17 Mar 3 Key Commercial Capabilities to serve customers and grow revenue
This post is the first one of a series aimed at exploring how best-in-class organisations structure their approach to acquire, retain and grow customers.
I invite you to read the whole post and then to download the 3 Complementary Capabilities one-pager that summarises the thinking behind this post with a single graphic.
Introduction: When KAM is the wrong answer to a real problem
In a recent past, a customer asked me to support them in fixing a recurring adoption issue with their KAM initiative launched 3 years earlier.
This industrial global company is selling complex solutions to large customers, public and private organisations across the globe.After reviewing data and interviewing people on 4 continents, I had to tell my customer that pushing KAM was bound to fail because it meant using the wrong instruments to solve a recurring issue of a lack of customer intimacy. What started as a project to fix an ailing KAM programme morphed into an initiative to develop a deeper intimacy with both new and existing customers. A rich action plan has been defined and is now being implemented. Once this organisation will have progressed enough on complex sales and on basic account management, it be in a much stronger position to enhance and expand its KAM intiative.
This situation reminded me of another one. A few years ago, forced to stay at the hospital for months, I was gracefully invited to provide some advice to a consulting team helping a large company design and implement a KAM programme.
The customer was a regional market leader in software technologies for online payments through a network of affiliates. They were facing a competitive threat from small players targeting their major customers. Quite enthusiastic about the concept of KAM after an expensive training with a prestigious academic organisation, the leadership team had decided to launch a KAM initiative. Although working only in the background, with no direct contacts with the customer, it became rapidly clear to me that this company was using the wrong instrument to manage a very real threat. The cause of their problems with top customers and the door left wide open to competitors was a practice of overpromising during the sales process and underdelivering after. Key customers were quite disappointed by serious weaknesses in the quality of the technical support and the solidity of the technical roadmap. There was no way a KAM approach would directly fix these issues. It took months for this company to accept to open their eyes, recognize the problems for what they were, and start acting accordingly. Eventually, the KAM initiative was put on hold and other initiatives were started on the technical support, on the product evolution communication process with the customer as well as on managing expectations setting during the sales process more carefully.
Managing customers well requires 3 complementary capabilities
What can we conclude from these 2 stories? That, in order to well manage their customers, companies operating in a complex environment need to develop 3 types of commercial capabilities
- Complex Sales
- Account Management & Delivery
- Key Account Management
Let’s explore what each of these 3 capabilities covers.
The Complex Sales Capability
The Complex Sales Capability is the first marker of the quality of a sales force and the supporting functions.
Complex sales is about generating and winning opportunities and acquiring new customers in a B2B (private) or B2G (public/government) environment where different stakeholders are involved on the buyer’s side and the solution is partially or totally co-constructed with the customer.
The term complex refers to the number of stakeholders involved in the buying process, to the duration of the buying process and to the level of stake and risk presented by the purchase for the buying organisation.
The ultimate KPI for this capability is the win rate, the percentage of qualified opportunities leading to a closed deal. The number of new customers acquired in a year is also an important metric. Other relevant KPIs measure how efficiently the sales process is driven from its early stage to the final decision. As opportunities are handled both with new and existing customers, it also makes sense to take this parameter into account in the evaluation of the sales efficiency.
The leading contributing functions to this capability are marketing and sales. A very traditional view of the world is that marketing is in charge of generating the leads and sales is in charge of driving the sales process to its end. A close look at the world of complex B2B sales shows that in best-of-class organisations, the reality is much different: marketing and sales are both involved during the whole sales cycle. In addition other functions, especially “technical experts”, whatever their exact title is, are involved and are key contributors to this capability.
The Account Management Capability
The Account Management Capability is a key component of a company’s business model and, in most cases, it is also the second marker of the quality of its sales force.
The Account Management Capability covers two aspects. First, it is about delivering the value promised during the sales process, in order to satisfy and retain customers. The ultimate KPIs for this part are customer satisfaction and retention. Other relevant KPIs might measure success in delivering projects and services. Second, as a marker of how good the sales force (or Customer Success team) is, Account Management is about growing revenue on the whole portfolio of existing customers. The main relevant KPIs are the amount of revenue and growth rate generated by customer and on the whole customer portfolio.
The Leading contributing functions to this capability vary depending on the nature of the business and how the vendor is organised. The sales team role is usually to analyse the whole customer portfolio, categorise and prioritise the accounts and drive the necessary commercial dialogue with each of them. Depending on the nature of the business, other functions can be in a leading, co-leading, or supporting role.
For example, in an increasing number of software or service companies, Customer Success teams are chartered to lead the customer engagement more than their sales colleagues ( a model in fact already used since decades in some companies). In a different environment, Agencies, whatever their service offering, are used to a model where Account Directors and their Account Team drive the customer engagement, not the sale team. In many industrial companies services are taking an increasing share of the value creation for customers. This puts the Service team at the core of Account Management. All in all what matters is that the whole organisation is well aligned and operates efficiently to satisfy, retain and grow customers. That is why Account Management must be handled as an element of the company’s business model and not only as a sales task.
The Key Account Management Capability
The authentic Key Account Management Capability is an optional strategic instrument used by companies to create more value for and with the most important customers. Properly used, it is a powerful instrument to accelerate the execution of the strategy.
A clear marker of authentic KAM is a deep involvement of many functions with key accounts: product development, services, logistics, legal, executives. That depth of engagement is possible only with a limited number of carefully selected customers. The relevant KPIs for authentic KAM depend on the exact scope of a KAM initiative. They almost always include a growth acceleration criteria as well as indicators focused on the implementation of the strategy and the pace of innovation.
Many organisations call KAM a practice to simply put more sales resources and efforts on the largest customers. In terms of required skills, processes and resources, this belongs more to plain Account Management with an intensity related to the customer size. Authentic KAM is a collective game that goes way beyond Account Management. It has higher ambitions and implies a more sophisticated cross-functional coordination and collaboration. That is the reason why authentic KAM has such a high transformational effect on an organisation as seasoned KAM/GAM practitioners know.
The Head of the KAM Programme and the Key/Global Account Managers are the leading contributors but many other functions are involved both in the delivery and commercial management aspects. Also, a true KAM initiative brings its full impact only if well understood and supported by the executive management team.
Why distinguishing these 3 capabilities matters so much?
Let’s go back to the two stories presented at the beginning of this article. In both cases, the companies wanted to push authentic KAM whereas the real issues were related to Complex Sales and Account Management.
The first company was losing far too many deals because of weaknesses in developing intimacy with the buying party during the long and very complex sales process. Then, it was not leveraging all business opportunities for additional projects on existing customer. The second company wanted to get closer to their largest customers and block competition but they were overpromising while selling and not delivering on the basics of the software industry (quality, reliability, quick resolution of problems, clear calendar of product evolution). As already stated, KAM was not the most appropriate instrument to solve these fundamental company-wide issues.
Coming back to a more global view, we can conclude that the 3 commercial capabilities Complex Sales, Account Management and Key Account Management are all relevant to acquire and keep customers and generate more revenue. However, their respective contributions are notably different as clearly demonstrated by their specific KPIs. Moreover, developing, maintaining and enhancing each of them requires very specific efforts. Confusion on these 3 areas leads to a partially or totally wrong evaluation of the situation leading to inappropriate decisions on improvement measures. Unfortunately, this happens very often. In most cases, impacted organisations do not even realise what is happening.
The 3 capabilities can be presented as a pyramid (download the one-pager with the graphic here)
- Complex Sales is the bottom of the pyramid.
- Account Management is the middle part of the pyramid
- Authentic Key Account Management is the top of the pyramid. It is an optional strategic instrument used selectively with the most important customers (not necessarily the largest).
Both Complex Sales and Account Management apply to all customers and are relevant to all vendors. KAM is a powerful instrument but not relevant in all cases as, sometime, a tweaking of Account Management for the largest accounts is more adapted. In addition, in complex, often technology-driven, environments, KAM tends to overlap with Partnerships & Alliances Management.
Conclusion for now and a Call to Action for company leaders
By exposing the 3 commercial capabilities related to customer management, we have set the frame for a series of future posts who will explore each of them in depth.
If you are leading Sales, Marketing or Strategy & Corporate Development, here is a suggestion for a small exercise.
Working on a large whiteboard, preferably as a team, separate the board in 3 zones, one for each of the capabilities. Then, for each zone, answer the following questions.
- How do you operate today? What are you doing to ensure the consistency and impact of activities?
- Which KPIs are you using? How well are you performing?
- Which functions are involved and how well do they act in a coordinated way?
- For the KAM zone: what does KAM truly means for you? Do you need Authentic KAM or is it more about managing the largest customers with no or little impact on other functions?
- What are your conclusions after this exercise and where are you going to act first?
Our future articles will explore each of the 3 capabilities in more depth and how to strengthen them. They will give you practical advice to put an end to the all too frequent confusions that endemically limit your sales performance and which most sales training and consulting approach fail at resolving because they don’t identify them.
If you want to discover how we approach the development of the 3 capabilities, take a close look at the KAM With Passion website and discover our service offering: Complex Sales & Sales Enablement, Account Managementt, and KAM/GAM To be informed of new posts, register to the Newsletter. And, if you have a Complex Sales & CRM, Sales Enablement or Key/Global Account Management project or need to improve something in one of these areas, get in touch!