Ssm lecture-20 & 21 (key account management)

07/06/10 1

By :

Prof. Amit Kumar

07/06/10 2

“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”.

IILM-GSM

Importance of this course

Selling & Sales Management

07/06/10

IILM-GSM

Selling & Sales Management

07/06/10

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

IILM-GSM

Selling & Sales Management Key Account Management

07/06/10

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.

IILM-GSM


07/06/10

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.

IILM-GSM


07/06/10


IILM-GSM


07/06/10


• 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.

IILM-GSM


Characteristics:

07/06/10

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.

IILM-GSM


07/06/10

Distinctions between Transactional Selling and KAM

IILM-GSM


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

07/06/10

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)

IILM-GSM


07/06/10

Advantages of Key Account Management

However, KAM is not without its potential dangers.

IILM-GSM


07/06/10

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.

IILM-GSM


07/06/10

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.

IILM-GSM


07/06/10

IILM-GSM


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

07/06/10

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:

IILM-GSM


07/06/10


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

IILM-GSM


1. Personal Trust

07/06/10


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)

IILM-GSM


2. Technical Support

07/06/10


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)

IILM-GSM


3. Resource Support

07/06/10


The objective is to improve the quality of service provision.

Methods:

Reliable delivery

Fast/ JIT delivery

Installed computerized recorder system (FedEx)

IILM-GSM


4. Service Levels

07/06/10


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

IILM-GSM


5. Risk Reduction

07/06/10

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.

IILM-GSM


07/06/10

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.

IILM-GSM


Ssm lecture-20 & 21 (key account management)

Leadership & Management

Transcript of Ssm lecture-20 & 21 (key account management)