Major/Key account management
Key account management is a strategy used suppliers to target and serve high-potential customers with complex needs providing them with special treatment in the areas of marketing, administration and service. In order to receive key account status, a customer must have high sales potential. A second characteristic is that of complex buying behavior; for example, large decision making units with many choice criteria are often found in dispersed geographical locations. The decision-making unit may be located in different functional areas and varying operating units. Third, key account status is more likely to be given to customers willing to enter into a long-term alliance or partnership.
Such relationships offer buyers many benefits including reliability of supply, risk reduction, easier problem-solving, better communications and high levels of service. Key accounts that are geographically widespread are often called national accounts.
Key account management has three features. First, key account management involves special treatment of major customers that is not offered to other accounts.
This may involve preferential treatment in the areas of pricing, products, services, distribution and information sharing. This may take the form of special pricing, customization of products, provision of special services, customization of services, joint co-ordination of distribution and workflow, information sharing and joint development of business processes and new products. Second, it is associated with dedicated key account managers who typically serve several key accounts.
They may be placed in the suppliers’ headquarters, in the local sales organization of the key account’s country, or sometimes on the premises of the key account.
Third, key account management requires a multifunctional effort involving, in addition to sales, such groups as engineering, marketing, finance, information technology, research and development and logistics.
The six most critical conditions needed to ensure the success of key account management are as follows:
- Integration of the key account programme into the company’s overall sales effort;
- Senior management understands of, and support for, the key account unit’s role;
- Clear and practical lines of communication between outlying sales and service units;
- Establishment of objectives and missions;
- Compatible working relationships between sales management and field salespeople;
- Clear definition and identification of customers to be designated for key account status.
|1. Develop long-term relationships||Relationship building|
|2. Engage in direct contact with key customers||Co-ordination|
|3. Maintain key account records and background information||Negotiation|
|4.Identify selling opportunities and sales potential of existing key accounts||Human relations|
|5. Monitor competitive developments affecting key accounts||Focus on specific objectives|
|6. Report results to upper management||Diagnosing customer problems|
|7. Monitor and/or control key account contracts||Presentation skills|
|8. Make high-level presentations to key accounts||Generating visibility, reputation|
|9. Co-ordinate and expedite service to key accounts||Communication|
|10. Co-ordinate communications among company units servicing key accounts||Working in a team|
Five ways of building strong customer relationships will now be described.
- Personal trust
The objective is build confidence and reassurance.
- Ensure promises are kept;
- Reply swiftly to queries, problems and complaints;
- Establish high (but not intrusive) frequency of contact with key account;
- Arrange factory/site visits;
- Engage in social activities with customer;
- Give advance warning of problems.
The objective is to provide know-how and improve the productivity of the key account.
- Research and development co-operation;
- Before- and after-sales service;
- Provide training;
- Dual selling (supplier helps key account to sell).
- Resource support
The objective is to reduce the key account’s financial burden.
- Provide credit facilities;
- Create low interest loans;
- Engage in co-operative promotions to share costs;
- Engage in counter-trade (accept payment means of goods or services rather than cash).
- Service levels
The objective is to improve the quality of service provision.
- Reliable delivery;
- Fast/just-in-time delivery;
- Install computerized reorder systems;
- Give fast accurate quotes;
- Defect reduction (right first time).
- Risk reduction
The objective is to lower uncertainty in the customer’s mind regarding the supplier and the products/services provided.
- Free demonstrations;
- Free/low-cost trial period;
- Product guarantees;
- Delivery guarantees;
- Preventative maintenance contracts;
- Proactive follow-ups;
- Reference selling.
Criteria for selecting key accounts
Traditionally the key criterion for designating particular customers as ‘key accounts’ was on the basis of the large quantity of output sold to a customer on the basis that an organization bought a considerable amount of product from a supplier, it deserved special treatment because of the high profit contribution it made, the supplier was motivated to provide the extra resources because the loss of that customer would have a significant impact on its own sales and profits. As experience with key accounts has grown, the range of criteria used to select key accounts has grown, based on the strategic or long-term importance of specific customers to a supplier. These include:
- Accounts that have growth prospects through their ability to build sales and market share in their existing markets.
- Accounts with growth prospects through their position as major players in small or medium-sized but expanding markets.
- Customers that are willing to be partners in innovation allowing joint new product development with a supplier and/or will allow a supplier to test new products in their production processes.
- Customers that are early adopters of new products and so aid the diffusion of such products in the marketplace.
- Highly prestigious accounts that improve the image and reputation of the supplier and can be used in reference selling the sales force.
- Accounts that are important to and currently served competitors that the supplier has decided to attack.
- Accounts that provide a high contribution to the supplier’s profits.