Key Account Management (KAM) – Using the 80:20 Rule

Anyone in business will tell you that it is easier and cheaper to sell more products and services to an existing client than it is to go out and find a new client. Key Account Management or “KAM” is all about focusing on your key existing clients – your very best customers.

Applying the Rule

In theory, this is the perfect way to increase your profits and develop better relationships with your most valuable clients. If we apply the 80:20 rule then, in an average business, 80% of profits tend to be generated by the top 20% of the clients.

So, these key accounts are the most valued customers of a business. A KAM strategy is a marketing and business development approach that focuses on taking special care of these customers. Each key account should have a business plan, dedicated resources (such as an account manager or single point of contact in your firm) and should be identified throughout your business as being a strategically important relationship.

Selecting the Right Client

The most important thing here is to select the right customers for investment. Many businesses tend to underestimate the importance of this step and often show a casual attitude when it comes to selecting the right clients to develop. Some firms simply select all their big clients.

There is nothing wrong with that strategy; however, they often fail to consider the potential to grow those particular relationships. After all, just because a client is big doesn’t necessarily mean it is particularly profitable.

Resource Availability

In creating a KAM strategy you should also consider resources. There is no point in creating a strategy to develop 60 key clients if you only have the resources to actively manage 10 key clients. These key client accounts will need to be managed in an active way and this will require time and effort.

Ideally, you will want to create a specific business plan for each key client relationship and you will need to dedicate some financial and people resources in order to execute these business plans.

KAM, if executed well, can be a very effective marketing strategy in that it focuses your firm’s business development and marketing resources on the targets where you are likely to make the biggest impact.