Creating Value in Key Accounts

By Mark Lubkeman and Vikas Taneja

Key account management (KAM) is falling short of its potential because of four common mistakes. One, the right accounts—those with the highest upside—are not designated as “key.” Two, relative to the resources deployed to serve them, too many accounts are designated key. Three, key account relationships are too often transactional rather than strategic. And four, as a result of the first three mistakes, the accounts that are considered key receive price discounts, but opportunities for joint value creation are lost.

Addressing these challenges requires a concerted effort that starts with understanding both customers’ needs for products and services and how customers want to be served. Frequently, major customers—whether they are called key, strategic, or global—are underserved. One global company with a sprawling and historically successful sales force found that 70 percent of its key accounts were dissatisfied with the relationship. It should be no surprise that sales to those accounts fell short of their potential.

Through effective KAM, we have observed that companies can generally lift revenues by 5 to 10 percent, improve margins by three to five percentage points, and lower the cost to serve by 10 to 20 percent. Companies achieve these results by enhancing account penetration and retention and by allocating resources more effectively.

The steps toward achieving these results are easy to understand but difficult to implement. Several barriers stand in the way. By overcoming them, companies can successfully capture financial upside opportunities and enjoy a deeper relationship with their most important customers.