Key account management is far more complex than we give it credit for. Account management best practices apply to most customers, but managing larger accounts requires more insight, sharper foresight, and good use of hindsight.
What is key account management?
Key account management (or strategic account management) means managing a business’s key customers to grow recurring revenue and reduce churn.
There’s a reason companies should focus on retaining existing accounts: it’s five times cheaper than acquiring a new customer.
According to research from the Harvard Business School, 5% increase in retention leads to 25%-95% higher profits.
Managing strategic accounts well grants you six key benefits:
- Better knowledge of your client’s business context
- Increased deal sizes and upsells
- Increased customer loyalty
- Better project management
- Better executive access
- Shorter sales cycles
Strategic account management gives you insight into what your client is working on, dealing with, or planning.
Using that knowledge, you can identify opportunities to increase the number of projects you work on together or the profitability of existing projects.
You can also manage projects more efficiently, which leads to better outcomes and increased customer loyalty.
Done consistently, all of this leads to shorter sales cycles with existing and future accounts.
However, many businesses have a limited understanding of how key account management works. This risks dissatisfaction and churn.
Let’s break down the strategic account management playbook step-by-step to avoid this.
How strategic account management works
There are six critical elements of strategic account management:
- Whitespace analysis
- Competitor analysis
The first step is to identify your key accounts by analyzing your accounts by revenue or loss potential. Who are your most profitable customers? Which losses would harm your cash flow or business the most?
The Pareto principle comes in handy here: 20% of your customers bring in 80% of your revenue. Once you’ve identified this 20% cohort, it’s time to map them out in detail.
When you map out the current state of affairs with each key account, you get incredible insight into what you need to double down on or phase out. There are five aspects of each key account to understand:
- Timelines and calendars: What tasks or projects are coming up? Which deadlines do you need to be aware of?
- Workflows: How do you currently undertake each activity? Have you documented each process for posterity?
- Stakeholders: From your end, who is the account manager, technician, or specialist that works on the account? Could you replace them quickly if needed without disrupting any workflows? If not, that might present a concentration risk. From the client’s side, who are the liaisons for the account? Who are the buyers, champions, or detractors — and what are their motives?
- Financials: How much recurring revenue are you currently earning from the account? How much does it cost you to service the account from personnel, time, and resource perspective?
- Wins and losses: How can you prove results and ROI on the account? Would this account qualify as a reference customer, success story, or case study?
A greater understanding of your strategic accounts prepares you for the next step: workflow improvement.
With a clear understanding of each key account, you can improve their workflows to be more efficient and profitable.
This might include cutting down on unnecessary meetings to save time, using different vendors to save money, or planning to prevent last-minute requests.
Streamlining also affects the tools you use — for example, swapping out spreadsheets for project management software or using content scheduling tools instead of posting content manually.
There will be activities within your key accounts that simply aren’t profitable or justifiable. These low-hanging fruits are ripe for elimination.
Let’s say you work at an ad agency, and one of your key clients is a bank.
The client might conclude that their podcast isn’t drawing as many listeners as they initially expected or that the monthly event they host for business owners isn’t returning the ROI they wanted.
Phasing out these low engagement or low-profit activities improves the health of the account and frees you up for better-paying opportunities.
5. Whitespace analysis
After spring cleaning the account, you can start identifying areas of untapped potential — the “whitespace.”
Every major account has plenty of opportunities to boost profits, raise the brand’s profile, or both.
Whitespace analysis requires a critical eye for opportunities that competitors have missed or which might require fewer resources.
For example, after phasing out the bank’s podcast, the agency realized that thought leadership pieces in a leading trade magazine drove more pipeline.
They also began writing columns in local newspapers to educate the market and drive demand for their offerings.
6. Competitor analysis
It’s not enough to understand your accounts — you must also master their business context and the competitors they’re up against.
Each competitor has strengths and weaknesses, and knowing these allows you to gain an advantage and help your client win.
For example, the bank’s leading competitor might have lower fees than your client, but your client might have more branches and ATMs countrywide.
While the competitor launches a campaign extolling their lower fees, the agency can help their client build a campaign touting greater banking convenience.
These five mapping elements allow you to do better work for more revenue and improve the profitability of your key accounts while retaining them for longer.
But there are specific skills an account manager needs to do this successfully.
4 critical skills you need for key account management
As an account manager tending to strategic accounts, there are four critical skills you must hone:
- Leadership and ownership
- Strategic thinking
- Analytical skills
1. Leadership and ownership
As a key account manager, you’ll need to be responsible, accountable, and informed about each account and its activities.
While your job is to coordinate all the moving parts of the account — allocating human resources, liaising with vendors, and managing timelines and reports — you are ultimately accountable for results.
As we say at FreeAgent, ‘Be a Driver, not a Passenger’ — and nowhere is this more important than in account management.
2. Strategic thinking
It’s easy to get caught up in day-to-day tactics, but big-picture thinking is crucial to anchoring the overall strategy of your key account.
It’s essential to check in often with management and the client to understand if you’re still on track and understand which tactics to deploy at different phases.
Due to the sheer number of people involved on an account from both sides, clear communication is critical to completing projects on time, getting buy-in, and communicating results.
It’s not just what you say — it’s how you say it, when you say it, and what tools you use. Poor communication in account management can have adverse ripple effects downstream.
4. Analytical skills
Activities like whitespace analysis, periodic reporting, and campaign planning require drawing insights from data.
For example, slow sales growth might indicate low product-market fit, but it might also be a function of the time of year or ongoing investments that haven’t borne fruit yet.
While these four skills are crucial to effective account management, their utility might be hampered by the various challenges key account managers face in the workplace.
Challenges with key account management
Five main challenges may hamper effective account management. These include:
- Lack of buy-in for account plans: An account manager is an intermediary between different stakeholders. Their job is to get buy-in from different departments to move a deal or project forward. Sometimes, these requests to move forward may compete with other priorities in either the client’s company or your business.
- Low or no communication between both sides: Underlying these requests and relationships is the level, quality, and frequency of communication between all parties. Lack of communication, negative communication, or miscommunication can all hamper the ability to get buy-in for a project.
- Lack of proper tools for account management: Account management is a complex role, and using the right tools for the job is crucial. Managing accounts through spreadsheets or lacking robust reporting tools can make the process inefficient.
- Single points of contact causing friction/delays: When there’s only one point of contact between the client and the business, this can delay project outcomes. For example, if the client’s liaison goes on holiday, all work may grind to a halt until they’re back. If they’re not directly involved in a specific aspect of the business, that too may slow progress. For example, the agency’s copywriter may need access to the bank’s social media analytics to understand their audience better and craft relevant copy but the bank’s marketing manager defers to the digital comms team. This introduces an extra step in the process. If the copywriter had direct access to the digital comms manager, they could get information faster.
- Tension between short and long-term initiatives: There’s always tension between long-term and short-term initiatives. A key account might prioritize sales in the short term but neglect to build the brand over the long term, making it harder to get buy-in for brand-building initiatives. The key account manager’s job is to strategically analyze such opportunities from a cost and ROI perspective, then communicate their findings and recommendations to the client’s leadership team to get buy-in.
How a CRM helps with strategic account management
Strategic account management is about maintaining and growing the value of key commercial relationships. This is where CRM software comes in.
Built for customer relationship management, CRM software gives you insight and visibility into your key accounts.
It helps you analyze, direct, and report on activities within your accounts while generating new opportunities.
By providing centralized visibility into the financials and projects of each key account, you can collaborate with stakeholders more effectively and communicate strategic reports or tactical moves.
The key to achieving this lies in most modern CRMs’ features. These include:
- Context features: See account details and all communications from stakeholders in one place, saving you from switching between multiple apps
- Project and task-tracking features: Know all deliverables, assignees, and task timelines at a glance
- Reporting feature for projects and financials: Generate accurate and timely reports on project progress, spending, and revenue in easy-to-read formats
- Third-party app integrations: Connect with essential email, storage, security, and other apps through APIs
- In-app communications: Send relevant and timely communications from your CRM to account stakeholders
Manage your key accounts more effectively
Key account management is a complex role, but with the right approach and tools, you can deliver better outcomes, grow the business relationship, and retain your most important customers.
FreeAgent CRM helps teams get all their customer relationships in one place, work more collaboratively to get more done, and track and improve performance.
Try out FreeAgent for key account management today.