Question

Identify one (1) potential corporate segment for the business/brand and describe how the five (5) Key Account Management stages might be implemented in this context.

Answer 1

Market Segmentation Definition

Market segmentation is the process of dividing prospective consumers into different groups depending on factors like demographics, behavior and various characteristics. Market segmentation helps companies better understand and market to specific groups of consumers that have similar interests, needs and habits.

In each market segment, there are typically three things that are common to all segments - homogeneity, distinctiveness and reaction.

In each individual group, the potential customers are generally homogeneous - meaning they are generally fairly similar in terms of their common needs. Additionally, the members of each individual grouping are distinct from the other groups - or, they are different in some ways than customers in other groupings. Lastly, consumers in each group have similar (or relatively similar) reactions to various marketing, advertising and products directed at their segment, and tend to perceive the full value of products differently than others in different groups.

Segmenting Customers Based on Customer Sophistication

As the name suggests, segmenting based on customer sophistication means dividing your target audience based on their product or industry acumen. Like other methods included in this post, segmenting by customer sophistication offers the opportunity to tailor your campaigns toward a lead’s specific needs. However, instead of splitting customers by their needs, firmographic information, or potential value to your business, customer sophistication looks exclusively at a target company’s awareness of the problem your product solves.

To use the cloud service provider example again, an unsophisticated lead may be one that still keeps hard copies of every document in filing cabinets. Or, it may be a brand new startup that has not encountered the massive storage complexity associated with running a tech company yet.

Alternatively, a sophisticated target customer may be one that already leverages cloud services, albeit through a major competitor of yours. In such an instance, the goal of your contact would not be to explain why companies need a cloud service provider because your sophisticated lead already knows that. The goal should be explaining how your services differ from the competitor they currently use.

As with the other methods, marketers risk making faulty assumptions about customer sophistication. A new startup may know very well they need a cloud service provider and might find your top-of-the-funnel product explanations tedious and, frankly, annoying. Likewise, a presumably sophisticated customer may be using a CSP currently, but without any real idea of what would happen if the service was stripped away completely

Meaning of Key Account Management

Key account management is the process of building long-term relationships with your company's most valuable accounts. These accounts make up the majority of the business' income. To turn buyers into business partners, a key account manager (KAM) typically provides dedicated resources, unique offers, and periodic meetings.

As professional services firm BTS points out, key account programs often lead to increased costs and lower margins. That's the inevitable outcome of giving a customer greater resources and often your best discounts.

But if you use the right key account strategy, you'll reap greater sales volume and long-lasting strategic relationships.

The Benefits of Key Account Management

Why should you start a key account management program? Key accounts are 60 to 70% likelier to close than new ones, plus spend 33% more on average.

According to the Harvard Business Review, customer satisfaction increases 20% within a few years of starting a key account management program. Profits and revenue, meanwhile, can increase by 15%.

And programs that have been around for five-plus years can see results twice that.

Key Account Management Strategies

Key account management is the process of building long-term relationships with your company's most valuable accounts. These accounts make up the majority of the business' income. To turn buyers into business partners, a key account manager (KAM) typically provides dedicated resources, unique offers, and periodic meetings.

As professional services firm BTS points out, key account programs often lead to increased costs and lower margins. That's the inevitable outcome of giving a customer greater resources and often your best discounts.

But if you use the right key account strategy, you'll reap greater sales volume and long-lasting strategic relationships.

KEY ACCOUNT MANAGEMENT STRATEGY

1. How transactional your current sales process is.

If your sales cycle is relatively short and your sales reps have minimal interactions with prospects, key account management probably isn't the right choice. Key accounts require consultative selling techniques — and it will be hard to teach your salespeople to adopt completely new processes for just a few clients.

2. If your product has upsell and cross-sell potential.

There's little point in continuing a relationship with the customer after the sale if they're not going to buy more. (Obviously, you still want to provide excellent customer service and support to promote word-of-mouth marketing and high retention rates.)

3. Your ability to 'land and expand'.

The above rule has an exception: If you can get your foot in the door of the prospect's company and then grow the account by selling to other departments, offices, subsidiaries, etc., a key account strategy may be a good investment.

4. The competitive landscape you're facing.

A key account program can serve as a competitive advantage. Imagine your customer has narrowed down their choice of vendor to you and one another company. If you can promise to make them a key account — and your competition can't do the same — you're likelier to win the deal.

5. Company capacity and resources.

Successful key account management depends on company-wide support, executive buy-in, and a dedicated key account team. You'll also need enough runway for an investment that might take 12, 24, or 36 months to recoup.