Companies and organizations at all levels, from self-employed individuals to global corporations, from private to public, need FS. Their needs vary widely, according to factors such as size, industry sector and style of management. Generally, the larger the organization, the more complex its needs. However, this does not mean that the principles of KAM apply only in dealing with very large organizations. It really depends on the current or potential significance of the customer to your business. A company that is very small for a global bank may be very large for an insurance broker! So, we start discussion of corporate KAM at a regional level.
Small to medium sector KAM
In every country, millions of small businesses have banking needs, but most are mini-businesses, mainly the self-employed. This is a very important sector but one best dealt with mainly by mass-market methods, which use and personalize aspects of KAM at low cost, rather than the more expensive and traditional forms of customized KAM. It may be useful to distinguish between those that are more like personal customers and those that have the potential to grow into tomorrow’s large accounts.
At the level of mid-size businesses, KAM starts to become relevant. For example, medium-size professional customers or group practices (such as solicitors, accountants, doctors, dentists) may be important for banks on a
What is a key account in financial services?
Defining key account management in FS
Table 2.1 Categories of KAM
Category Market Scope of KAM Examples of Product Needs Corporate Very wide: Enormous range Banking, sector: all types of of levels of KAM, insurance
general corporate from regional (property, people, companies and through to vehicles),
public sector national and reinsurance, organizations. global accounts. pension schemes,
investment.
Corporate Corporate Narrower – mainly Specialist sector: clients and at international investment investment other FS and national levels. services, capital
banking companies. raising, mergers
and acquisitions, risk management.
Intermediary Historically, A wide range of Insurance (life sector mainly FS levels including and general),
companies to joint ventures (such pensions, other FS as HBOS and investment companies, Sainsbury’s), products, though now partnerships mortgages, other players (such as Bristol & banking, savings.
have entered (eg West Bank
supermarkets, providing savings car dealers, products through telcos). Saga), tied agents
(an insurance company selling through a third party as sole supplier), multi-ties, and sales through networks of independent financial advisers (IFAs), agents and brokers.
regional basis. Here, a local supplier of FS may have the advantage of local business awareness and intimacy of contact. The supplier will need to demonstrate this with an understanding and empathetic approach and high responsiveness. However, the size of the business generated may limit the amount of tailoring of the service to the client’s needs. It may also be very demanding on the skills of the account manager, who may need to provide a range of services across different industries and professions and so will need broad knowledge. Smaller companies often need higher levels of servicing from their FS suppliers than the latter are prepared to give. This mainly relates to the relative size and profitability of the business generated by the company compared with the cost to the supplier of servicing it.
Large corporate sector KAM
Here, there is generally a different balance of power between client and supplier from that in the relationship with small to medium organizations.
Large corporations typically have complex needs, and suppliers compete aggressively for their business. For instance, corporate customers may have multiple banking relationships, traditionally using (in the UK) between 11 and 32 banks to service their business (Tyler and Stanley, 1999). Generally the larger the corporate customer the more banks it uses, though many companies are now reassessing this approach as they consider that fewer suppliers are easier to manage while retaining competition and choice. Usually suppliers are ranked in importance and it is important to win lead bank status in the ranking process, as this ensures the largest slice of the business (Holland, 1992).
The immense bargaining power of large organizations makes them very demanding customers, requiring tailored products at low prices and an in- depth understanding of their business. In addition they often have their own expert knowledge through their specialist financial functions. Hence they have a high degree of knowledge of the services offered by different banks and of their method of delivery. They expect excellent operational service quality and this perhaps explains their preference for managing multiple banking relationships (Tyler and Stanley, 1999). This puts great pressure on their suppliers to perform effectively, in providing routine services and also strategic support. The supplier must have in-depth knowledge of the client’s market, a wide range of product capabilities and good knowledge of regulations and laws. For clients dealing in imports and exports, the financial service supplier must offer additional services like export factoring, guarantees, indemnities, currency exchange, rate protection, knowledge of regulations and even local support in other coun- tries. In this sector, effective KAM is needed to manage the many opera- tional relationships between corporate client and supplier and to maximize the business development opportunities that arise from the relationship.
What is a key account in financial services?