Key Account Management - Case Study Example

of Key Account Management 24 April 2006 When a business conceives a product to sell in the market, one of the important queries it anticipate is how much and how soon shall the return of investment be. Essentially, a business must be all about product and profitability. But with the increasing consumer awareness and literacy, notwithstanding the stiff competition with in the sales arena, it is a daunting task for a supplier to succeed in becoming a market leader in their respective category. No matter how original and important a product may be to a consumer, eventually the emergence of other more trendy and better ones shall render it less popular and in the long run negligible. The sustainability of a product is constantly dependent upon the support given by the supplier including among others: the marketing strategies that enable wide recognition to all levels of consumers; a promotional tactic aimed at creating "the need" among consumer thereby assuming a stronger foundation for product positioning in an ideal market segment consequential to loyalty and patronage. But these are strategies effective only during the initial stage. Once positioning is established, all efforts must then be centred at maintaining a course whereby profitability is promising, incidental to an effective reason to improve. This is where Key Account Management or KAM is most useful. Key Accounts are those that provide high revenue and critical asset, requiring strong leadership and excellent management skills. KAM is the most practical means of survival in this highly competitive market amidst increasing demand in current economic condition, a way to achieve longevity and create future growth, a way of preserving a good customer relationship. This essay emphasizes the Role of Key Account Management, as a tool and process that equips a company in acquiring and retaining large customer revenue fosters symbiotic mutually profitable and sustainable business relations resulting to a "win-win" situation. In a business that engages in sales, taking care of the product is equally unilateral with taking care of those who avail your product since they are salient factor to obtain your investment returns. Since key account is parallel to cash inflow, much effort should be allocated in monitoring its movement. As such, the goals, missions, value, principles as well as the skills and capabilities inherent among sales personnel should be conveyed properly to every members of the organization. This should be initialised by the company head who takes responsibility relaying imperative matters to all levels of sales director who receives compensation dependent upon the generated sales profit. In his article Key Account Management Strategy, Jay Dwivedi said that "Salespeople learn only the hard way that many big companies really give them the business that they deserve based on the effort that they put in. Therefore, it is important to clearly identify what customers are "key" to your business and then serving them using a well thought out plan" (Dwivedi, n.d.). A good key account management entails constant check and update in terms of performance at least on a quarterly basis, taking into account the total revenue; percentage profits; growth rate of sales in existing product line; value of new products/services; order size distribution and average and price comparison with other customers in the same category. In his web article, the author furthered the importance of understanding, that while support from the corporate office is imperative, the actual development of key account management program is the effort originating from the local executives who knows the over all whereabouts of the market. Since this program is constantly evolving in a manner similar to the rate of improvement of the product, a continuous feedback from the customers is thus crucial to the alignment of the goals. Thus we are pressed with the question, how do we identify a key account There are only three basic elements in identifying: Quantitative categorization of revenue; determinations of metrics and the third is the evaluation of impact to the company. With categorization, accounts must be according to the amount of sales generated, whereby it falls under three grouping (i.e., sales over 1million; sales 100,000 to 1million; sales less than $100,000. Taken into consideration in the determination of the metrics includes the contribution of the margins and the direct profit, and finally evaluating the turnover as well as success of the resources allocated. KAM strategy involves defining and prioritising the objectives. In the planning stage, a situational market analysis should be the basis of formulating growth, service and delivery strategy. Questions like, who should handle the account What are the necessary skills in choosing the personnel to handle the account, should be considered when organizing a team. Through the processes of continuous performance check, benchmarking and assessment, the supplier is able to recognise market demands, consumer needs, product update, effective costing and pricing at the same time pay more attention to the what the customer needs. As a result of this, the supplier is able to modify or improve certain aspect of the product making it more appealing to the consumer thus leveraging a good market share. The simplest way of managing key account is by allocating the necessary resources incidental to the potentials of the product. This is effectively done by balancing the profit versus allotted financial assistance in a form of rebates and discounts. The two-pronged strategy is commonly employed by companies with a low potential account, whereby they allocate maximum resources and effective strategy only with in a given period of time. If this strategy does not take its anticipated effect beyond the projected period, these companies usually dump this low potential account and focus on another one. Another strategy development involves three phases: one is the assessment of needs of your clientele; followed by the development of the skills and capabilities necessary to address the needs of the customer and finally the manner with which delivery of these needs are implemented. In the last stage, it is important to emphasize that the supplier and the customer operates under a symbiotic relations wherein the customers helps the supplier grow and make more product while the supplier assists and becomes a partner to the customer by ensuring the quality, availability and profitability of the product once sold to the end consumer. Like any other partnership, both parties should benefit from the sacrifices extended. Success does not happened over time, and rather takes a long and arduous process of give and take. It undergoes several stages with which this is termed as Pre-KAM, Partnership-KAM and Synergistic-KAM. Pre-KAM is the establishment of potentials. In here, a plan is already conceived; a prospective buyer is already identified along with the strategy to utilize in order to entice the prospect into buying your product. Likewise, in this stage, the seller should pursue all effort, present the product edge and provide reasonability as to why the buyer needs to purchase. Like an ardent lover pursuing courtship, the primary aim is to acquire the buyer's agreement thus perfect the transaction. It is only in the Partnership-KAM wherein constant transaction is present. In here, the buyer acknowledges the truthfulness of the allegations of the seller while in the pre-KAM stage. In this stage, the buyer knows that he will have to continue his purchase otherwise the profit gained over said product will be lost. Therefore the seller has achieved the goal to create the need for the product. However, a good KAM supports the business of the buyer in order to sustain the sellers gain, thus, the seller must allocate and provide assistance and support effective to the buyer. It is not consistent to say that this support must appear in a form of rebate, discount or whatever financially related resources. What is relevant at this point is to exceed the buyer's expectations by proving excellent customer service. Thus, agreement and compromise allowed the product to gain the movement desired by both the seller and the buyer. Finally in the synergistic-KAM, it is worthwhile to note that there is a continued focus of the joint value creation for the end user. Both seller and buyer want to foster the partnership and transcend to a level whereby problems and rewards are dealt with in quasi-integration ultimately making the product excel in the market category it belongs. In conclusion, If I were to start my own packaging business and name it SNACK-PACK, if I intend to bring my product into a more mature KAM stage, it would have to involve the allocation of several resources including a thorough market feasibility research in the Pre-kam stage, whereby I will have the access as to the manner of approaching an identified prospect along with the offers that will equip me to manoeuvre and work my way in convincing the prospect to buy. With persistence and creative tactic, such as presenting a good scheme to allow the buyer a good profit as well as the promise of providing an excellent marketing support, I know I can bring this to a level whereby we exists and progress together. Reference List Wilson K 1999. Managing Customer Relationships - A guide for Strategic accounts. 'The Sales and Research Trust'. Retrieved From, the World Wide Web http://www.questia.com April 21, 2006. Read More