What is key account management (Part 1)?

Posted 27th May 2010 in Articles, Sales & Marketing | 1 comment

Hanno Wolfram Innov8 Once you search in Google for key account management the number of hits is about 197 million. Searching in Google for key account management plus pharma will give you about 550,000 hits. The vast majority of these hits are about congresses, conferences and books. Key account management nowadays appears not to be a lot more than a new buzzword in many cases, seen as successor or the saviour of the sales force. The number of articles around key account management is numerous and the understanding of it very diverse in different peoples minds depending on their background. The term and its understanding in pharma To understand the current situation around account management we must first look into a range of markets and pharmaceutical companies. It will show that in almost all countries the traditional sales model is moving towards, or at least enriched by, what is called key account management. In some cases it is simply re-labelling those medical representatives that have been kept on board and making them Key Account Managers (KAMs) who visit physicians in hospitals. In other cases it is about having a team of people from across the whole organisation trying to introduce the product, or a solution(!), in question to specific entities or organisations. We know that the term itself is understood in a wide variety of ways and even in the same organisation people do not have a very clear idea about what key account management is and what KAMs should do. To help explore this issue, we conducted a web-survey and asked respondents within pharma to define the term. The range of responses displays a vast collection of diverse views and very different interpretations! Please write a brief definition of what you understand of being an Account.

 An account is an individual or a group of individuals which take a common and unique decision for a specific issue. These individuals will have different profiles (both personal and professional) and might interact to reach an agreement. An account is a sales/business term to describe an established book of business. Typically, an account is synonymous with a specific client company, example: in pharma, a wholesaler could be an account, a specific hospital would be an account, a chain of pharmacies could be an account. An account is every institution/person which/who can contribute to your turnover and/or profit. Being an account means building a relationship between buyer and seller. An account is a client (or potential client), typically made up of multiple people determining the buying decision (a buying unit), each with different roles, needs, objectives, etc. (Potential) customer, group, KOL, etc. which (may) need my services, goods etc, or may prove benefit for the company in other ways (e.g. KOLs, networking). An account is a number of people, who mutually agree on the usage / purchase or introduction of a product or service within a business. An account is not a client, a prescriber, etc. that is an account is not a single person. Above all, an account has to be conceived of as an organization that is as a complex system consisting of decisions. So, an account is not a bigger client, it is something completely different. Account = customer who produces profit or has the potential to do. In fact that is the target company. In our business an account is a company (group of individuals). A decision making unit, which enables us to pursue our financial and strategic goals. Client or prospect that can generate, directly or indirectly, revenue for my business. Now, dont tell me that they all mean the same or at least something similar! Some might do so, but what about the rest?

Such a diversity of understanding is the key reason for lack of effective cooperation when it comes to key account management.

Such a diversity of understanding is the key reason for lack of effective cooperation when it comes to key account management. Try to ask this question in your company and find out yourself. These answers might enlighten you a bit as to why meetings tend to last so endlessly long, not really contributing an adequate return on time invested. However, being facetious about this might not really be an option, since significant numbers of irretrievable hours and huge amounts of money are invested on key account management. We therefore suggest defining an ACCOUNT as follows:

If we assume this to be an appropriate definition for an ACCOUNT, then the second word to look at is the word KEY. Most of our respondents were clear that key is about the most important accounts. What did not really show from their answers was how you would select the key ones from the rest. After you shared your definition of what an account is for you, please give a definition of what then is meant by key account. Think about how you define which of the accounts are key to you and why? Key accounts are those people of accounts, who are important for the successful marketing of my products. Persons with influence, power and the mood for my product. The one that brings the biggest outcome, in terms of ROI or anything else defined. Key defines important customers. Key account is identified by 3 parameters: potential, performance and buying preference. Key account is an account with a significantly high (higher) business potential. A key account is one where the influence of those customers within the account can have potential for greater influence on the market outcome for our products than in other accounts. Most important, relevant for my business 80:20, 20% of accounts make 80% of my sales.

 Key accounts would be those that generate the most revenue, that represent the best opportunity for growth, or that are currently non-revenue generating, but you are trying to break into their business and become a supplier. The entities that bring you stable and continuous growth. Key accounts are those held by customers who produce most profit for a company or have the potential to do so, or those who are of strategic importance. A key account is one that is particularly important to you for any number of reasons (revenue level, influence on other accounts, etc). Customer (group), which is operationally (sales, potential, etc.) or strategically important and thus worth a special way of working with (e.g. benefits, access to leadership team, helpline). Important customer, high potential and/or high sales. Generally, a client with significant contract value; might be also an opinion leader or strategic for a product. These are the most important accounts to reach the financial and strategic goals. For a key account projects usually are more complex and larger. The account managers expertise must put them in a position to negotiate with different experts on the same level. The 20% of the client base which brings in 80% of the revenue. Again, you can see that all the above answers do not provide a clear direction. The answers bring up new questions such as What is potential? or What does strategic importance mean? Is it all about growth, securing current revenue, getting an optimum launch trajectory; is it about the people in an account or the organisation itself? We must assume that one of the challenges in setting-up or improving key account management is about differentiating those truly important accounts from the rest who do or could deliver most value or carry the most unmet needs. Searching for those shows that their selection depends on what we want to achieve. It is about company strategy.

one of the challenges in setting-up or improving key account management is about differentiating those truly important accounts from the rest

Only after you have precisely defined objectives and strategy, can the selection procedure to differentiate key accounts from the total universe of accounts begin. You should run your key account targeting exercise only on available information and leave this work to business intelligence or external providers. The internal bias, especially in the field, can be assumed to never reveal a group of key accounts that match your objectives and strategy. Such a targeting process should be about facts and figures; individual assumptions should be avoided by all means. KEY therefore should be something which is calculated on the basis of economical rules and mathematics. Paretos 80:20 rule is one good indicator for this. So to summarise, we now have a definition for the first two words:

You may or may not agree with these definitions, so comments are welcome! However, in the second part of this article, we will explore what the role of the KAM is, bearing in mind the definitions proposed above.

What is key account management (Part 2)?

Posted 2nd June 2010 in Articles, Sales & Marketing | 6 comments

Hanno Wolfram Innov8 (Continued from What is key account management (Part 1)) In part 1 of this article, we explored the varying definitions of key accounts in the context of key account management. As an aggregate view, the following definitions were proposed:

If we find this acceptable there is still one more question open. What or whom is managed in key account management? Our web survey answers below show that there is yet more diversity of response to this critical question: A number of people work as Key Account Managers (KAMs). Your previous answers reveal what you understand as being a key account. Could you please state an idea of what or whom you believe your KAMs should manage? Product, project. KAMs should be highly skilled to manage a range of customers not just prescribers, they should be able to work with purchasing professionals, board level customers, CFOs, formulary groups and health economists. They should have a degree of autonomy that allows them to negotiate terms and conditions, resource investment, partnership projects etc without having to refer to management all the time. Mentoring of set customers with high revenue or potential. Attracting new customers with potential. People and structures (e.g. networks, hospitals, new provider structures, influencers). Access / recommendations for our brands to physicians and then patients. What: business; sales; Whom: decision influencers (makers) in the account. I believe they should manage the whole value chain policy makers, payers and prescribers. The KAM will have to manage different stakeholders depending on the where and when of the decision making process. For instance, it will be different if the product is to be approved, or to support the usage of a product in a hospital. KAMs should manage the relationship between key accounts and the company that they represent. The relationship is a broad word that should include not only sales generation, but

ongoing client service, troubleshooting, personal contact, problem solving and new business development. What: everything directly or indirectly linked with past present and future sales Whom : everyone involved with What. Key account management means the management of customers relationships that are most important to a company. Development of these customer relations and customer retention is important to business success. KAMs need to manage the relationships and influences in the buying unit in order to get a favourable outcome for their firm. KAMs identify and manage through appropriate investments of time and budget, the important people within each account. Paradox: they have to manage their communication with or to the account but communication/networks is/are per se not manageable (like a project is) but they can track degrees of investments (financially, time, others) and outcomes (responsivity, turnover etc.) but this demands a very elaborate understanding of communication processes and a lot of insight and, last but not least, working discipline. What: they key subjects of the contract, the client business needs, the business prospects and the personal relationship. Whom: depends on the contract subject. The KAM defines and manages the action plan to develop business. He/she consolidates opportunities, decides who is the best person to present to/speak with and manages global negotiations and client satisfaction. Financial decision makers. The team of the company that is available to serve the account. He/she is the central face to the customer. Imagine your role was to find people to work as a KAM. You would probably start by writing a job description, which would allow you to define what you expect to be done or achieved by this most valuable person. The next step might be to write a profile of required qualifications for your KAMs. If I had to start this, I could hardly refer to the majority of entries above. This might be owed to the fact that the word management might carry some mysteries by itself, but we shall not pursue that here and now. A major challenge will be answering whom these people can manage and not what should be managed. If you want to manage someone, he or she should be somewhat close to you: basically

this does not apply to people in an account. Nor do I believe that revenue and products can be managed either.

It can be a very wise decision not to assume KAMs as being omnipotent.

It can be a very wise decision not to assume KAMs as being omnipotent. Many senior managers have already discovered that key account management is not an incremental process of simply moving traditional reps from deciding physicians and sending them into hospitals! If you are ready to say farewell to the omnipotence of KAMs then you will soon see that people involved in key account decisions have very varied needs: medical, surgical, economical, regulatory, pharmacoeconomic, pharmacodynamic, pharmacological compatibility or legal if you want to close a contract on a tender. Trying to meet all these, you will need what you already have: back-up people inside your company. If you give full responsibility for the commercial results in an account to your companys living contact, the KAM, you will agree that his or her managerial task will be to manage those people who can assist, support and help him or her to become successful. These people are working somewhere in your own company and these people should be managed by a KAM. Making them members of the key account management team could have an intriguing side effect. Managing internal people across different departments is not an easy task at all! These subject matter experts live and work in different worlds as well. The smallest common denominator between a KAM and one of the internal team would be the sender of the regular pay cheque. It sounds like hard work for the KAM to manage such a team and it will require empathy, highly developed networking skills and being extremely good at building robust relations. But dont these aspects sound very similar? The KAM needs them with both the people in the account and with their internal colleagues as well. They would be my major issues for a profile of qualification. Above all a person being a KAM or wanting to become one must know in advance, that he or she cannot be omnipotent. If they try to do so they will fail, so perhaps modesty should be part of a KAM profile too? At this stage, we can attempt a definition for MANAGEMENT in this context:

Hopefully, the above might help us to identify what key account management is and how interesting and challenging the profession of a KAM is. Being a KAM is the first time in your professional life in the field when the capability of working in a team really matters. They should be or become passionate to identify requirements, wishes and needs within their target audience in an account, and do their very best in involving subject matter experts from within the own company, fully giving up working alone. Being blamed for missing outcomes or celebrating huge and lasting revenue increases by oneself is not really rewarding. Finally the content of the below table seems to look comprehensive:

One semantic and content detail still appears missing What do you call people within an account who are involved in this decision making process? Let us have a look back into the early ages of industrialisation, the times when departments were first set up, organisational structures were established and producing goods was a real effort involving more than the boss and few more people working around him in a geographical sense. When industry arose it was a threat to a whole company, not only for bribery reasons, if and when a singular person (remember: omnipotence!) ordered all those varied goods, materials and many other supplies. A very early step was to differentiate these purchasing people by their knowledge; making one responsible for the steel for production, another one responsible for machinery and so on.

Being a KAM is the first time in your professional life in the field when the capability of working in a team really matters.

Many battles were fought internally around whether this or that decision was right for cost reasons, quality, and applicability in production processes etc. Someone then had a great idea to solve such dilemmas: What about setting up a team, formed with subject matter experts who had to be involved in a decision making process? Such a unit would involve all those who carry responsibility, have them participate, and introduce the combined knowledge of a company in such most valuable decisions: The Decision Making Unit (DMU) or Buying Centre was born.

So what did we learn from the survey? To summarise: 1. There is an ACCOUNT, which can be an entity of many kinds, and of course it could be a hospital. 2. Someone with analytical skills identifies those accounts that carry the highest importance according to company objectives, strategy and relative to a portfolio of drugs or devices. These are KEY ACCOUNTS. 3. Finally you find or develop internal people who are able to leverage their various skills for clear insight into where their counterparts inside an account need assistance. This assistance comes from similarly competent counterparts from inside the providing company. Since only your people in the field know the demands of their contact persons, they will identify necessary skills and expertise inside your company, ask for assistance, create and manage a virtual team that supports them achieving the wanted results. If you have done this, well done, because you have established professional KEY ACCOUNT MANAGEMENT. 4. We know today that in organisations of many kinds decisions are hardly made by a singular person, but subject matter experts are appointed to participate with their individual expertise in any decision making process. We will call this the DECISION MAKING UNIT or BUYING CENTRE. All contact persons of your KAM within an account should be part of this DECISION MAKING UNIT. NB: In case of varying indications areas, drugs or products, there will be more than one DMU within a singular account. Working with key accounts, (remember, they are the entities most relevant for the future prosperity of your company!) is ambitious, needs very different skills, and only allows few mistakes. This is why you can find a synonym for key account management in the literature: Complex Selling.

The difference to a medical representative detailing to a lonely decision maker who should prefer your product when he prescribes a specific treatment to a patient therefore becomes much more simple:

So, we have found what I hope you will agree is a clear definition for key account management and described the role of the KAM. Now, implementing the operational change to effectively conduct key account