Question

In: Finance

Explain the strategies necessary for revenue account management.

Explain the strategies necessary for revenue account management.

Solutions

Expert Solution

Revenue Account Management isn’t an overly expensive Customer Success strategy. It’s a long-term revenue growth strategy that could end up more than doubling revenue key account spending, increasing the revenue exponentially without having to market to new customers. Instead of focusing all the efforts on finding new short-term customers, grow the revenue key accounts into strong long-term partnerships.When the key accounts grow, so will the top line and bottom line.

To unlock the future potential of most important existing clients, we need a great RAM (Revenue Account Management) / KAM (Key Account Management) strategy. In addition to the potential long-term benefits, an effective KAM strategy may help your company by:

1. Providing New Clients - It may sound counter-intuitive, but by focusing strongly on key accounts business may actually create new customers as well. Word-of-mouth advertising is one of the most effective forms of marketing, but it’s difficult to do unless we have clients that are highly satisfied with your service and keep returning to our company, such as your key accounts.

2. Creating a More Accurate Target Market - Part of RAM/KAM is learning everything we can about your key account customers. We can compile all your data on your key accounts and find out what they have in common. This may help your marketing department to make an accurate target customer profile so they can focus on finding and acquiring the type of customers your business really wants.

3. Keeping us Informed on Industry Trends - To be successful at RAM/KAM, we'll need to thoroughly understand what’s going on in our customers’ industries as well as our own. This will also assist us in forecasting for the future and help protect us from unexpected catastrophes.

How Key Account Management Affects Revenue

It’s easy to assume that the more clients we have, the more money our business will make. This is why business growth, marketing, and competitive sales strategies are critical to the success of many B2B companies today. But, adding additional clients is not the only way to improve our revenue stream, nor is it the most effective way in most cases.

Research has shown that retaining customers is not just cheaper than creating new ones, it’s also more profitable. RAM is the next step up from customer retention. Instead of simply keeping our key accounts connected to our company, we’ll be actively helping them to grow in their field. As their company grows, so will our revenues. This is because the strategic partnership created between us and that key account will expand as they have need for more of our services at a higher level.

By showing our key accounts that we are invested in their success, we will create a high level of trust in our relationship. This will lead to a more consistent and profitable customer relationship that allows us to sell more comfortably to each company. If we understand the needs of our key account fully, we will be able to tailor our products and services to fit those needs well.

According to Paul Farris’ book Marketing Metrics, businesses have a 60 – 70% chance of selling to existing customers versus a 5 – 20% chance of selling to new customers. While this is directed more at B2C companies, the concept is true also for B2B companies. The other relevant fact to know is that statistically, existing customers are likely to spend 67% more than new customers.

Key accounts already know the offer of a good product or service, which is why they’re such important customers. What KAM does is strengthens the trust even more by turning a normal customer retention relationship into a strategic partnership. By building this trust and showing our key accounts that we're invested in helping them grow their business, they will be more inclined to turn to business for solutions to their problems, which will expand their existing contract with us and create more revenue.

Long-Term Versus Short-Term Revenue Strategies

Every business needs to have long-term growth and revenue goals. Keeping a long-term focus makes it easier to be prepared for future success or challenges. With a long-term KAM strategy, your company will be more prepared to handle growth and expansion since you will see it coming ahead of time. If you focus on expanding your customer base with new customers, you may not be prepared to handle the rapid growth, leading to a poor long-term outlook for your company.

But, if you can’t survive in the short-term then long-term doesn’t matter. So, while RAM is a great way to grow your company’s revenues and plan for a stronger future, you need to combine it with an effective marketing and sales department to bring new clients into the mix for sustained revenues. New clients may also become new key accounts, giving your company an even stronger long-term KAM focus.

Revenue Account Management can be costly in the short-term, as you will use a lot more resources to create and maintain the strategic partnership. But, the benefits of retaining, growing, and expanding key accounts should outweigh these short-term costs by a substantial amount. If a key account partnership is not turning profitable after more than a year or two or has no potential to do so, you may need to re-evaluate your process for separating key accounts from regular customers.

Conclusion

Your revenue accounts already know you offer a good product or service, which is why they’re such important customers. What RAM/KAM does is strengthens the trust even more by turning a normal customer retention relationship into a strategic partnership. By building this trust and showing your key revenue accounts that you’re invested in helping them grow their business, they will be more inclined to turn to you for solutions to their problems, which will expand their existing contract with you and create more revenue.


Related Solutions

Explain management and care strategies for Alzheimer’s
Explain management and care strategies for Alzheimer’s
Describe revenue management and explain tools used by revenue managers.
Describe revenue management and explain tools used by revenue managers.
In active portfolio management, anomaly-based investment strategies are common. Identify and explain these strategies. Also explain...
In active portfolio management, anomaly-based investment strategies are common. Identify and explain these strategies. Also explain what would be the main factors that contribute to the high returns of these strategies.
In active portfolio management, anomaly-based investment strategies are common. Identify and explain these strategies. Also explain...
In active portfolio management, anomaly-based investment strategies are common. Identify and explain these strategies. Also explain what would be the main factors that contribute to the high returns of these strategies.
Identify and explain six sourcing strategies in supply chain management?
Identify and explain six sourcing strategies in supply chain management?
6) Unearned revenue is classified as a. an asset account. b.   a revenue account. c. a...
6) Unearned revenue is classified as a. an asset account. b.   a revenue account. c. a contra-revenue account. d.   a liability account. 7) Which of the following would not result in unearned revenue? a. Rent collected in advance from tenants b.   Services performed on account c. Sale of season tickets to football games d.   Sale of two-year magazine subscriptions 8) If an adjusting entry is not made for an accrued expense, a. expenses will be overstated. b.   liabilities will be...
Strategic Management 1. Company’s current strategies: describe the strategies and use supporting materials to explain what...
Strategic Management 1. Company’s current strategies: describe the strategies and use supporting materials to explain what the strategies are. Based on the evidence of the last 3-5 years of operations, discuss to see if the strategies were a good or bad fit. suggest improvements through enhancing the various strategies or introduce new changes of strategies to the company. each 20 marks
Explain how an airline’s inventory management system and revenue management system must be linked.
Explain how an airline’s inventory management system and revenue management system must be linked.
what are the Municipal solid waste management strategies?and industrial waste management strategies ?
what are the Municipal solid waste management strategies?and industrial waste management strategies ?
1. Which of the following statements is NOT true about the Revenue Management? a. Revenue management...
1. Which of the following statements is NOT true about the Revenue Management? a. Revenue management is based on setting and updating prices. b. Revenue management is originated in the airline industry. c. Through revenue management, the firms can allocate their capacity to different fare classes over time in order to maximize revenue. d. Revenue management focuses on shaping demand via controlling supply under the limited capacity. 2. According to the Littlewood’s Rule, which of the following does NOT generate...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT