ssm lecture-20 & 21 (key account management)
TRANSCRIPT
07/06/10 1
By :
Prof. Amit Kumar
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“A student pursuing management education from IILM-
Graduate School of Management, for example may find
himself or herself placed in a firm as a Sales Manager.
Our goal is to prepare the student for the exciting
challenges related to leading sales organizations in
today’s hyper-competitive global economy”.
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Importance of this course
Selling & Sales Management
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Learning Outcomes
After studying this chapter, you should be able to:
• Understand what a key account is and the advantages and disadvantages of KAM
• Decide whether KAM is suitable in a given situation
• Understand the criteria used to select key accounts
• Tasks and Skills of KAM
• Ways in which relationship with key accounts can be built
• Key success factors for key account management
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Contents
• Key Account Management
• Advantages and Disadvantages of KAM
• The Tasks and Skills of KAM
• Building Relationship with Key Accounts
• Key Success Factors for KAM
• Case Study: Cloverleaf plc.
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What is Key Account Management?
KAM 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.
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What is Key Account Management?
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What is Key Account Management?
• In order to receive key account status, a customer must have high sales potential. (IBM gives Big Blue Status to their loyal customer. All Big Blue status are IBM's Key Account).
• A second characteristics is that of complex buying behavior. The decision-making unit may be located in different functional areas and varying operating units.
• Third, key account status is more likely to be given to customers willing to enter into a long-term alliance or partnership. Key accounts that are geographically spread are often called national accounts.
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Characteristics:
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KAM-Examples
P&G assigned a key status to Wal-Mart. Wal- Mart shares the scanner data from its check out counters in its over 4500 stores through the satellite. It helps P&G plan its production, better management of its production runs and keep its inventories low as it no longer depends on sales forecast but actual sales data. Wal-Mart gains as it does not have to keep inventories, get faster replenishments.
FedEx assigned a key status to IBM where FedEx stocks IBM’s spare parts in its own warehouses and delivers them across the world on instructions from IBM’s service personnel.
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Distinctions between Transactional Selling and KAM
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Transactional Selling KAM
Overall Objective: Sales Preferred Supplier Status
Sales Skills: Asking questions, Building trust, providing
handling objections, closing excellence service
Nature of Relationship: Short, Intermittent Long, More Intense Interaction
Salesperson Goal: Closed Sale Relationship Management
Nature of Sales force: One or two Many salespeople, often salespeople involving
multifunctional per customerteams
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Advantages of Key Account Management
• Close working relationship with customer- the salesperson knows who makes what decisions and who influences the various players involved in the decision-making process.
• Improved communication and co-ordination- the customer knows that a dedicated salesperson or sales team exists and they know who to contact when a problem arises.
• Better follow up on sales and services
• Higher Sales- most companies that have adopted key account selling techniques claims that sales have risen as a result. In banking also HNI customers are very important.
• Co-operation on research and development for new products and joint promotions (e.g. within the FMCG/Retail Sector)
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Advantages of Key Account Management
However, KAM is not without its potential dangers.
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Disadvantages of KAM
• When resources are channeled towards a limited number of companies, the supplier runs a risk of increased dependence on, relatively few customers.
• The risk of pressure on profit margins if a customer choose to abuse its key account status.
• The possible danger of a customer applying ever-increasing demands for higher levels of service and attention once they know that they have preferred customer status.
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The Tasks and Skills of KAM
• Simply choosing the company's top salesperson to handle the management of key account is not recommended because the jobs are so different, with the latter requiring a higher level of managerial ability (e.g. leadership, co-ordination, development of account strategies and communication).
• This is because powerful buyers in key account carry high expectations are very demanding.
For example, they expect key account salespeople to act as partners in creating strategic solutions to their
problem or to be experts who provide specialized product application knowledge.
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TASK SKILLSDevelop long-term relationships Relationship Building
Engage in direct contact with key customers Co-ordination
Maintain Key account records and background information
Negotiation
Identify sales potential of existing key
accounts
Human relations
Monitor and control key account contracts Presentation Skills
Co-ordinate and expedite service to key accounts
Communication
Co-ordinate communication among company units servicing key accounts
working in a team
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Building Relationship with Key Account
There are certain ways in which suppliers can build relationships with key accounts.
Five ways of building strong customer relationships are:
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Building Relationship with Key Account
The objective is to build confidence and reassurance.
Methods:
Ensure promises are kept.
Reply swiftly to queries, problems and complains
Establish high frequency of contact with key account
Arrange factory / site visits
Engage in social activities with customers
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1. Personal Trust
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Building Relationship with Key Account
The objective is to provide know-how and improve the productivity of the key account.
Methods:
Research and development
co-operation before and after sales service
Provide training
Dual selling (suppliers help key account to sell)
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2. Technical Support
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Building Relationship with Key Account
The objective is to reduce the key account's financial burden.
Methods:
Provide credit facilities
Create low interest loans
Engage in co-operative promotions to share costs
Engage in counter-trade (accept payment by means of goods
or services rather than cash)
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3. Resource Support
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Building Relationship with Key Account
The objective is to improve the quality of service provision.
Methods:
Reliable delivery
Fast/ JIT delivery
Installed computerized recorder system (FedEx)
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4. Service Levels
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Building Relationship with Key Account
The objective is to lower uncertainty in the customer's mind regarding the supplier and the products/ service provided.
Methods:
Free demonstrations
Free/ low cost trial period
Product guarantees
Delivery guarantees
Maintenance contracts
Proactive follow-ups
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5. Risk Reduction
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Key Success Factors for KAM
A study by Abratt and Kelly (2002) investigated the perceptions of suppliers and key account
customers regarding the success factors of key account relationships. They identify six critical
issues that can assist management in the creation of enhanced and sustainable
relationships.
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KAM Key Success Factors
1. Suitability of the Key Account Manager
2. In-depth knowledge and understanding of the key account customer's business
3. Commitment to the partnership
4. Delivering Values
5. Trust
6. Proper Implementation and Understanding of the KAM concept.
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