FEATURE | KEY ACCOUNT MANAGEMENT
BALANCING RISK AND REWARD What should sales strategists be doing to make sure key account management is still working, asks BETH ROGERS
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ver-demanding purchasing managers, the costs of the key account infrastructure, excessive focus on too few customers – why do we still love key account management (KAM)? It may have marked the transition from product-based selling to customer orientation necessary in the economic circumstances of the 1990s, but is it still relevant, useful or profitable? Based on a chapter in the new book Malcolm McDonald on Key Account Management, by Malcolm McDonald and Beth Rogers, this article takes a critical look at the risks inherent in KAM. What should sales strategists be doing to make sure it is still working effectively in 2017?
things that should appear on the risk register as a result of pursuing key account strategies? If they are acknowledged, you can make informed decisions about how to manage them.
FINANCIAL RISKS Company boards tend to focus on financial risks. What financial risk can a KAM strategy represent? We often talk about Pareto’s rule – 20% of the customers deliver 80% of revenue. What if only one customer represents 10% of revenue? What if trying to maximise business with those 20% leads to neglect of the other 80%? Although sales strategists must analyse the lifetime value of customers and allocate more resource to the best opportunities, they must also find some resource for the rest DEFINING RISK of the customer portfolio. Even “A risk that could have a First, let’s consider what risk is. if the customers who represent big impact on the Risk can be a positive thing, but a small proportion of revenue company deserves a the majority of risk registers in are only served by portal or contingency plan, even if companies are long lists of telephone, these services must things that could go wrong and be good. It is those myriad the probability of it need to be managed carefully. A small customers who balance happening is small” risk that could have a big impact risk in the customer portfolio. on the company deserves a Key accounts go out of contingency plan, even if the probability of it business, get taken over and change their sourcing happening is small. The risk matrix on page 42 is a strategies. Even if you have been doing business typical analysis tool used by risk managers. The with them for decades, any compensation that probability of an event is mapped on one axis, and might be written into the contract in case of exit its impact on the other. Like all matrices of its will not mitigate the shock to the company. type, it only gives a snapshot. Risk profile can There should be a contingency exit plan for change over time and so the analysis needs to be every key account. Sometimes, purchasing reviewed and repeated regularly. Many companies managers ask suppliers to share their exit plans. update their risk register every month. They want to know that if they drop a supplier, Is your company secretary monitoring those they will not be responsible for job losses likely
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