Key Account Management Strategies: A Comprehensive Analysis

Desklib provides solved assignments and past papers to help students succeed.

Key Management Accounting
1

Table of Contents
Introduction...............................................................................................................................................3
Conclusion................................................................................................................................................12
References................................................................................................................................................13
2

Introduction
Key Account Management is a strategic approach that is used to develop long term relationships
towards the accounts that are critical to the business. It is a method that helps in developing
important and strong relationships with the oil customers to optimize the value of the firm and
achieve mutual goals.
It is a structure that is used by the companies to focus on the customer management structure.
This system facilitates the implementation of Customer Relationship Management in every
individual unit.Under its functionality there is a key account that solely holds all the information
regarding the achievement of the company.
3

It is seen in most cases of a business that all accounts are treated in the same manner. It is very
important for the managers to understand that there are certain key accounts that need special
attention, as these accounts can increase the firm’s portfolio by a major margin. A management
rule states that 80% of the profit comes from some specific strategic accounts. It is vital for the
firm to comprehend what resources they are investing in those accounts so that they can
maximize the profits (Tzempelikos and Gounaris, 2015).
The segregation of these two accounts type aids in maximizing the potential of the sales of the
firm. As a MD it is extremely important to understand that there are certain areas that remain
neglected in the pursuit of revenue. There is KAM Software that helps in locating the key
accounts that have not been identified by the management. The characteristics of KAM are
provided as below:
 It is a little high profile, but it can be managed.
 It is very fruitful to various types of relationships, but it is to utmost importance that the
relationship between the supplier and customer is to be built on a degree of trust.
 Some glitches between the accounts of the suppliers and customers can be resolved with
the help of KAM. To maintain a cordial relationship between the two it is necessary that
the flow of communication should be proper between the two.
 It also helps in measuring the profitability received by individual customers. This
provides very crucial information about the segregation of profits and also gives an idea
of how these accounts can be further monitored in order to get highest level of
profitability from these individual customers (Murphy and Li, 2015).
 The account managers need a strategicbroad portfolio to deal with independent or
integrated customer relationships.
The main question that arrives in front of the management is that why is KAM so important and
is often ignored by various companies. It is a biggest tool for gaining the marketing deals that
could turn into lucrative sales, which will evidently increase the profit earnings ratio of the firm.
4

There are certain factors that influence the execution of KAM. In an organization these factors
can be internal as well as external.
Internal Factors It refers to anything that is operating or functioning within the company and it
does not matter whether they are tangible or not. These factors reflect the strengths’ and
weaknesses of the firm. If one existing element brings positive effect on the company, it can be
considered as a strength, whereas if the element brings a negative effect it is categorized as a
weakness that needs to be addressed in a very brief period of time from the management (Smith,
et.al., 2015). There are different types of internal factors, which are presented as below:
 Plans & Policies
 Human Resource
 Corporate Image and Brand equity
 Labor Management
 Financial Forecast
External Factors It refers to the factors that are under no control of the company. The managers
make some decisions considering the environment that is prevailing outside the company. The
plans involve marketing strategies and other essential and important areas that needs to be
analyzed for gaining better results. There are numerous aspects that covers external factors.
These could be listed with the economic situation, laws, surrounding infrastructure and the
innumerable customer demands (Tzempelikos, 2015). The external factors are categorized as
Micro and Macro factors. These are explained in detail as below:
Macro factors
 Economic
 Political
 Technological
 Social
 Natural
5

Micro Factors
 Customers
 Competitors
 Public
 Marketing & Media
 Talent
There are certain key accounts that are related with these external and internal factors and these
needs to be well compiled and aligned within the organization. To figure this out the managers
need to have proper information about all the suppliers and the product they are selling and its
contribution in the overall production (Salojärvi and Sainio, 2015). While producing goods, there
are certain raw materials that act as the key ingredients or the main source. These enhance the
quality of the product. So, it is important to evaluate the areas and sync the related accounts so
that there is a clear image of the roadmap that is need to be followed by the management in order
to achieve higher revenues.
Information Required
A dedicated team is required for the appropriate functioning of Key Account Management. To
develop this, there is certain crucial information that is required by the team to assemble the most
important details. The information required for this is:
 Total number of suppliers that are dealing with the business.
 The input of the suppliers to form a relationship.
 The percentage of profit earned from these suppliers.
 Use of facilitating technologies such as EDI and shared databases.
 The time span of dealing with the suppliers.
 The rates on which the suppliers are providing goods.
 Future benefits and needs that can be fulfilled by the current scenario.
 Individual progress report of suppliers.
6

 Selection criteria of the suppliers.
It is important for the firm to indulge in in-depth analysis of the margins that are earned by per
transaction. With that data in hand, they can focus on building a mutually valuable long-term
relationship. The effect of this is more endearing and it will fetch the trust of the suppliers in the
company. This will reduce or completely eradicate the mistrust or miscommunication. The aim
to Key Account Management is to fulfill the long term goals of the firm, they do not emphasize
on the short term advancements (Lacoste and Blois, 2015). The sales will give higher returns on
the long term when these methods are followed.
Time Frame
The functionalities and execution of KAM is little high profile. The team that is required to
follow the guidelines for accomplishing the desired results needs to be very dedicated and should
be well endowed with knowledge of the usage of every individual account prevailing in the
system. To bring the structure of KAM, a lot of time is required to establish the relationships, to
scan the role of every account. The key areas in which the team should emphasize their focus
are:
 Comprehending the nature of the product.
 The feedback of the customer towards every aspect such as price, quality, services and
so on (Parvinen, and Moller, 2015).
 Building an organization chart to define the key account buyer’s role.
 Personal interaction with the suppliers, this will help in building a more intimate
relationship and would strengthen the ties associated.
 Monitor the behavioral changes in the suppliers.
 Keep a track of the culture of the company.
 Ascertaining the right areas that need to be highlighted.
The criteria that need to be defined in order to execute the structure of KAM in the organization
can be noted as below:
7

Key
Account Contact Main
Manager
Selling Company Buying Company
Image: Bow-tie structure of KAM, 2019
Source: By Author, 2019
The main criteria that need to be surfaced for an effective relationship are that both the parties
have to understand the demands of each other. If either of the party does not record what is being
set in the customer database, it will be very difficult to implement the complete process
(Beckers, et.al., 2015).
Another very important set of criteria’s that needs to be taken care of while planning the
implementation of KAM are:
 Creation of new opportunities.
 Penetration of new buying centers.
 Provide ideas to clients for pursuing new ideas and possibilities.
 Comprehend the buying abilities of the buyers.
 Measuring ways that stands out of competition.
 Presenting solutions to tough issues, overcoming the hurdles and winning new business.
After assessing these areas it is important that the team now looks forward to the criteria that
aids in identifying key accounts. They can be done so by evaluating the
 Potential of Revenue that can begenerated.
 Growth Potential
 Impact on Solvency
8
Marketing,
Logistics,
Finance and
Operations
Marketing,
Logistics,
Finance and
Operations

 Potential Channel Partnership
 Geographic alignment
 Aspects of innovation
The accounts need to be segregated in different categories for extracting the specific, productive
and performing key areas.
Departments required for Execution of KAM
To form policies or strategies about something very important, it is required that there is absolute
coordination between all the departments of the organization. In a company there are various
activities that takes place and the accounts are being managed accordingly. As the focus of KAM
is to improve the relations between the suppliers and the customers, it emphasizes on paying
attention to some key accounts (Kowalkowski, et.al., 2015). This will lead to generation of better
results and eventually higher productivity and revenue.
The main departments that are concerned with the organizing and planning of KAM are
Marketing, Production and Sales. Let us look in brief how these play a rather enduring role in the
complete process.
 MarketingThe main aim of this department under any industry or organization is to
prepare leads. They establish relationships which bring in new business. The product
made is advertised to the customers as well as the suppliers. The benefits and profit
margin are elaborately discussed under this. For recognizing the key accounts, it is
important that the base is set up through this department. They are responsible for
building a foundation on which the sales can do its further work.
 SalesThis department comes to action when the stage has been set by the marketing team.
The objective of this department is to convert the leads into the sales. This is the area that
is responsible for generating the highest amount of returns from the input. They
consistently interact with other companies about how being in a KAM can benefit both
the parties. It will be equally rational for both the sides to come up to an agreement that
will fetch long term gains for both the parties (Steiss, 2019).
9

 ProductionIt is the most important department amongst all. The production unit
determines the capacity of individual material to produce profit. The production of goods
are done in different methods, they can be either produced as semi-finished goods,
supplementary goods, by-products or finished goods. The ultimate consumption is done
by the consumers only, but the category defines the level of revenues that the product is
able to generate (Murphy and Li, 2015). When this is calculated after a series of thorough
analysis, it becomes easier to determine the ‘Key Accounts’.
Phases of Implementation
The implementation of such a task is not easy for the management. To efficiently do the process,
certain phases need to be followed for better results. There are five phases that are channeled for
implementation of KAM. The phases are elaborately described as below:
 Right KAM StrategyFor designing of a successful account management, it is important
that the company should have a right strategy. The development of such strategy can
only be succeeded with the right knowledge, information, precision and depth. For this,
there should be a clear understanding about the position of the company with its
customers. To achieve this, right software needs to be integrated with the firm that has
all the required data.
 Right Key accountsIt is to be noted by the managers and the team that not every
customer that seems to have big sales potential fulfills the criteria or requirements if a
strategic account. When the corporate strategy is looking out for certain very specific
customers that have the highest potential of leading the organization towards achieving
its set goals, these may or may not enjoy the advantages served by the organization. The
criteria under which the key accounts are selected is to be framed with extreme
particularities. These are the accounts that are responsible to set up 80 % of the revenue
for the firm (Smith, et.al., 2015).It is important for the team to find those accounts and
pay maximum attention towards them.
 Efficient Manager and TeamThe most important aspect of the whole process is that, it
requires a very efficient manager and a very productive team. The manager should be
highly qualifies and he should know about the functionalities of every single unit or
10

account. As it is a very high profile work and it requires time, effort and teamwork, the
members of the team should be extremely dedicated towards achieving the aim of the
organization. The Account Manager has to fulfill certain special requirements in terms of
his professional competencies and his personality to interact and influence the related
suppliers and customers. The manager should recruit his team without any interference
from higher management and focus on delivering the required results.
 Properly managed account strategyTo achieve the desired results, it is important that
the strategy chosen for accomplishing the task is properly managed. Developing strategic
partnerships with the key accounts is the main aim of the professional management. The
primary motivation of the organization is to move forward from the status of replaceable
supplier to one of the most strategic partner. Forming a strategy is a very complex
process and it needs certain very firm decision do that the execution can be very accurate
and the results can be very productive (Tzempelikos, 2015).Managing the strategy is a
very crucial t\ask and needs proper attention and time.
 Proper ExecutionAbove all things, the most important thing is the execution of the
strategy. All the data that is compiled by the team needs to be organized in proper
manner for extracting better results. Following a proper order will ensure highest level of
quality in the KAM of the organization. The strategies should be implemented through
an array of performance indicators and personal monitoring by the managers and his
team.
11

Conclusion
The report presents a series of information about the importance of Key Account Management
for enhancing and improving the performance of the company. There are certain factors that are
responsible to act as hurdle in implementing the structure in the organization. These factors can
be classified as Internal and External.
The report also presents why and how the structure would be beneficial for the firm. Much
organization tends to neglect the fact that there are specific accounts that are responsible for
generating higher revenues than the other. This is then brought in light by the KAM. The
relationship between the suppliers and customers is extremely important for the firm to achieve
the long term goals of the firm and also of the suppliers. This relationship is lucrative for both
the parties.
The report also signifies the role of the account manager and his team in executing and achieving
the desired results.
12