All your client accounts are not created equal. And a smaller proportion of these accounts probably bring in the most money for your company. As a result, you must pay close attention to these key accounts to maintain and possibly even increase the revenue your business can produce. For this reason, you require a key account management process.
CEOs (Chief Executive Officer) and chief sales officers place a high priority on key account programs. Unfortunately, they frequently fall short of expectations for revenue growth. By addressing three crucial problems—misguided key account selection, overworked key account managers, and resource waste—CSOs can buck this trend.
Chief sales officers (CSOs) frequently increase the resources they devote to their biggest accounts to accelerate key account growth. However, most CSOs believe that this strategy is ineffective – the biggest customers get the best resources.
In the forthcoming sections of this write-up, I will help you with some of the primary challenges that key account managers face post sales. But, before that, let us look closely at the definition of a key account.
What exactly can be termed a key account?
One of the most important clients for your company could be referred to as a key account. These clients give you credibility in their market, contribute a disproportionate amount of your revenue, refer new clients to your business, or do all of the above.
However, the definition of valuable depends on the values held by your enterprise. It might be based on all, some, or even all of the following, for instance:
- Amount or a portion of the recurring income they generate
- How profitable a relationship you have with them (revenue taking into account cost)
- The lifetime value of the client
- Number of referrals they make, Level of Influence, and/or Authority
Your business requires a clear, stringent definition of key accounts. These customers will receive a significant amount of your company’s time, energy, and resources. You want to be sure they are the right ones, so the more specific and detailed the criteria, the better.
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What is the best way to ascertain key accounts in an enterprise?
Do not base your decision solely on profit. Instead, analyze the historical revenue-to-cost ratio of your current customers. Next, determine how much room each account has for growth. If they are a strategic partner, for example, do they have the contacts, assets, and/or reputation in the industry to change the course of your business significantly?
Use a key account scoring matrix to determine your key accounts based on numerous factors. Simply assess each account in accordance with the criteria you choose, and then give them a score between 1 and 10 for each category. Your key accounts will be those that received the highest scores.
You can opt for three to five selection criteria. Here are a few for your convenience:
- Products fit
- Existing connections
- The potential to join as a channel partner
- Fit with culture
- Locational alignment
- The buying processes
- Income potential
Although it can be tempting to designate a large number of clients as key accounts at once to change your business’s trajectory significantly, it is better to be cautious. A traditional buyer can be informed that they are being promoted, but a key account cannot be informed that they have been demoted.
Additionally, avoid taking on too much at once. Starting a key account management program calls for organizational-wide change, C-suite support, employee hiring and training, and the adoption of new procedures. You can concentrate your efforts if you start out small.
The real question is, where do the key account managers struggle post-sales? Let us try to find an answer to this question in our next section.
Primary Challenges That Key Account Managers Face
Following are the primary challenges faced by key account managers post-sales:
Enabling account expansion
It is better to be pragmatic in business than equitable. Let me explain what may seem like an insensitive statement. Imagine that you run a thriving cloud-based solution with hundreds of customers. Large enterprises and small businesses are among your clients. If you do everything right, even your smallest customers might recommend you to someone else’s company. However, your corporate clients have locations all over the world, and if just one of these accounts were fully sold, it could significantly alter the course of your company.
Really, do you want to handle both accounts equally?
Whether you have ten clients or 10,000, some will be more important to your future growth than others, and not all clients will be created equal. Therefore, a sales leader must identify strategic accounts, not of equal value. To increase the revenue from their most valuable client relationships, the best sales leaders design formal, quantifiable, and repeatable processes. When a business can increase revenue organically from its strategic accounts, it can grow its market share while paying less for new customers.
Remember that while strategic account management focuses on the future, sales are concerned with the here and now.
Improving customer retention
Account management starts after the sales, focusing on nurturing customer relationships. The two main goals of account managers are to increase opportunities and keep clients as clients. They achieve these goals by getting to know their clients’ goals and assisting them in achieving them. This is where the challenge starts.
The account manager serves as a long-term liaison and, ideally, a trusted consultant for the client, in contrast to a traditional sales role, which is temporary and concentrates on gaining the client. In other words, account management is relational, whereas sales is transactional.
Understanding the needs of their clients enables the account manager to assist in providing information, resolving issues (ideally with tailored products or services), and establishing a long-term strategic partnership with the client that goes beyond the initial sale.
Building a strong account management team is essential for businesses looking to increase client retention. Account managers serve as your clients’ primary point of contact after the sales team secures a client. To best serve the client’s needs, they are crucial for resolving client conflicts, facilitating communications with sales and customer support, and comprehending the client’s goals and pain points.
Account managers are key factors in a customer’s satisfaction with your company and serve as the client’s advocate within the organization.
Reducing operational costs
The old business proverb – 80% of your sales come from 20% of your clients – holds true for the majority of organizations. Therefore, handling these priceless assets with more caution would be sensible. But far too frequently, businesses lack a specific procedure for cultivating these important client relationships.
Management of strategic accounts is difficult. With so many moving parts, it is simple for information, insights, or people to get lost. However, key accounts are your most valuable clients, so you cannot afford to make a mistake.
Key accounts spend an average of 33% more than new clients and are 60% to 70% more likely to close. Key accounts are the lifeblood of many businesses because they result in decreased sales costs and higher revenues.
Do not let your best connections pass you by. You can continue to benefit from long-term partnerships for many years to come by putting in place a formal strategic account management process.
Nurturing your advocates
Account managers are one of the most important determinants of a customer’s experience with your business because they act as the client’s advocate within the organization. Account management is essential for any business that wants to succeed. It is a procedure that offers a structured and systematized way to manage customer relationships.
The company must live up to the expectations of its customers, who depend on it to deliver on its promises. A way to ensure this occurs is through account management, which involves talking to customers, getting to know their needs and expectations, meeting those needs, and maintaining those relationships as needed.
This ensures that businesses can meet their clients’ needs and are proactive in anticipating their future requirements, which can lead to increased client loyalty and higher overall revenue for the business. Understanding customers’ needs and offering the highest quality service are the first steps in gaining loyalty. This is where CRM (Customer Relationship Management) software can aid in keeping track of the communication between businesses and customers.
Improper organizational alignment
The issue is, typically, an organization is not well-aligned to deliver the full value of solutions to customers and manage the raised expectations. And if an organization has a functional structure that resembles a funnel, this can be avoided. Do not even begin with key account managers if the entire enterprise cannot look beyond departmental objectives and embrace the idea of assisting clients in succeeding.
Resentment and a lack of ownership by some regional salespeople may also be an issue. The problem arises when a national client is designated as a key account. Regional sales personnel may believe they have lost control of their local account to a key account manager and stop supporting it. Account management duties and incentives must be carefully managed to prevent this.
When a client is chosen as a key account by just one of an enterprise’s lines of business rather than all of them, it can be challenging for companies with independent sales teams and lines of business. The seller’s representatives can send very conflicting and confusing messages to buyers. Each of these will negatively impact the key account manager’s efforts.
Handling one too many accounts
The account’s dollar value sets key accounts apart from the other, less important ones. Typically, this is either profit or revenue. For example, most businesses will have a predetermined revenue cap, like $1 million. And all businesses capable of producing more than the cap will be classified as key clients or accounts. And the fact that account managers frequently have too many key accounts to manage is what causes the issue here.
Having one account manager manage more than ten accounts is absurd if all those important clients truly mean that much to the company. One account manager will never be able to establish the crucial connections, learn enough, and integrate the supplier’s resources. Not to mention succeed while doing all of that for over ten accounts.
Key account selection ought to be done with more care than currently. In addition to revenue, other considerations must be taken into account. Additional factors like growth potential, market position, market influence, and global coverage should be considered when choosing accounts. Strategic account selection is required for key accounts.
Inefficiency results from too many accounts for account managers to work on. Customer satisfaction with an account manager’s work in a time of need may exist in the short term, but long-term business growth is unlikely.
Key accounts should be carefully chosen. In addition to revenue, other factors need to be taken into account. Growth potential, market share, global reach, market influence, the importance of production plant loading, and customer reliance on supply are all factors that could be important. Key account selection should be made strategically.
The Key Account Manager becomes ineffective when there are too many accounts. The clients perceive the supplier the way they did when a local account manager handled their business. It is even less in some instances. In an emergency, they might get a more powerful person, but not much happens in terms of long-term business growth!
Based on the primary challenges that key account managers face, it can be safely said that key account management transformations go beyond simply lowering prices and securing bigger contracts, which could ultimately result in a price war. Key account management is a holistic process that calls for focused efforts. 43
Key account management can be difficult and have an enormous impact how you interact with your clients. It must involve more than just a sales campaign. The rewards may be worthwhile if it becomes a long-term business strategy for the entire organization, realistically chosen key accounts, and the right people are employed.
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Dattatraya Shetty is an IT Professional with 2 Decades of experience in areas of Product Development, Implementation & Service Delivery Management. As the Head of Implementations and SOC Compliance in Smartkarrot he is on a mission to provide relishing customer experience.
Published October 11, 2022, Updated February 28, 2023