Key Account Management was the topic of discussion at a recent workshop I attended. The sales people concerned were discussing selling very high value consumables to very rich people. The key account management rule book says you should identify the top 20% or so of your customers who, according to Pareto principles, will probably bring in 80% of your business. And lo and behold the figures worked out almost to the %.
Then one bright person observed that, if you applied the same rule to the top 20% of customers again, you found that in fact 4% of customers in this instance generated around 65% of the business. So why not just focus on those, stop trying so hard to sell to the bottom 96% (or at least bottom 90%) and have an easier life, lower overheads and probably better profitability.
Well this is where the Key Account Management strategies are absolutely necessary. Those strategies do, of course, mean that every effort possible is put to keeping the real KEY ACCOUNTS. But also that those customers further down the pecking order in terms of current spend are targeted to take them into the spending bracket of the top 4%. Because you never know if one of your competitors takes a couple of your big spenders and suddenly that top 4% is only generating 50% of your overall revenues and the business looks shaky.
So the sales team have to keep feeding new clients into the sales funnel to find out what potential they offer and to discover whether it is possible to develop some of these clients into profitable key accounts. So the bottom 80% of customers, bringing in only 20% of your revenues, could be the breeding ground for your next generation of big spenders.
Putting a key account management strategy together is not an easy thing for everyone, so to put one together that works, external expertise is likely to be a good idea. The better the strategy the more the business will gain from it – greater penetration, better management of knowledge about customers and more effective ways of getting the organisation closer to the customers.
Key account management is not an option it’s a must.
By Mike Cooney | Righttrack’s Commercial and Financial Director