Key Account Management

Key accounts in marketing are referred to as key customers or groups of key customers.

In a competitive environment the ability to manage key customers is a vital ingredient for business success. When managing key accounts, the entire marketing mix comes into play. The product has to be tailor made to meet specific customer requirements, pricing has to be need based, promotions customized in terms of specific key account characteristics etc.

Key account management is a specialized activity, carried out as an integral component of effective marketing. When managing key accounts the golden rule to remember is that the most profitable customers are not necessarily the largest. Therefore it is important to manage customers in order to satisfy their needs in a profitable manner and not to bother if they are large or small players.

Key account management is aimed at building a portfolio of loyal key accounts by offering them on a continuing basis a product/service package tailored to their individual needs.

Success depends partly on the degree of receptivity demonstrated by the customer to a partnership approach to co-ordinate day to day interaction under the umbrella of long term relationship, selling companies typically form dedicated teams headed by a key account manager.

This definition dwells on the key dimensions of key account management, namely loyalty building, focusing on individual needs long term basis dedication/commitment. As such key account management is not a quick fix activity and should never be viewed in this manner.

Building relationship is a key purpose of managing key accounts. In addition key account management integrates contact between all parties involved in the process ( especially the buyer and supplier). Further emphasis is placed on mutual benefits of all parties i.e. it must achieve a win-win situation for everyone. Since individual customer needs are the focus of key account management, product and service offerings are customized to a very large extent.

The final most important aspect is the openness and sharing of all relevant information, between all parties. This is the ultimate ambition in a key account management programme. Transparency between a buyer and a supplier can only be reached based on trust, respect and mutual understanding.

In developing key accounts, the first stage is to identify the trade channels through which the product will be distributed. Secondly, you must identify the key accounts in each trade channel selected. Thirdly, profiles of the key accounts should be developed. This is an important step in order to understand clearly the needs of individual key accounts. The fourth step is to have regular communications with the key accounts identified. This is an integral part of network and communications should be carried out at all levels in the customer/key account organization. The fifth step is to establish mutual objectives between the buyer and the supplier. An understanding of the goals of each party, will lead to each party empathizing with each other. A final step is to service the key accounts identified, through your key account servicing structure. This coverage is the support needed for relationship development and nurturing. The overriding factor is the key account development process, is the supplier and the buyer, both focusing and building relationships in the longer term.

There are many pressures both internal and external, that have an impact on the key account management process. Let us examine them briefly.

The growing power of customers - the customer or buyer has many options in terms of suppliers. As such the buyer is in a strong bargaining position and this exerts pressure on key account management.

International dimensions - globalization brings with it a fair share of global pressure.

Pace of change - Changes in the external environment are taking place, at an electrifying speed. Technological changes, social and economic changes etc. These changes have a definite impact on the key account management process.

Maturity of Markets - In mature markets the emphasis is on customer retention. This is achieved by focusing on key customers and managing them effectively.  Customers mature markets also demand greater product benefits and value addition which a key account management structure is well suited to deliver.

Process Changes - This relates to ordering and invoicing processes, delivery or order fulfillment processes etc. The development of IT has led to major changes in processes, relating to the management of key accounts.

The ability to be an astute negotiator, is a crucial element in key account management success. When negotiating with key customers it is important to separate, people and personalities from the problems. Often problems are compounded by people and their personalities. It is also important to be:

1. Patient
2. A good listener
3. Willing to give and take
4. A positive thinker
5. Creative
6. A good communicator

If the above criteria are met key account management can be carried very effectively through good negotiation ability. Please note that the art of negotiation is the ability to show people how to get what they want, while getting what you want. This applies greatly to key account management as well.

Essentials for effective key account management

1. Match the person with the key account. The person servicing the key account must have the experience, skill and personality to match up with the expectations of the customer.
2. The customer should be the focal point of all activities. This is basic - but is often forgotten by experienced marketers.
3. Teamwork for success at all times. The knowledge and services of specialists are required, to offer solutions to customers.
4. Key account managers should be well informed about their customers needs, expectations and also about their own business.
5. Develop a principal contact in both the supplier and customer organizations. This will help in better key account management, communication and co-ordination.
6. Key account management is a way of conducting business, and not an isolated business process. It should be considered an integrative method of serving customers.

It is always useful as a supplier, to get into the customers shoes, so that you are able to recognize and understand, their needs better.

Every single customer irrespective of whether they are small or large, expects to be treated as special. They also expect excellent service at all times and do not hesitate to delist customers who fail in this regard. Suppliers are required to continuously add value through the exchange process. This value addition could be in the form of margins, credit facilities, promotional support etc. The supply of good quality products and frequent availability of products, are the expectations of key customers. Finally, easy access and contractibility to the supplier is also an expectation of the customer.

Key account management requires different customers and customer groups, to be approached on a special basis. This requires the supplier organization to have the right customer orientation and service mentality. The ability to understand the culture of customer's organization and align yourself accordingly, is a key element for success, which suppliers should always keep in mind.