At last week’s meeting with management, Steph, our sales manager, was asked to consider a key account management strategy and submit a report in time for next month’s meeting. She dutifully agreed, not knowing a thing about key account management. But what else could she do? No wonder that when we met recently Steph wanted to know about — you guessed it — key account management. Her questions were thick and fast.

What is key account management? Are there advantages and disadvantages to key account management? What should be the tipping point in her decision-making process regarding the use of key accounts? Are there set criteria for selecting key accounts? Boy, did she have questions!

WHAT IS KEY ACCOUNT MANAGEMENT?

Not surprisingly, the data showed that about 20 per cent of Steph’s customers accounted for 80 per cent of the revenues and income. But does that mean that 20 per cent of her customers should be classified as key accounts? In fact, what really is a key account, anyway, and what is key account management? Let’s hear from Jobber and Lancaster (2012).

“Key account management is a strategy used by suppliers to target and serve high-potential customers with complex needs by providing them with special treatment in the areas of marketing, administration and service. In order to achieve key account status, a customer must have high sales potential.”

ADVANTAGES OF KEY ACCOUNT MANAGEMENT TO SELLERS

Here are three powerful advantages to suppliers who employ a key account management strategy:

1. &empmargin;Close working relationships with the customer

2. &empmargin;Better follow-up on sales and services.

3. Higher sales.

DECIDING WHETHER TO USE KEY ACCOUNT MANAGEMENT

Expanding the argument of Jobber and Lancaster, let’s look at three critical factors before making a final decision on the use of a key account management strategy:

1. Is there a small number of customers that account for a very high proportion of your sales? In Steph’s case, although 80 per cent of revenues came from only 20 per cent of customers, there was just a handful of really large accounts. Strike one, she thought.

2. Is there potential for differentiation of the products or services offered by her firm in a way that would be highly valued by her customers? Was this a no-brainer because product differentiation was uncommon in her sector? Her reality was that whatever new or differentiated products or services her firm offered — they were quickly copied. But wait… wouldn’t the establishment of in-depth communications allow her firm to co-create augmented or potential products or services for a competitive advantage? Not quite sure, Steph didn’t offer. Strike two on the inside part of the plate.

3. Would there be significant cost savings to her firm? Not being able to think of any, Steph, our sales manager, just had three strikes. Key account management at her firm was out!

So Steph decided that she would make a no-case submission for key account management. But what to do with the small number of really large accounts?

Steph was convinced that in her quest to build a powerful Caribbean salesforce she should give selected members of her team special training in consultative selling — a step above conventional solution selling. These salespeople would have a higher-level discussion, focusing on the strategic objectives of major customers, hopefully to their delight, and in the process extract a greater share of wallet.

Written by Herman D Alvaranga, president of the Caribbean School of Sales Management (CSSM) the region’s first dedicated sales, marketing and brand management college. E-mail hdalvaranga@cssm.edu.jm.