Success Strategies in Channel
Management
Key Account Management in
Collaborative Relationship Building
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Stages in KAM
Uncoupling-KAM
Key Account
Management
Key Account Quiz
Inter-relational causes
of uncoupling:
Breach of Trust
Cultural Mismatch
Quality Problems
Analysing The
Potential For
Partnership/Synergy
External Causes of
Uncoupling:
Changing market positions
Financial problems
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Key Account Management
Key Account Management is a natural development of customer focus and
relationship marketing. It offers critical benefits and opportunities for
profit enhancement to both sellers and buyers.
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Customer Power
Customers know that they can demand
more of suppliers, because suppliers
know that they have to retain customers,
not just to maintain profitability, but to
stay in business. The nature of customer
power manifests itself in many ways.
Customers want bespoke, sophisticated
solutions, which means that to win them
is very costly and retaining them is
critical to achieving long-term
profitability.
The Evolution of Key Account
Relationships
There are stages of Key Account
Management that match transitions on the
continuum from transactional
relationships to collaborative
relationships. This is called the Key
Account Relational Development Model.
It is possible to assess the position of
supplier organisations at various stages
of key account development, analyse
managerial behaviour, and gain insights
into the changing profile of skills
necessary as relationships mature.
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Pre-KAM
No transactions exist, therefore proportion of business is zero.
Nevertheless, the buying organisation has been targeted,
therefore the supplier organisation is trying to establish
interaction.
Pre-KAM describes preparation for KAM, or 'prospecting'. A
buying organisation is identified as having key account
potential, and the supplier organisation starts to focus
resources on winning some business with that prospect.
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Early-KAM
The second stage is labelled EarlyKAM. The buying organisation wants
recognition that the value offering is
the prime reason for the relationship and expects it to work, so the supplier
organisation must concentrate on
getting it right, enough to convince
the buying decision makers that they
want more of the same. The buying
organisation will still be using the
value offers of other selling
organisations.
Some buying organisations are driven by
short-term demands for low prices,
particularly in difficult economic
circumstances, such as recessions.
The emphasis switches from product
excellence to social integration at the
Mid-KAM stage. Everyone in the
supplier organisation will be expected to
know the names of key accounts and
understand their importance to the
organisation, and the service that must be
given. The buying organisation will now
know the people in the wider key account
team as well, and some senior managers.
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Mid-KAM
Partnership-KAM
The supplier organisation is now a
preferred supplier, so the proportion
of business from the buying
organisation may exceed 50 per
cent. Interactions have become more
complex, and occur between many
members of staff in each
organisation.
At the Mid-KAM stage, the supplier
organisation has established
credibility with the buying
organisation, a degree of trust has
been established.
When Partnership-KAM is reached,
the supplier organisation is seen by
the buying organisation organization
as a strategic external resource. The
two organisations will be sharing
sensitive information, and engaging
in joint problem resolution. Pricing
will be long term and stable, perhaps
fixed, but it will have been
established that each side will allow
the other to make a profit!
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Synergistic-KAM
The supplier organisation
understands that it still has no
automatic right to the customer's
business. Nevertheless, exit barriers
have been built up. While the buying
organisation is confident that its
relationship with the supplier
organisation is delivering improved
quality and reduced costs, the exit
barriers are not likely to be tested.
Costing systems become transparent.
Joint research and development will
take place. There will be interfaces at
every level and function between the
organizations.
There will be a joint business plan, joint
strategies, joint market research.
Information flow should be streamlined,
and information systems integration will
be planned or in place. Transaction costs
will be reduced and time will be taken out
of work cycles. Billing will be bespoke to
that buying organisation.
There is widespread understanding in
the organisation that Key Account
Management is strategically right, and
the determination exists at the highest
level of the organisation to stick with it
for the long term.
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Synergistic-KAM
The organisation has a
comprehensive and meaningful
recipe which distinguishes key
accounts from non-key accounts, and
takes notice of the customer's need
for it as a supplier as well as vice
versa.
Key accounts have dedicated teams,
or at least there is a wide
understanding within the organisation
of who the key accounts are and how
they are to be treated.
Patience and persistence are highly
valued as well as dynamism, as
sometimes it takes years to develop
key accounts to synergistic levels.
High status is attributed to key
account managers, so that they have
the incentive to stay and thus develop
the account. Importance is also
attributed to what other professionals
achieve for key accounts.
These factors are discussed in more
detail in later sections.
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Uncoupling-KAM
Uncoupling-KAM describes relational breakdown. Breakdowns can occur at
any stage for a number of reasons. Many purchasing professionals might
expect a supplier organisation to sit down and discuss exit plans alongside
any contract to supply. Exit plans have certainly been common in
manufacturer/ retailer relationships. Even where exit plans are not formally
required, it would be prudent to develop contingency plans for UncouplingKAM, if only to reduce the likelihood of it happening.
Some supplier/customer relationships are ill conceived and others are affected
in a negative way by changes in the external environment and changes
internal to one or both organizations. Uncoupling-KAM is rarely caused by
price problems.
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Inter-relational Causes of Uncoupling
A change in key personnel
If relationships are not institutionalized, organization to organization, then the
so-called 'single point of contact' personal relationship between the key
account manager and his or her main contact will be all that holds the
business together. If either leaves, the buying organisation is presented with
an ideal switching point. Similarly, if the relationship between the two main
contacts deteriorates for any reason and action is not taken, switching can
occur which would be unlikely if there were links at many other points,
including board level.
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Breach of Trust
A breach of trust is the one thing which
has the potential to really kill a business
relationship, although the stronger the
relationship, the more forgiving it is
likely to be of genuine mistakes.
Buying organisations do not like shocks
from selling organisations. The best
approach for a supplier organisation
about to miss a deadline, delivery or any
other sort of routine obligation, is to let
the customer know in advance.
A breach of trust is often rooted in a lack
of communication.
Exhaustion/lack of persistence
Supplier organisations may lose
accounts through neglect. From time
to time, key account activity needs
revitalization. The longer a business
relationship continues, the more
difficult it is to sustain a high level of
attention to its progress.
Complacency and frustration can
creep in, and partnership becomes a
debased word.
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Cultural Mismatch
Some organisations have difficulty
relating to others of a different
culture. The main cultural mismatch
mentioned is price versus value. A
organisation who concentrates on
price deals might still be a key
account, but will be most likely to
change hands, and therefore likely to
have low status in the selling
organisation. Meanwhile a
organisation with modest market
share but interested in partnership
sourcing can increase its importance
to a selling organisation.
National and regional cultures can
create difficulties in doing business.
Organisations quite often struggle to
find people with the skills to deal
with differences across international
boundaries.
Another manifestation of cultural
mismatch is the fear of denigration
of brand values.
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Quality Problems
If a product fails to keep pace with competitors, or if the buying organisation
experiences performance problems, the relationship with the supplier
organisation may be terminated. Process excellence, and high quality
professional staff, are also expected from organisations espousing key
account management.
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External Causes of Uncoupling
Changing market positions
If a buying organisation suffers a
dramatic loss of market share, Key
Account Management benefits do not
seem so cost effective to the selling
organisation. Certainly, the buying
organisation that loses market share
will no longer enjoy access to the top
key account managers. They are very
status conscious about their
customers and would not want to stay
on an account whose market share
had shrunk.
Financial problems
Some account relationships falter or
are terminated when either party
experiences financial problems.
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Analysing The Potential For Partnership/Synergy
It is important for key account strategists in supplier
organisations to establish whether or not a relationship
between a supplier and customer can achieve higher
relationship levels, and therefore would be suitable for a
collaborative approach. An examination of the product/process
mix, and value chain considerations can be helpful.
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The value offer (product)/process mix
The potential for Synergistic-KAM largely depends on the correlation between
the complexity of the processes between the supplier organisation and
buying organisation, and the complexity of the product and technology the
supplier organisation is delivering.
If both product and process are complex, optimum mutual benefit, and benefit
for the end buying organisation, is obtained through some degree of vertical
integration. The needs of the buying organisation are constantly evolving,
and can be best fulfilled by a supplier with very detailed knowledge of the
context in which it operates. This explains why partnership and synergistic
relationships are usually observed in industrial and business-to-business
markets.
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Subjective Attitudes
In addition to the objective analyses that might be applied to assess potential
for partnership, subjective attitudes must obviously be considered when
supplier organisation strategists assess how much to invest in developing a
key account. Some buying organisations have very positive views about
partnerships with suppliers, some are avowedly adversarial and there are
many shades in-between.
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Key Account Quiz
How advanced is your key account practice?
How well do you know your key accounts?
Score out of 10:
Know their key customers/segments/value
offers?

Do you:
Know which of your competitors they use,
why and how they rate you? 
Know your organisation's proportion of
customer spend?

Know what they value/need from their
suppliers? 
Know their financial health (ratios, etc.)?
Know their strategic plan?

Allocate attributable (interface) costs to
accounts/customer groups?


Know their business process (logistics,
purchasing, manufacturing, etc.)? 
Know the real profitability of the top ten and
bottom ten accounts/ customer groups?

Know how long it takes to make a profit on a
major new customer? 
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