KEY ACCOUNT MANAGEMENTTHEORY, PRACTICES AND

CHALLENGES
Group-1, Sec.-B, PGP-2

IIM-INDORE

Introduction: The reading refers to the currently strategically important concept of Key Account
Management, which aims at building a portfolio of loyal key accounts by offering them with
services/products satisfying their individual needs on a continuous basis by the selling companies.
The strategic importance of the product supplied to the customer, customers receptivity towards the
partnership and skills of the supplier in building long term relationship with the customers are three
important factors which determine success of KAM. This concept is highly prevalent in B2B markets
and offers the critical benefits and opportunities for profit enhancement to both seller/buyer. This
reading depicts the increasing importance of KAM, prevalent practices and the challenges in KAM.
Theoretical Overview of KAM: The origin of KAM is attributed to the three major breakthroughs
in history. First came with the concept of Buying Centre or Decision Making Unit (team/collection of
individuals who participate in buyer decision making process) by Webster and Wind and were
focused on the composition/dynamics of the team and its forced consideration of political behaviour
and power distributions within buying organization. Second came in early 1980s by The Industrial
Marketing and Purchasing group, when they propose interactionist approach in which buyer/seller
relationship were analysed highlighting the interaction process, participants, environment and
atmosphere. The third major breakthrough came with open-system nature of organisations with
heavily drawn notions of negotiated environment, resource dependence and internal/external
stakeholders. Thus it lead to redefining of marketing as, building and sustaining customer and
infrastructure relationships, hence leading to define companys credibility based on the relationships
it enters into. KAM needs reliable diagnostic tools and performance measures to be developed for
strategic marketing fit. Customer portfolio analysis and grouping of customers in terms of
profitability are the major tools prominent in the KAM analysis. The framework that is used in
analysis (approached 20; 13 became part; 11 allowed access to their KAM) is the relational
developmental model and the account portfolio model given by Millman & Wilson and Fiocca
respectively. This analysis gave the 6 stage model of the buyer/seller relationship status based on
their current level of involvement with each other (either simple or complex) and the nature of
customer relationship (either transactional or collaborative), which are Pre-KAM (A scanning and
attraction stage where buying companies are identified and resources are focused on winning some
business), Early-KAM (Selling company is concerned with account penetration opportunity
identification and more focused on quality products, services and intangibles), Mid-KAM (With
established credibility, selling company is a preferred supplier to the buying company but is not the
only supplier and buying company have clear exit plan too. More emphasis on social integration than
product excellence), Partnership-KAM (At this stage, selling company is strategic external resource
for buying company with sharing of strategic information and engaging in joint problem resolution
with agreed profit making by both side. Selling companys innovation more preferred for quick

adoption.) and Synergetic-KAM (The ultimate stage where the dyads create values for each other
with a quasi-integration, thus leading to building of exit barriers and more transparent cost systems
as well as joint research and development programmes). The sixth and least preferred stage is
Uncoupling-KAM (the relation breaking stage mostly due to breach of trust especially by the
supplier side). Apart from the relationship, the quality of the products (either simple or complex) and
processes involved in delivery of these products (either simple or complex) is very important, with
Synergetic-KAM having high complexity in processes as well as products whereas transactional with
Simple process and product. The next step is to understand how well the customers demands (who
want to build long term relationship with the seller) are being met by the product. Here lies a big
challenge due to the less competitive seller present or impact of low prices on the buyers. Hence, we
use a matric which include both factors i.e. business strength and key account attractiveness.
Practices: The selling and identification factors of KAM are Volume and or potential volume (: well
recognized throughout the business), Potential for Profit and Status Related (adds more intangible
value to the company by being a partner to the seller). From the buying companys perspective the
supplier selection criteria used are Ease of doing business (installation of quality process), Quality of
products/services (the product must effectively work and offerings must recognize the current
demand in the market) and quality of people involved in KAM. The soft skills required by Key
Account Manager are Integrity towards the customer, Product/Service Knowledge, Communication
and advanced interpersonal skills are must for the buyers, Understanding buyers business and
environment to provide with desired services/products and selling/negotiation skills are very
important.
Challenges: The challenges faced by the KAM are as follows:
Global/Local Organizational Issues: On a global basis organizing vast scope and complexity of
partnership in order to maintain the consistency of services at world-wide standards. The mismatch
between the buyers and sellers due to the customers reluctance to be treated globally, a challenge
arises. Thus, it is an organizational challenge.
Process Excellence: To achieve synergy in dyad, business processes of the two must be integrated so
as to avoid flaws in order fulfilment, logistics, administration and streamlining paper work.
Development of Key Account Manager: Development of advanced interpersonal skills and
relationship management as well the extensive programmes for updating on the relevant changes in
market, business environment and commercial procedures and techniques to enhance the decision
making ability of the managers.
Development of Key Account Teams: Non-availability of formal/informal teams under KAM and
less authority of Key account managers is another challenge to KAM. Proper structure of the

reporting line under the Key account manager taking into consideration the need of buyer is highly
required.
Conclusion: Key Account Management has shifted from selling only to more sophisticated
value added approach.