Whilst law firms recognise the many benefits of developing client relationships, efforts are often ad-hoc, tactical in nature, inconsistent, and difficult to measure an ROI.
A dramatically changing business environment, with increasingly complex client relationships, has created an urgent need for greater understanding and a more strategic treatment of key clients.
And even firms where innovative client development initiatives are well planned and executed effectively, a true key account management (KAM) strategy is often not in place.
Below, we explain what key account management is and how you can implement an effective KAM strategy at your law firm.
What Is Key Account Management?
According to “Key Account Management: The Definitive Guide,” key account management is a strategic approach, separate and distinguishable from client development / account management, which should be used to ensure the long-term development and retention of strategic clients.
KAM is difficult to do well, often requiring 1 to 5 year plans, and should therefore only apply to a relatively small number of carefully selected clients where there is a mutually recognised “key supplier / client status” and a high degree of trust.
Key account managers themselves need gravitas, a broad portfolio of business management skills, a significant degree of control over the firm’s resources, and high level decision-making abilities.
5 Steps for Implementing Key Account Management at Your Law Firm
Step 1: Select Key Clients
Who are your key accounts and on what basis is this decided? For starters, take a look at each clients’ revenue, profitability, future potential, and brand strength.
Devising an objective-based selection criterion is a key step. Consider which clients are of the most value to your firm now and in the future based on factors including:
- Profitability of work (see Step 2)
- Annual fees
- Strength of clients brand (“referability”)
- Number of services currently bought
- Future growth potential
- Regularity / frequency of matters
- Type of business (owner managed, large LTD, PLC, etc.)
- Length of the relationship
- Client’s industry growth
- Our expertise in the client’s industry
- Relationship strength — at an individual and organisational level
Your KAM programme can be fatally flawed if you select too many, or the wrong clients to invest your time in. All key clients are not created equal and during this initial analysis you may find the clients you have traditionally seen as “key” are perhaps not as strategically important as you may have believed.
Step 2: Measure Profitability
You will have heard of the 80/20 Pareto principle—where 80% of your revenue comes from 20% of your clients.
Profit follows a similar route, with 80% of your profits coming from 20% of your clients.
However, less well-known is that for many businesses, not one of their top 25 clients in terms of revenue are also in their top 25 clients in terms of profitability. Reasons for this can be larger clients often demand better pricing and levels of service and generally take up more of your resources. Although it can be difficult to accurately calculate the profitability of a client, without such transparency, your selection of key clients may be poorly targeted and results difficult to measure.
Step 3: Understanding the Relationship Status Quo
Next, you need to ascertain what stage the relationship is currently at. Ask yourself:
- Where are we now?
- What is the depth and breadth of our relationship?
- Who do we know?
- Who knows who best?
- Who don’t we know and who should we know better?
Tools like Introhive have made this step far simpler by giving you accurate insight into your relationship strength with clients at an individual and organisational level.
Step 4: Categorising Key Clients
Once you have selected your key clients (and potential key clients) you must then categorise them by their potential to help you grow your firm’s revenue and profitability.
The book mentioned earlier, “Key Account Management: The Definitive Guide,” suggests there are four classifications of a key client:
Use these classifications to categorise your key accounts based on your objectives and the status of your relationship. Then, create a specific development strategy for each of those classifications.
Step 5: Plan, Plan and Plan
With your key accounts identified and organised, it’s time to create a formal key account plan for each of your selected clients. To outline your plan at its most basic level, ask:
- Where do we want to be? (Objectives)
- How do we get there? (Strategies and action plans)
- How will we know we are getting there? (Measurements, controls, and review process)
Know Your Customer
The first step to creating a KAM plan for each of your selected clients is to research and collect all available internal and external information. There are numerous areas to research which this blog cannot do justice, however, one key area is to fully understand your current level and scope of work with the client.
Calculating your current “share of purse” will help to identify the potential growth opportunity for each client. Crucial to understand is who within your firm knows who at the client, what relationship and business development type activities have happened in the recent past and are there any opportunities currently being worked on.
Analyse the Opportunity
The other half to creating your key account plan is to understand what’s at stake and what will influence your ability to reach your previously outlined objectives. To better understand the opportunity, you’ll need to answer the following questions:
- Who are your competitors?
- What have we tried before?
- What are our strengths and weaknesses?
- What are the opportunities and threats to this relationship?
- And, most importantly, what does the client think of us?
Once you have selected you Key Clients and verified these decisions with internal research and discussion, you must now include your clients in the discussion. Explain you would like to develop a deeper, more strategic relationship with them and outline the resources you are willing to commit. But they will need to buy in too before the plan can work.
Targeting the Right Accounts
Whilst this short blog only scratches the topic’s surface, I hope I have outlined how general client development activities and true KAM strategy are very different. Key account management is a high-profile area which should be of strategic importance to your firm.
How can Introhive help with client development initiatives and KAM strategies?
It has until recently been all but impossible to gain accurate insight into your firm’s relationship capital. And you can’t manage what you can’t measure.
Introhive has changed all of this. Introhive helps you to understand the nature of your client relationships in terms of size, shape, depth, breadth, and strength—at an individual and organisational level. We passively capture all contacts within your business and then score the relationship strength using over 30 touchpoints. Having rich relationship insight like this is key to developing clients and implementing an effective KAM strategy.
Request a demo with us to learn more.