and tips)
By Indeed Editorial Team
Published 30 April 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Key account management is an integral element of many companies' strategies, which allows them to maximise the potential of their sales efforts. As a key account manager, you'd use your relationship building skills to answer existing customers' requests and ensure their happiness. To better understand this process, it's helpful to read about the basic components of key account management. In this article, we answer 'What is key account management?', explain how it differs from sales and explore key stages of relationships with key accounts.
What is key account management?
Learning the answer to, 'What is key account management?' can be helpful for you if you aspire to become a key account manager and want to make a final decision about your career path. Key account management (KAM), also known as strategic account management, is the process of managing and nurturing partnerships between an organisation and their customers or clients. As a result of implementing effective KAM strategies, companies use positive action and brand building methods to increase their business wealth and maximise their earning potential among their most important customers.
Typically, people responsible for this area of management are known as key account managers. The primary responsibility of those in this role is to help a company and its sales department reach specific sales quotas and key customer objectives. They utilise information about a company's sales and strategies to determine demand and learn more about key customers, including where they live or what their spending habits are. Key account managers often work alongside sales representatives and business development specialists who identify and source new clients before forwarding them to the KAM department.
What's the difference between key account management and sales?
If you're thinking about working in KAM, it's helpful that you understand the differences between this role and working in sales. As a salesperson, you're responsible for selling your employer's products, which means that you can work in almost any industry that does business with individuals or corporate clients. When it comes to KAM, this area of business development is specific to existing customers mostly in Business-to-Business (B2B) organisations that have long-term, repetitive relationships with their customers.
This means that working in sales requires you to consider a large group of potential customers and, in many instances, process multiple smaller transactions that help you reach your sales targets. In key account management, your responsibility would be to work with a smaller group of highly important, recurring clients who are typically interested in making large purchases on behalf of their employers or their own companies. On a day-to-day basis, you help them make purchasing decisions by gaining a deep understanding of their specific needs, requirements and business challenges.
Stages of key account relationships
Successful key account managers are highly effective when it comes to building strong and long-lasting relationships with the most important business customers, known as key accounts. To fully understand the nature of this type of relationship, you can review the key stakes of relationships with key accounts:
1. Tactical relationship
The first stage of relationships with a business customer is strictly tactical, which happens shortly after the key account manager opens the key account. When a relationship with a client is tactical, it means it's still short-term and superficial. It's also easy for either party to exit the relationship during this stage.
At this stage, you can suspect that you're just one of many suppliers that the client has. It's important that you concentrate on making the partnership as attractive as possible for them, which allows you to build more trust and prepare for entering later stages of the relationship. Typically, you can do this by focusing on pricing as your main criteria and ensuring that you quickly and effectively react to any questions or requirements that the client might have.
2. Cooperative relationship
Once the relationship becomes cooperative, it usually means the customer-supplier interactions go beyond transactions. You can observe engagement from both sides, especially at the operational level. It's still easy to exit the relationship, but doing it might be slightly more inconvenient for either of the parties.
During this stage, the cost of a relationship may increase for you as the supplier. You may notice that it's necessary that you assess the potential of the account and decide if you want to remain at this stage or move the relationship even further. Investing more resources into the relationship is usually worth your time when you see that there's high potential for maintaining a long-term partnership with that particular account.
3. Interdependent relationship
When your partnership with an account becomes interdependent, it's possible that you're their only supplier and the relationship is equally beneficial for both sides. At this stage, interactions are both operational and functional, which gives you a chance to learn much more about the account. It's important that you focus on using that information to better understand their situation and determine what they might expect from the relationship. This way, you can offer them better services and strengthen the partnership by positioning yourself as a trustworthy business partner.
It also becomes more difficult for the account to exit the relationship when it enters the stage of interdependency. This often happens because at this stage, you're also the biggest supplier that they might have and they've started including you and your employer in their predictions and plans. As a result, the partnership becomes much more profitable for you as the key account manager.
4. Strategic relationship
This is the last and the highest stage of a relationship with a key account. It's possible to enter this stage once the relationship remains beneficial for both sides for an extended period of time. Exiting a relationship at this stage is highly likely to be very traumatic for either of the sides, as it can generate a lot of costs.
When you manage to reach this stage with an account, it's crucial that you nurture the partnership for as long as possible. To do that, make sure you know how to react to the account's many demands. For example, you can offer them discounts or special prices which aren't available to other accounts.
Benefits of key account management
To fully understand the answer to, 'What is key account management?', you can analyse different benefits which it can generate for a company. Here's how companies can benefit from developing and maintaining effective KAM strategies:
key account management concentrates on building stronger relationships with fewer customers who show business potential, which means they can increase the average size of sales deals
through investing in relationships with key accounts, managers increase customer loyalty and trust
KAM strategies help companies become valuable business partners for customers, who can recommend them as suppliers to other businesses
key account managers concentrate on highly detailed sales data, which helps gather insightful data that the executives may use to improve their awareness of the company's potential
by establishing successful and long-term relationships with their key accounts, companies can scale their processes and become more competitive in the market.
Tips for effective key account management
Career development as a key account manager is an ongoing process, as the field is continuously evolving and it's necessary that you know how to adjust to your accounts' new demands and requests. Here are some additional tips to consider to better organise your account management efforts:
Focus on customers with the highest potential
Key account management is all about potential, which is an important metric that allows you to determine if a relationship with a client can enter higher stages. As an aspiring key account manager, it's helpful that you learn how to develop realistic criteria for assessing client potential. As a result, you can effectively source prospective long-term business partners from the company's client database.
Develop strong relationship building skills
Knowing how to source valuable clients can only be fully effective when you know how to build strong relationships with them. To determine what approach to take with each client, it's helpful to have strong communication, active listening and analytical thinking skills, which are all-important components of relationship-building skills. By prioritising your accounts' demands, you can position yourself as a loyal and professional business partner and increase your chances of becoming their only supplier.
Scale your transactions
For companies, it's always more profitable to sell more to existing customers rather than maintain relationships with numerous short-term clients who only generate small transactions. Knowing how to provide existing customers with something that can benefit them can help you reach your sales quota with far fewer transactions. It also saves you a lot of time, which you can spend on strengthening your existing business partnerships.
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