Ten. Nine. Eight. Seven. Six. Five. Four. Three. Two. One. The all-too-familiar sound of the champagne popping signals the beginning of a new year.
It’s Wednesday, January 1, 2020. You have twenty-four hours left of vacation. Twenty-four hours left until you must worry about getting back into a normal rhythm. It seems like just yesterday that you were taking time off for the holiday season.
Pause. You’ll worry about that later. College football kicks off at 1:00 pm with the Outback Bowl and Citrus Bowl. Later in the evening, it’s the Maize and Blue in the Granddaddy of Them All, the Rose Bowl. Michigan looks to secure its first win in Pasadena in over 20 years. And then it’s the Sugar Bowl. Juggernauts from the Big 12 and SEC go head-to-head to help settle an age-old debate: Offense vs. Defense. The Air Raid (Big 12) vs. Staunch Defense (SEC).
Play. Once the clock reads 00:00, your thoughts shift to tomorrow morning. Waking up early. Getting to the gym before sunrise. Making the kids lunch. Hitting your revenue number. See, it doesn’t matter if you hit plan in 2019 (you did) or if you missed your number. 2020 is a new year. And with the new year is new expectations. A clean slate.
What are you doing to ensure your top accounts remain customers? How are you fending off competitors who are actively courting these customers, trying to get them to switch?
Enter Account Management.
What is Account Management?
Account Management is the process of building long-term relationships with your most valuable accounts. These accounts often make up most of the company’s revenue. In 2018, existing customers represented 68% of a company’s total income (Source: Kapta).
Account management can lead to increased costs and lower margins. This is inevitable when you provide additional sales resources to select accounts and offer better discounts. However, if executed properly, your organization will benefit from long-lasting strategic relationships—and greater sales volume.
Account Management enables rapid growth by pulling two of the three growth levers:
1) Retain Existing Customers
2) Upsell/Cross-Sell Existing Customers
3) New Logo Acquisition
Download the account management tool and answer a series of questions to determine if a change is needed to your account management process.
Why Account Management is Critical to Your Success
Creating new opportunities within existing key accounts helps organizations grow faster than the market and the competition.
Why are these accounts so important to growth? These accounts:
a) Represent a disproportionate amount of the company’s total revenue
b) Often refer new customers to your company
c) Provide your company more credibility in their respective space
Organizations strive for revenue diversification (e.g., 80% of revenue coming from 20% of customers) to mitigate churn risk. However, many organizations’ revenue is highly concentrated in a select number of customers. As revenue becomes more concentrated, it becomes vital to retain that business—or risk missing your number and the year-end bonus.
It’s why sales leaders everywhere often review their strategic accounts and say, “we can ill-afford to lose these.” The unfortunate reality is even the best ran organizations lose strategic accounts from time to time.
What are the Latest Trends in Account Management?
- Increased Revenue Concentration Across Existing Customers – Revenues from existing accounts are on track to increase in 2019 and 2020. This will further imbalance revenue from existing and new clients, making the KAM role more important.
- Relationships as a Competitive Differentiator – As the B2B space gets more crowded, companies need to further differentiate themselves from their peers. It is critical to understand the customer needs so you can provide value for their business.
- Use of Qualitative/Quantitative Data to Identify Key Accounts – Review the historical ratio of revenue to costs. Understand how much upsell opportunity exists within each account. Choose up to five criteria, including: product fit, solvency, existing relationships, etc.
- A Proactive Customer Success Motion– Customers are more likely to take their business elsewhere when you do not uphold your commitments post-sale. A proactive—not reactive—customer success motion ensures the business needs are met.
- Continued Belief that Customer Service Drives Growth – Nearly 9 in 10 account managers believe that exceptional customer service beyond expectations drives revenue growth. While customer service does increase the likelihood of customer retention, it has no meaningful impact on growth.
- Customer Improvement Activities is the Leading Driver of Growth – These activities show organizations how they can improve the business and the benefits of a commercial relationship. These activities have a positive impact on customer retention and growth in existing accounts.
Refer to “Reallocating CSM Time Can Dramatically Improve Customer Success Revenue” to better understand the role of the Customer Success function in driving growth.
What are Additional Benefits of Account Management?
Long-term clients tend to buy more. Across industries, each 1% increase in customer retention results in a 3x-5x increase in profits.
In addition to driving growth in your existing customer base and de-risking revenue concentration, Account Management helps:
a) Reduce churn
b) Generate leads for upsell & cross-sell opportunities
c) Improve long-term pricing
d) Increase renewals
e) Identify and decrease account risk
Refer to “A Best-Practices Account Management Process Will Drive In-Year Revenue Growth” by Andy Hastings to better understand how reducing churn can positively impact the customer lifetime value (CLTV).
Not long after stepping back into your office following the long break, you are given a number. This number is your expected performance over the next twelve months. And each year, it becomes increasingly more challenging to achieve that number.
Effective Account Management processes help organizations retain and grow existing accounts, positioning you for short and long-term success.
Download the Account Management tool to better understand the benefits and assess whether or not a refined account management process is right for your organization right now.