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 PreKAM (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.