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Can key account management bring true differentiation?
Are you considering Key Account Management training?
The highlight of this year’s Sales Performance Association Christmas event and meal was a session delivered by Dr Iain Davies of Bath University on Key Account Management (KAM) implementation.
Now, I’ve sat through many Key Account Management training sessions in the past and read various literature around it but Dr Davies’s session was a refreshing take on a topic that often appears on our Enquiry list.
My first observation about KAM is that it is a bit like coaching in organisations; it can take many forms and what one organisation means by KAM will be completely different from another. If we consider that the nature of the interface between customer and supplier can range from complete transactional at one end through to complete embedded strategic partnership at the other, with a whole host of options and variations in-between then defining where KAM kicks in can be problematic. This is the view of Dr Davies, who goes as far to say that it is impossible to offer a generic Key Account Management training programme to an organisation, because a KAM implementation is so unique to a company’s particular market sector, product portfolio and internal structure and culture that to take an approach that has been used elsewhere is generally doomed to failure. Which is what happens to over 70% of KAM implementations.
The reasons organisations consider a Key Account Management training implementation is because they see it as a way of increasing revenue, protecting against competitor activity and customer churn. Davies argues that rather than starting with KAM as the objective an organisation first needs to consider how it is going to achieve a strategic plan for competitive advantage. A useful framework to consider here is VRIN – which sets out the four criteria necessary to achieve sustainable competitive advantage – that what you have to offer to the customer is valuable, rare, imperfectly imitable (so others can’t copy it) and non-substitutable.
KAM may be one strategy for achieving sustainable competitive advantage in your market place with your customers but there may be other options which are not necessarily as costly or time-consuming to the supplier organisation and may deliver the same level of competitive advantage.
The focus of KAM can be on any combination of the following:
- Operational Efficiency – which can also be delivered through TQM.
- Customer Intimacy – which can also be delivered through CRM.
- Product leadership or innovation.
KAM is usually about product leadership but bear in mind that co-creating innovation with customers is inherently expensive, which is why KAM programmes that focus on this alone can only do it with a very small number of customers (in reality probably only one) and can only do it in the short-term. The payoffs to the supplier organisation come when the co-created product can be sold off to other customers.
The key point to make about a KAM role is that it is not about selling. KAM is about changing and aligning the knowledge management in an organisation to deliver to a customer. 60% of a Key Account Manager’s time is internally-focused and it is their ability to manage their internal resources that will determine whether or not the KAM programme is a success. We could regard the Key Account Manager as the conductor of an orchestra, rather than a sales person.
Organisations also measure the wrong things when they try to assess the impact of KAM. What KAM delivers in the short term is happy customers. Sales, revenue and profit come much further down the line, and it could be argued that increased profit is a goal that is often not achieved at all.
So in summary, if you are considering a Key Account Management training implementation, stop and think first. Are you clear on how you are going to achieve sustainable competitive advantage and is KAM the appropriate strategy to take you there? If so, which element are you going to focus on – operational efficiency, customer intimacy, product leadership, or a combination of all three? Next – do you have the people in your organisation with the skills to do the complex management that KAM demands, especially if it is to be on a global scale? And finally – how are you going to measure the impact of your KAM programme and are those measures realistic in the timescales set?
Seven companies share their ROI stories and how they improved performance, changed behaviour and transformed fortunes. This report is important reading for anyone evaluating their company's sales performance and / or considering a skills improvement programme.
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