Key Account Management (KAM) and its siblings SAM and GAM have been around for many years now. It is fair to say that not all industries have embraced the concept at the same speed. KAM is fairly ‘old-hat’ in some industries, whereas others, for example Pharmaceuticals, came late to the party and have implemented KAM sparingly, and not uniformly.
So much has been written about KAM that one is inclined to think it has been a universal success. In truth, many KAM initiatives, often launched to a great fanfare, fail. Why might this be?
There are, of course, no guarantees and any number of reasons why such initiatives do not get traction. Perhaps the problem lies with
Resistance from Customers – Losing business of those who discover they are not ‘Key’, or those who are using that fact to leverage large price discounts.
Competitors – While we are doing all the good ‘Gardener’ practices for KAM, opportunistic old-school salesmen are swooping in in the here and now and stealing business from us
A misunderstanding of what KAM truly is. – There are a number of business terms that are widely used and discussed and yet are perhaps only sparingly understood (e.g. ‘synergy’, ‘cost-leadership’ and ‘value’ spring to mind)
A misunderstanding of the profound corporate cultural change that is required to become truly customer-centric (essential if a KAM strategy is to succeed).
Whilst any (indeed all) of the above may play a role, the most frustrating one we see (and we see it a lot), is that last one. Key Account Management is a strategic choice. It requires new business models of operation, resourcing, a new understanding on what success metrics are and a strategic, long-term view. Unfortunately, what gets rewarded gets done and too often the remuneration plans in situ in organisations get in the way of successful KAM operations. At best they often do not help, at worst they commonly provide perverse incentives and actually sabotage the KAM programme at the outset.
KAM is a long-term deal. It is strategic by its very definition and it is (often, though not always, slow!). Personnel are typically rewarded quarterly, but even if annually, this is often too short a timescale to properly judge the success of failure of your KAM efforts.
Often, a company will roll-out a KAM initiative and review monthly sales as the principal metric. Senior Management review flat or even falling sales figures for the first three months of the KAM programme and conclude that the initiative has failed and slowly, everyone loses faith and old ways of working creep back in. Even very senior managers are guilty of this. CEOs who are often judged on the share price, get very jittery if they have been asked to turn their sales operations upside-down, presumably spend a fair bit of money on reorganising and see returns that are not what they feel were promised. If the financial media notice this, the stock price falls and the whole KAM initiative is quietly dropped, if not in name, then certainly in practice.
KAM strategies are more like marriages than dates. Most customers will remain as they always have been, transactional, but those accounts that are key or those development accounts you are trying to convert into Key Accounts, need a thourough culture shift and a huge amount of patience from you.
In truth, the best way to actually achieve success with KAM is to downplay it a little. My suggestions are
- Choose only a very small number of accounts to be Key Accounts. This will ensure resources and attention do not entirely desert your entire customer base and will protect your sales and profitability measures as the majority of customers are still in the old, transactional model.
- DO NOT have your Key Account Managers report to your Sales Managers. KAM is a strategic Business building process, we need to dispel the lingering idea that it is just ‘new sales for the 21st century’)
- Understand this is a marriage and not a date. If you are single, it is OK to date a lot of people, if you are married…
- Understand this is a culture change, most of your sacred cows may need to be gently retired and put out to pasture.
- Understand the ultimate goal and outcomes and be realistic about interim step and use these to derive your success metrics.
From time-to-time certain concepts get very popular in business (TQM springs to mind as an example), people do a little reading (but not enough), get very excited by this ‘new’ shiny idea and bowl in. Because the idea was not fleshed out enough and the potential pitfalls foreseen, the result is often disappointment. Consequently some of these programmes end up with aa skeptical audience and a ‘we tried that, it didn’t work’ handle. Yet done properly… some of the best cars in the world, some of the best consumer tech in the world and THE best motorbikes are made by Japanese companies the were steeped in TQM principles a long time ago. It took a while for their dominance to emerge but, well, here we are now.
So give your KAM initiative time, choose only a very small number of accounts (to limit your exposure and to allow you to ‘try and fail’). It is not the next big thing, but it may just ensure prosperity in the longer term.