At a recent Proactive Marketing Executive course (see http://www.pmforum.co.uk/training/) we spent a fair amount of time talking about marketing/business development initiatives where the focus is on managing a few major clients – a Key Account Management KAM programme.
I was asked to summarise the key reasons why firms should concentrate resources on a major client or Key Account Management (KAM) programme:
- According to the Pareto principle, 80% of a business’ revenue and profits will come from 20% of its clients. It is therefore sensible to focus attention on these major clients – as part of a risk management strategy. Tailoring your service – through a KAM programme – to specific clients is often part of the firm’s differentiation strategy and can act to ‘lock in’ critical clients. It’s also worth considering that your competitors may be targeting your largest clients so it would be foolhardy to lose them through complacency.
- Research indicates that clients that use a variety of services are more profitable. It also indicates that it costs six to seven times more to generate work from a new client than an existing client. For example, in a recent book http://kimtasso.com/book-review-professional-services-marketing-handbook-edited-by-nigel-clark-with-charles-nixon/ Allen & Overy revealed “Client work involving five or more countries was 30% more profitable than single-country domestic work”. KAM is an effective way to improve cross-selling within a partnership.
- Major and loyal clients are often a major source of referrals for clients. It may be because they have a strong reputation or because the nature of the work you do for them is critical or innovative. If you expect a major client to devote time to providing testimonials and acting as a reference site, then it is only fair that they should receive some benefit from doing so. A KAM programme will help ensure that the balance is maintained.
- A firm’s systems are often inadequate at recording and managing the vast amount of information about a particular major client so someone needs to be tasked with collating and maintaining the information and sharing it with the relevant people so that appropriate and timely action is taken. While this blog focuses on key referrers, the principles apply for key clients http://kimtasso.com/referrer-and-intermediary-management-internal-information-systems/ Furthermore, some clients may have specific contracts or service level agreements with the firm and these will need to be monitored.
- A major client is likely to require a variety of services from numerous teams and offices in a firm. It is therefore important that someone holds responsibility for co-ordinating these services, assessing the satisfaction of the client (client listening initiatives are often integral to KAM programmes) and planning its future development. The role of Relationship Partner or Account Manager will require time that is not chargeable to the client but essential for the delivery of service. KAM programmes measure the investment and return of this time.
- Key clients move through stages with a provider – for example, from commodity provider, to service provider, to strategic partner to trusted adviser. As clients form partnerships with suppliers, there needs to be a greater focus on the relationship – to ensure that there is ongoing deep mutual understanding, to take proactive development steps and also to promote collaboration and even the co-creation of new services.
- Whilst synergistic KAM is currently rare in the professions, the most advanced programmes in industry have large dedicated teams of staff focused entirely on clients. These teams often have a deeper knowledge of the client’s business and market than many of the client’s own staff and it is from this position that they are able to provide insights to senior management and craft initiatives that add value to both the client and the service provider in a true strategic partnership. These KAM teams bid for and win major investment from their businesses and often lead the innovation and new product development initiatives of their businesses. The books below provide more information on this.
Growing your firm is like filling a bucket – if it is leaky and you continue to lose clients (especially big ones) it will take even more effort to generate more new clients to fill it. Some research indicates that a reduction in client churn by just 5% can lead to a profit improvement of 50%. Research also shows that a 10% increase in loyal clients can generate a 20% increase in profits. So a bird in the hand really is worth two in the bush! Client retention is affected by many factors including service delivery excellence, proactive added value services and pricing but KAM can be a critical way to retain and develop major clients.
However, introducing a KAM programme requires significant investment (mostly of fee-earner time) and long term structural and cultural change in a practice. And it can take a significant amount of time. However, the rewards are potentially huge. One law firm spent seven years implementing its KAM programme during which time the average annual fees for a client increased from £67,000 to £267,0000. In 2013, Freshfields reported significant success with a CRM with aspects of KAM http://kimtasso.com/crm-success-statistics-from-freshfields/
Other blogs on KAM:
How to establish a KAM http://kimtasso.com/faq/establish-key-account-management-kam-programme/
Books on KAM:
Please note that I run a public course on “Towards KAM: Helping fee-earners with client relationship management” http://www.pmforum.co.uk/training/index.aspx I also provide in-house training courses on both designing and implementing KAM programmes and to equip fee-earners with the necessary relationship management skills. I continue to provide consultancy support to various accountancy and law firms with their KAM programmes.