Journal of Marketing Mamgement, 1997, 13, 737-757

Malcolm McDonald\ Tony Millman and Beth Rogers^

'Cranfield School of Management, Cranfield University, Cranfield, Bedford MK43 OAL, and ^University of Buckingham, Buckingham MK18 lEG, and ^First Opinion, 18 Lancaster Avenue, Slough, Berks SL2 lAX

Key Account Management: Theory, Practice and Challenges

Key account management is a natural development of customerfocus and relationship majheting in husiness-to-huiinea markets. It offers critical benefits and opportunities for profit enhancement to both sides qf the seller/buyer dyad. This paper describes a framework for understanding the development of key account relationships. It has also incorporated a comprehensive guide to the current practice of key account management and comments on the challenges for the future of key account management practice. The paper is based on research involving in-depth interviews with key aaount managers, their managers and their main contacts in the customer organisation. The scope of key account management is widening and becoming more complex. The skills of professionals involved in it at strategic and operational leveb need to be constantly updated and developed. T?iiJ paper demonstrates how key aaount management can he implemented and points decision-makers in the right direction for better practice in the long term.

Introduction Key accounts are customers in a business-to-business market identified by selling companies as of strategic importance. Key account management (KAM) is an approach adopted by selling companies aimed at building a portfolio of loyal key accounts by offering them, on a continuing basis, a product/service package tailored to ttieir individual needs. Success depends partiy on the strategic importance to the customer of what is being supplied, and the degree of receptivity demonstrated by the customer to a partnership approach, as well as the skills of ttie supplier in meeting customer rveeds. To coordinate day-to-day interaction under the urnbrella of a long term relationship, selling companies typically form dedicated teams headed up by a "key account manager". Key account management is a rutural development of customer focus and relationship marketing in business-to-business markets. It offers critical benefits and opportunities for profit enhancement to both sides of the seller/buyer dyad. This paper describes a fi-amework for understanding the development of key account relationships. It also incorporates a comprehensive guide to the current practice of key account nutnagement, and comments on the challenges for the future of key account management practice. The paf>er is based on research involving in-depth interviews with key account managers, tfieir senior managers and their main contacts in tine customer organisation. The scope of tey account rruinagement is widening and becoming more complex. The skills of profrasicmals involved in it at strategic and operatiorwl levels need to be constantly updated and developed. This report demonstrates how key account 0267-257X/97/080737 + 21 $12,00/0 1997 The Dryden Press

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management can be implemented and points dedsion-n:\akers in the right direction for better practice in the long term.

The Origins of Key Account Management In order to trace the origins of key account management in the literature, it is necessary to analyse and synthesise contributions from several areas, such as: industrial marketing; organisational buyer behaviour; sales management; purchasing/supply management; industrial networks and relationship marketing. Much of the early literature cm industrial marketing and organisational buyer behaviour concentrated on managing the marketing mix and constructing rational fiow models, which described generic processes/procedures typicaUy found in industrial purchasing situations (e.g. Robinson et al. 1967; Webster and Wind 1972a; Sheth 1973.) The first major breakthrough, in the relational sense, came with the concept of the Buying Centre (Webster and Wind 1972b), which also became known as the Etecision Making Unit (DMU). Subsequently, a r\umber of researchers have studied structural and behavioural characteristics of DMUs in various product/market contexts (e.g. Grashof and Thomas 1976; Wind 1978; Johnston and Bonoma 1981; Hutt et al. 1985; McWilliams et al 1992). These studies focused largely on the composition/dynamics of the DMU and were valuable because they forced consideration of political behaviour and power distributions within buying organisations. More importantly, they encouraged sodal science thinking among managers who, hitherto, had been rather laggardly in their receptivity to "soft" methodologies. Writers on sales management eagerly incorporated the DMU into their expositions of the seUing process over the 1970s and 1980s. Unfortunately, sales management has tended to be labelled as a practical, non-academic subject; and many trainers specialising in selling/negotiation techniques have done the profession a disservice by putting the marketing/purchasing interface in adversarial mode. Thus, much of the literature is of the generic "how to do it" variety, with little theoretical/empirical underpinning and paying scant attention to context. Only one strand of literature on sales management may be singled out as having received rigorous treatment in a way that provides useful insights on the behaviour of key account managers. This normally appears in the guise of role corvflict/ ambiguity or the "psychological contrad" associated with individuals performing boundary spanning roles (Walker et al. 1975; Singh and Rhoads 1991; Singh 1993). Equally disappointing is the literature on purchasing/procurement/supply management. Despite valiant attempts to professionalise the purchasing function over many years, it is only recently that such areas as: supply chain management; total quality management; supplier development; electronic data interchange; logistics systems etc, have received the strategic consideration they deserve (Lyons et al 1990; Henderson 1990; Flood 1993; Gadde and Hakansson 1993; Lamming 1993). In short, the purchasing literature is weak on strategic aspects of both interand intra-organisatior\al relationships. Such literature as exists on key accovmt management reflects the malaise in industrial marketing, purchasing and sales management in general. Key accoimt

Key Account Management: Theory, Practice and Challenges management is typically dismissed in a few short paragraphs under "national account management" (e.g. Hutt and Speh 1985; Kotler 1991; Powers 1991), or is firmly stuck in the realms of key account selling and selling to major customers (Melkman 1979; Hanan 1982; Miller et al 1988; Rackham and Ruff 1991). While there is a pervasive belief that effective key account management leads to increased sales/ profitabihty and improved sales productivity, writers seldom move beyond stating the need for a dedicated sales force and defining the role of account managers (Shapiro and Wyman 1981; Coppett and Staples 1983; Barrett 1986). The source of most data on trends in key account management is the annual survey conducted by the US National Account Marketing Association (NAMA). Various ad hoc surveys have also been pubhshed by The National Conference Board, The Research Institute of America and The Bureau of Business Practices. As far as is known, no comparable surveys are available on companies outside the US. The second major breakthrough came in the early 1980s with the "interactionist" approach proposed by The Industrial Marketing and Purchasing (IMP) Group (Hakansson 1982). In essence, the IMP Group advocated simultaneous analysis of buyer/seller relationships their model highlighting the interaction process, participants, environment and atmosphere. Relationships were deemed to represent both a valuable resource and an investment: to increase economic and technological efficiency; to serve as an information channel; and to reduce uncertainty Subsequently, researchers have developed the IMP model and operationalised it in a variety of contexts (e.g. see TumbuU and Valla 1985; Hakansson 1987, 1989; Ford 1990). As the IMP interactionist network approach gathered momentum, they borrowed heavily from parallel developments in industrial networks and this has greatly enriched our understanding of social structures/relationships (see Thompson et al. 1991; Axelsson and Easton 1992; Forsgren and Johanson 1992; Grabher 1993; lacobucd 1996). Research in the increasingly popular interactionist and network traditions, though largely descriptive, has much to offer a study of relational aspects of key account management. Of particular interest is the early work on dyadic interaction (Bonama and Johnston 1978; Wilson 1978), social bonding (McCall 1966; Easton and Araujo 1986; Wilson and Mummalanei 1986), co-operation (Axelrod 1984; Hakansson 1987; Hakansson and Henders 1992) and models based on courtship/marriage (de Monthou 1975; Ford 1980; Dwyer et al. 1987; Pardo et al 1993; Millman and Wilson 1994, 1995). A third major breakthrough is now apparent in relationship marketing (e.g. Jackson 1985; Christopher et al 1991; McKenna 1992; Millman 1993; Payne 1995). This literature has its roots in the open-systems nature of organisations, drawing heavily on the notions of "negotiated environment" (Cyert and Mcirch 1963), "resource dependence" (Ffeffer and Salencik 1978) and internal/extemai "stakeholders" (Mitroff 1983; Freeman 1984). Christopher et al, for example, argue that "relationships outside the organisation depend on the quality of relationships within it", making the important point that strategic intent and shared internal vcilues become part of the produd/services offered. McKenna re-defines marketing as "building and sustaining customer and infrastructure relationships", going on to suggest that a company's credibility depends on the relationships it forms. Not surprisingly, thrae and oflier recent writers (e.g. Spekman and Johnston 1986;

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Gummesson 1987; Prazier et al. 1988; Webster 1992), have called for relationships to become the unit of analysis in future empirical research. And finally, for key account management systems to be successful, there is an urgent need to develop reliable diagnosfic tools and measures of performance that support strategic markefing decisions. Of th^e, the most promising involve customer portfolio analysis and attempts to discriminate amongst customers or groups of customers in terms of their profitability (Piocca 1982; Campbell and Cunningham 1983; Ward 1982; Yorke 1986; York and Droussiofis 1993). While the development of diagnostic/analytical tools was not the main focus of this study, it is recognised that defining/monitoring key accounts is an intrinsic part of the economic component of buyer/seller relationships. An attempt to establish fee current status of these tools therefore was considered benefidal in aiding the distillation of best-practice.

Research Approach
Objeaiues

The objectives of the resean were: To understand better the managerial processes underpinning effective key account management. To examine both supplier and customer perspwcfives on key account relafionships in selected industrial/commercial settings. To characterise the role of the key account manager and his/her training and development needs. To elidt an agenda for further research on key account management bestpractice. It can be seen from the stated objecfives that the first two address the wider contextual issues in which the third is embedded. The fourth objecfive recognises that empirical research on key account management is in its infancy and suggests the need for an eclecfic approach which requires careful consideration of the linkages between inter-p)ersonal and inter-organisational levels of analysis.

Methodolcigy

Common-sense observations tell us that relationships between bujfing and seUing companies evolve over time. This process typically exhibits two salient features: first, increasing involvement and complexity associated with a shift from "transactional" to "collaborafive" modes of exchange; and, secondly, the building of trust and commitment towards a shared future. Using the six-stage Key Account Reladonal Development model propKJsed by MiUman and Wilson (1994), it was possible to assess the position of selling companies at various stages of key account development, analyse managerial behaviour, and gain insights into the changing profile of skills necessary as

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reladonships mature. (A graphical representadon of the model is shown below. Figure 1.) Exploratory research and experience of working closely with Cranfield clients had reinforced our belief in selecting the buyer/seller dyad as the basic btdlding block through which to study interacdon. This allowed the relational development model to be operadonalised in a way that captured the dynamic nature of relationships, the situation in both buying and selling companies and the extent of prior experiential learning. Clearly, there are many opportunities for longitudinal and cross-secdonal research studies in the area of key account management. Tracking the adopdon of key account management systems by a small number of companies, as a process of internal adjustment and external change, for example, would be particularly useful. However, such in-depth research over an extended pieriod of dme was considered too narrow and of limited external validity for the purpose in hand. In contrast, a large cross-secdonal study of dyads, while gaining coverage, would be superficial and fail to surface some of the qualitadve factors affecting reladonal development. A more realisdc approach, within the time and resource constraints, was thought to be possible using a rolling, judgmenteil sample of 12 dyads representing a range of product/service contexts and stages of development. Given the sensidvity and corifidential nature of the research, it was but a short step to the consideradon of personal in-depth interviews as the main instrument for data collecdon. Target respondents in selling companies were key accoimt managers and managers of key account managers (referred to as KAM directors or KAM strategists), half of whom were sales or marketing directors and half of whom were genera] managers. In buying companies, target respondents were the key account memager's prime contact, most of whom were purchasing directors or managers.

Complex

'Synergistic-KAM

Level of involvemeat with customers

PartnersHp-KAM

Mid-KAM

Early-KAM Simple Pra-KAM transactional Nature of customer relationship coUaborative

Figure i. Kef account relational development

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Malcolm McDonald, Tony Millman and Beth Refers

The interviews were semi-structured and topic based. All sets of respondents were asked about the same topics: the selection of strategic partners in the supply chain, the success factors for tiiose relationships, measurement of the progress of those relationships, the role and skills required of a key account manager, the internal and external organisation of strategic supplier/customer relationships, and the challenges for the future of these relationships. Open questions were posed, rather than preventing checklists. The purpose of this was to elicit what was foremost in the respondent's mind on each topic. The researchers were able to note clusters of key words and concepts, and to analyse where consensus or contrasting attitudes could be discerned. One salient requirement in dyads was, of course, gaining access to both parties at the appropriate level. Overall, starting with selling companies, 20 were approached and 13 (65 f>ercent) agreed to take part in the study, 11 of whom were able also to facilitate access to a matching key account. This gave a total response rate of 55 percent. All interviews were conducted on the selling or buying company's premises and typically each lasted 2 hours. Each interview was designed to be issues based, so as to elicit key account management experience, to facilitate reconstruction (albeit crudely) of historical development, and to aid distillation of best-practice. Given the nature of the sample size and resource constraints, this research is at best exploratory. The findings are indications of the state of the art in key account management, and there is already much potential for bigger longitudinal and crosssectional studies. Theory The theoretical frameworks that were found to be useful in analysing relationships/ potential relationships in seller/buyer dyads were the relational development model (Millman and Wilson) and the account porffolio matrix (Fiocca), A product/process matrix was developed as a preliminary step before using the latter.
Relevance of the Stages of the Relatiortal Development Model

Key accoimt management is a strategic, long term activity. From identifying the attractiveness of an account to achieving the full potential of the relationship with that organisation could have a 10 year span. It was obvious from the research that in selling companies with a long history of key account management, or in those associated with innovation in key account rrumagerrwnt, account plans are prepared with the rigour required for marketing plans, using a similar framework, and adopting a minimum 3-5 year outlook. It was clear from the very first interview that selling companies practising key account management do consciously plan to move key accounts from prospects towards higher relationship levels. This finding supported ttie proposal from Millman and Wilson (1994) that there are stages of key account management that match transitions on the continuum from transactional relationships to collaborative relationships. This is called the Relational Development Model, which is summarised in Figure 1.

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743

It also became clear, however, that whilst collaborative relationships are sought, some targeted key accounts are not willing to enter into such relationships and thus remain at the transactional stage. This, in itself, seemed to confirm the validity of the Relational Development Model. There was no other evidence to suggest that the Millman and Wilson model was not a reasonable representation of the range of possible relationships over time, even though some may not progress to the desired stage (see Figure 1). This model demonstrates the typical progression of a relationship between buyer and seUer through five stages Pre-KAM, Early-KAM, Mid-KAM, PartnershipRAM and Synergistic-KAM. A sixth stage, Uncoupling-KAM, can occur at any time in the relational development process. The operationalisation of the model can be achieved partly through an analysis of the volume of business between the supplier and customer and partly through the observed working relationships between the two companies. Where no transactiorw exist, but a buying company has been targeted, the relationship is at the Pre-KAM stage. Where transactions have been established, but the supplier is still one of many, the relationship is at the Ecirly-KAM stage. Where a supplier has achieved a najority share of the buying company's purchases for their product/service, and the buying company contact is expressing a preference for them, the Mid-KAM stage has been achieved. The Partnership-KAM stage assumes either a single sourdng relationship or something very close, with the existence of a partnership perfonnance index, or something similar. The Synergistic-KAM stage is characterised by single sourdng together with cross-boundary process delivery. Pre-KAM describes preparation for KAM. A buying company is identified as having key account potential, and the selling company starts to focus resources on winning some business with that prosped. (More Information about the identification of prospective key accounts is described later in this paper.) The Pre-KAM stage could be described as a "scanning and attraction" stage. Both seUer and buyer are sending out signals (factual information) and exchanging messages (interactions) prior to the decision to engage in transactions. The second stage is labelled Early-KAM. At this stage, the seUing company is concerned with identifying the opportunities for account penetration once the account has been won. Bespoke solutions are needed, and the key accoimt manager will be focused on understanding more about his/her customer and the market in which that customer is competing. The buying company wUI stiU be market testing other seUing companies, and expecting a demonstration of value for m^oney. The selling company must concentrate hard on product, service and intangibles the buying company wants recognition that the product offering is the prime reason for the relationship and expects it to work. At the Mid-KAM stage, the selling company has established credibility with the buying company. Contacts between the two organisations increase at aU levels and assume greater importance. Nevertheless, buying companies stiU feel the need for alternative sources of supply. This may be driven by their own customers' desire for choice. The selling company's offering is still periodicaUy market tested, but is reliably perceived to be good value. The seUing company is now a "preferred" supplier. There will be assumed longevity, even if individual contracts are renewed armuaUy. There may still be dear exit plans as well!

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Malcolm McDonald, Tony MUbnan and Beth Rogers

The emphasis switches from product excellence to social integration at the MidKAM stage. Everyone in the selling company will be expected to know the names of key accounts and understand their imprortance to the company and the service that must be given. The buying company will now know the people in the wider key account team as well, and some senior managers. When Partnership-KAM is reached, the selling company is seen by the buying company organisation as a strategic extemai resource. The two comp>anies will be sharing sensitive information and engaging in joint problem resolution. Pricing wiU be long term and stable, perhaps fixed, but it will have been established that each side will allow the other to make a profit! Key accounts will "beta test" all the selling company's innovations so that they have first access to, and first benefit from, the latest technology. The buying company wiU exped to be guaranteed continuity of supply and access to the best material. Expertise will be shared. The buying company will also exped to gain from continuous improvement There may be joint promotions, where appropriate. The partnership agreement will be long term; at kast 3 or 5 years. (Dne buying company daimed that, in practice, they put no time limit on their partnership agreements. Several categories of perfonnance are itemised in partnership agreements (up to 40 within our sample), and the selling company will be trying for 100 percent on every measure. Can there be any greater pinnade? We gained access to companies who were even doser. Synergistic-KAM is the ultimate stage in the relational development model. Synergistic-KAM refers to selling company and buying company together, creating value in the marketplace, i.e. quasi-integration The selling company understands ttiat they still have no automatic right to the customer's business. Nevertheless, exit barriers have been built up. Whilst the buying company is confident that their relationship with the selling company 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 organisations. Top management commitment will be fulfilled through joint board meetings and reviews. TTiere 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 company. There is a sixth stage in the relational development model tiiat demands key account strategists' attention. UncoupUng-KAM, describes relational breakdown and emphasises the need for contingency plans. Breakdowns can occur at any stage for a number of reasons, but the reason ftiat occurred most frequently in examples given by resp)ondents was a breach of trust. Buying companies, in particular, feel vulnerable, and place a very higji importance on the integrity of suppliers, a fador that will be revisited later in this paper.
Analysing the Potential for a Collaborative Approach the Product/Process Matrix

In assessing whether or not a relationship between a supplier and customer can achieve higher relationship levels and, tiwrefore, would be stutable for a

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745

collaborative approach, an examinafion of the product/process mix is indicafive. This step is worth taking before an account-specific analysis (see Pigure 2). The potenfial for Synergisfic-KAM largely dep)ends on the correlation between the complexity of ttie processes between selling company and buying company; and tiie complexity of the produd and technology the selling company is delivering. If both product and p>rocess are complex, optimum mutual benefit, and benefit for the end buying company, is obtained through some degree of verfical integration. This explains why partnership and synergistic relafionships are usually ol^erved in industrial and business-to-business markets. If both product and process are simple, it is more likely that relationships will remain "transacfional" and not move beyond the Early-KAM stage. This partially explains why relafionships between some manufacturers of consumer goods and some retailers are tradifionally adversarial.
Account Portfolio Atuilysis

The next step is to consider the charadedsfics of the prospect/customer, and how well their expiedafions can be addressed by the seUing company. Some managers in bu)Tng companies, whose strategy was to develop long term relafionships with preferred suppliers, commented on the lack of choice available to them. One remarked: "Some suppliers just can't meet the long-term challenge". Another said that he and his colleagues in purchasing felt that they were guiding some suppliers, doing the work for them and wasting time in the process. However, just as buying companies bemoaned the lack of selling companies who could meet the long term challenge, selling companies who aspired to be
KEY ACCOUNT PROCESS Complex Simple Examples 1. ffechnical consultancy 2. Pharmaceuticals Complex Examples 1. Highly complex one-off manufactured goods 2. Bespoke information systems

PRODUCT

Examples 1. Commodity electronics 2. Fast moving coiuumer goods

Examples 1. Customised financial servioes 2. Logistics

Simple Figure 2. The product/process matrix

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Malcolm McDonald, Tony Millman and Beth Rogers

partnership suppliers felt that there was a significant niunber of buying companies who were driven by short term demand for low prices rather than looking for the value that shared bt-practice can debver. The diagnosdc tool that can be used to support prospecting and account development decisions is the account f>ortfolio matrix, first identified by Fiocca (1982). It bears similarities to the GE/McKinsey matrix and Directional Policy matrix (see Figure 3). Selling com^panies tend to define buying companies as more or less attracdve to them depending on volume, growth potential, and market or technical leadership. Attractiveness factors often concentrate on these items alone. The reladve attractiveness of the prospect/customer's patterns of buying behaviour, the complexity of their requirements, their reladve power and compeddve posidon, and their skills levels may also be incorporated in an attracdveness index. A selling company may judge its business strengths by researching its performance against customer requirements. This is usually achieved in close seller/buyer dyads through a partnership performance index. Product quality and people quality is often taken for granted by the customer, and such indices will often concentrate on process excellence (reducing "hassle factors" for the customer). Practice Our research clarified three major aspects of current pracdce the factors used by selling companies in selecting and idendfying key accounts, the selecdon criteria used by buying companies in selecting preferred and partnership suppliers and the views of both on the skills required in the key account manager.

Business Strengths High High

Low

Key Account Attractiveness

Low

Figure 3. Account portfolio matrix

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747

The Selling Company's Perspective Selection of, and Definition of Aaounts as "Key"

Volume related factors. The Pareto 80/20 rule prevails, especially as selling companies set up their key account strategy. Volume was often described by key account strategists as the overriding factor in key account selection. Volume meant that the account would be well-recognised throughout the business. Even companies with 6 to 10 criteria for key account selection suggested that if the largest buying companies did not qualify, for example, on "interest in added value", they would stiU be key. Besides examining the volume of business coming through key accounts at any one point in time, most selling company strategists also examine the potential volume. One explained that selling companies who concentrate too hard on existing volume, miss out on new starts. Achieving an early entry into future market leaders was considered a very important aspect of key account strategy. Growing sectors attract more strategic attention than those stagnating or in decline. Potential for profit. One reason for the domination of volume related factors in key account selection criteria is that they are easy to measure. Selling companies also aspire to measure potential for profit, but find it more difficult. Underlying all criteria for key account selection is the expectation of improving profit. However, few companies have developed systems capable of enabling accurate allocation of costs to facilitate customer profitability analysis. Status related. Aside from quantifiable attractiveness, companies also coraider intangible attractiveness factors. Whilst price-oriented buying companies might still have characteristics qualifying them as key accounts, a relational approach is better suited to buying companies who are results-focused and interested in working with suppliers to achieve higher mutual value, A partnership approach is not a prerequisite for an account to be key to a sailing company, but it certainly seals its "key" status if it is in place. If it is not perceived to be in place, the potential for "key" status is reduced. Some selling companies stated that they were likely to target national, multinational or "blue chip" companies as key accounts. Status factors were cited, as well as volume, as reasons for this. They felt that their credibility as a supplier was enhanced by having well-known companies as customers. The prestige associated with a particular buying company can be critical to the selling company's motivation to win their business, because as a reference account, they can deliver a great deal more business indirectly. Whilst a selling company's strategy may be driven by their own criteria, in terms of assessing its own capability to win and keep attractive accounts, the selling company has to understand the perspective of the buying company.

77ie Buying Company's Perspeaive Selecting Preferred or Partnership Suppliers

Ease of doing business. If there is one supplier strategy that can move a supplier/ customer relatiorhip into partnership, it K to install quality processes that will make it easier for customers to do business with the company. Purchasing decision-

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Malcolm McDonald, Tony Millman and Beth Rogers

makers hold suppliers who make it easy to do business with them in very high regard. As one purchasing maitager put it, you have to take into account "aggravation levels". If selling companies waste time by causing pricing or invoice queries, short deliveries, and so on, then buying companies wiU puU away from them. Another said ftiat he did not constantly want to be chasing seUing companies. He expeded to give them the problem and feel assured that they would come back with an answer. Noticeably, few selling company respondents volunteered the existence of problems in processes, but one culturaUy bureaucratic selling company had worked very hard to unknot process problems at every interface with each key account. Nevertheless, it was suggested by many buying company respondents that once processes are right, the selling company is established with them. A purchasing manager said that if he wanted som^ething new he would always try and source it from an existing supplier who was already delivering in the way required. Quality (product/service). An attractive produd/service offer is a prerequisite for any relationship between a buyer and seUer. The product/service offer must consistently and continually meet the business criteria of the buying company and ultimately add value to the buying company's customers. In some cases, a strong brand name is desirable. Key account management is only valuable to some buying companies in that it should be a vehicle for improving their quality standards further. Needless to say, buying companies commented that longevity of business was assured if the selling company's produd was well-established. One said that at the end of the day the main thing was that "the stuff works". Another buying com.pany had been in ttie position of having to "turn a supplier off" because, although they did everything else right, the functionality of their products had failed to keep pace with market demands. Quality (people factors). The personality of key selling company contacts as well as their skills are important, although buying companies do look for helpfulness across the selling company organisation. Honesty, integrity and above aU "a spirit of understanding" are appredated. These factors are explored fully in the next section.

Skills Required in the Key Account Manager "Boundary Spanning" Setting and Buying Company Requirements

A key account manager needs far more skUls than a sales person. In fad, it is misleading to consider it as merely an extension of a sales career. Certainly, at Partnership-KAM and Synergistic-KAM stages, this is a management role requiring keenly developed management skills. Top key account managers manage across company boundaries, functional disdplines and different cultures. They command high levels of authority and status in both their own company and the customer's organisation. It is not unheard of for the remureration of top key accoimt managers to exceed that of Board members.

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KAM directors, key account managers and buying company contacts were all asked what skills were involved in the role. The following topics attracted the most dtations among respondents: Integrity. A majority of buying company contacts interviewed emphasised the importance of being able to trust the key account manager as an individual, as well as expecting selling companies to demorwtrate corporate integrity. The importance of integrity to customers is either overlooked or taken for granted by selling companies, but buying companies illustrated by examples how much they valued the conscious effort of suppliers to be trustworthy. Product/service knowledge. Most buying companies expressed the view that it was very important for the key account manager to be able to handle technical questions and they also expeded a detailed understanding of how the product or service could be applied. These fundamentals cannot be overlooked. Communications. KAM diredors, key account managers and buying company contacts acknowledged the importance of verbal fluency, presentation skills and exercising influence in meetings. Some also discussed the communications that have to be initiated within the selling company organisation in order to get things done for customers. In short, advanced interpersonal skills, were considered a "must". Buying company contacts also talked about "likeability". Issues of personal "chenustry" or "fit" were frequently raised. Understanding the buying company's business and business environment. It would be difficult for a key account manager to be successful without a thorough understanding of the buying company's business. However, one KAM director conunented that it was a relatively new requirement. A buying company contact suggested that due to downsizing, buying companies now depend more on the suppliere' contribution. Knowledge of the industry in which the buying company operates is also required. Bujong companies want the key account manager to know as much about the political, economic, sodal and technological factors affecting their business as they know themselves. Selling/negotiating skills. All interviewees said that selling took up a small proportion of a key account manager's time many suggested that it was as little as 10 percent of the key account manager's activity in a mature seUer/buyer relationship. Buying company contacts showed little interest in the key account manager's selling skills and were inclined to expect key account management to be somewhat more sophisticated. In contrast, key account managers were well aware that they were paid for getting orders ind said that a key account manager who forgets about selling is heading for trouble. Selling and negotiating were also highly valued by KAM directors. One general manager in charge of key account managers said that they have to imderstand that tiieir job is about making money and believed that those who fail as key account managers, whilst they might appreciate the money-making role philosophically, could not invest in it emotionally.

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MtUcolm McDonaU, Totfy MiUman and Bedt Rogers

Chailenges The biggest challenges described by selling companies involved in the Cranfield research were the global/local organisational issues of key account management, process excellence, the development of key account managers and the development of key account teams.

Clobal/tocal Otganisational Issues

Key account management was discussed in most dyads principally in the context of the UK market, even between some multinational subsidiaries in the UK, although in four of the dyads studied, elements of globalisation were evident. There are many advantages to the selling company and buying company who can deal with each other on a global basis, such as consistency in world-wide standards of service and economies of scale. The challenge facing them is how to organise the vast scop>e and complexity of this type of partnership. Progress towards globalisafion has to be taken a step at a time. The most frequently observed model of irutial globctlisafion observed in the Cranfield research was as follows: the selling company's head office defines its global capabiUfies, but the global framework for each key account is negotiated in the buying company's "home" country. Agreements within that framework, but tailored for local condifions, are managed in each geographic market (see Figure 4). This model is clearly a convenient first step from mulfi-nafional to global organisafion to meet the needs of key accounts. There are further steps, although selling companies are only too aware that purer models of global key account management present considerable management challenges (see Pigure 5). In this mddel, local account managers for a buying company cure directly responsible to the global account manager for that buying company. Local account managers have only dotted Une resp>onsibility to local management. This model was being considered in one of the dyads in the study, and has been implemented by some leading global companies in service sectors. Neither of ttese models have parficular relevance if the customer does not want to be dealt with on a global basis. In this resped, it is advisable to map customer
Seiling company SA (Spain) Worldwide HQ

Local Une management (USA)

Local line management (AustraUa)

GLOBAL FEAMEWOKK

Buying coPty (Australia) Worldwide HQ

Local key account manager (USA)

LOCAL IMPLEMENTATION Local DMU (USA)

Figure 4. GloM key account management, initiation moid

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needs to the selling company's organisational capabilides, as illustrated in Figure 6. If both seller and buyer are organised for global business, there will be potential for achieving synergy. If botih buyer and seller prefer local or category selling, their organisadons are ako likely to be designed to match each other. However, where mismatches occur, it is much more difficult for seller and buyer to achieve partnership. Selling Co Inc (USA) Board of Directors Buying Co PLC CUK) Board of Directors

Local management

Global Key Account Manager

GtXIBAL FRAMEWORK

Etc. Local account manager (Singapore) Local account manager (Holland)

Local account managers are responsible for local implementation. They have line responsibility to the Global Key Account Manager for the buying company.

Fig S. Global key account management line rtspo/isibility oriented to key accounts

Group buy (local delivery) Group sell (local delivery) Matcb

Local/catagory buying

Mismatch

SELLER

Mismatch Local/ ategCHy selling

Match

Figure 6. Organisational fit to meet buying company requirements: global/local matrix

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Global key accoimt management is above all an organisational challenge, A steering committee appears to be desirable at Board level, together with a key account team, and functional teams to troubleshoot implementation. There could be up to 100 people devoted to one buying company. Above all, global key account management requires close attention to co-ordiriation, and sensitivity to the trade-off between global integration and local flexibility (see Millman, 1996),

Process Excellertce A key factor in achieving synergy in seller/buyer relationships is the degree to which the business processes of the two companies can be integrated. Many seller/ buyer relationships, even where there is a key account manager, are marred by disputes about inaccurate order fulfilment, invoices and other flaws in logistics and administration. It is where companies have worked together to resolve "hassle factors" that loyalty has built up to a degree that means the relationship might be expected to be long term. One dyad in this study had eight joint project teams working continuously to improve aspects of the partnership. Processes between the two companies have been mapped, and the teams have identified areas where costs can be reduced or quality improvements made. Paperwork has been streamlined, which has eliminated time wasted in invoice and docket reconciliation. Teams initially judged their success on reducing time in operations and improving accuracy and financial performance. They have now moved on to aspects of quality such as cleanliness and stock tracking. Together, selling company and buying company appear to have been able to tackle higher risk activities more successfully than before.

Development of Key Account Managers

KAM strategists commented that it was difficult to design appropriate and sufficiently extensive training and development for key account managers. Key account managers themselves, even the very experienced, are eager for more. Updates are always required on topics such as commercial awareness, interpreting business performance, advanced marketing techniques, building business cases and following specific trends in key accounts' business sectors. Guides to account planning and commercial procedures, and techniques for measuring project profitability are popular. Courses to teach advanced interpersonal skills and develop relationship management are also generating interest Development is also relevant to flie period before a key account manager is appointed. People changes were described by all types of interviewee as "bad news". Key account managers do have to change from time to time and it can be managed in such a way as to be smooth and gradual. The new person must be given the time to glean tarvowledge and know-how from vvfhich they derive their credibility.

Key Account Management: Theory, Practice and Challenges A critical element of key account manager development is decision-making. The indications of the research were that many selling companies have some way to go in meeting buying company expectations in terms of the authority of their key accoimt manager. Buying company contacts exped the key account manager to be able to get things done "nothing less". They ttiought that key account managers should have more resources at their disposal, whilst KAM directors defended the key account manager's need to negotiate for resources for the buying company within the organisation. An indication of authority is the key account manager's reporting line. In 6 out of 13 selling companies in the study, key account managers were part of a sales or marketing department reporting to General Management. In 5 out of 13 cases the key account managers reported diredly to the General Manager. In one case this was the General Manager of a separate key accounts division. In another, the General Manager insisted that no one would come between him and the key account managers. UsuaUy, if the General Manager had key account managers reporting to him or her, brand managers and planners would report directly into General Management as well.

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Development of Key Aaount Teams

In many seUing companies, key account managers do not have fonnal or informal teams, but are expected to have influence in getting things done for their customer. Indeed, the traditional company organisation, where account managers have no other leverage over coUeagues other than escalation, is often not considered by buying companies to be appropriate to meeting their needs. They expect key account managers to have more authority. Not only are they interested in who the key account manager reports to, but who reports to him/her. Therefore, it is becoming increasingly common in seUing companies to find that the key account manager is in charge of a "dotted line", semi-formal team. Members of teams tend to have different line managers, but meet regularly with the key account manager and the key account and have objectives relating to customer requirements. in some companies in flie research, team members had objectives relating to key accounts and the percentage of time they should be devoting to their key account was one of them. In these caste, there were some elements of shared motivation and reward, and performance on that account would lead to career development and job security for team membere. In most cases of "dotted lines", operational staff were required to report to the key account manager as well as their line manager about contacts with bujring companies. The key account manager must be able to plan and monitor who is talking to whom at what leveL Buying companies exped their dotted line key account team to include a director, at least as a mentor. Team members spend less time in front of the buying company than the key account manager, but they are making sure everything happens at each interface seller/buyer relationships are multi-layered and multi-faceted. The key account manager conducts ttie orchestra.

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Condusions from the Fieldwork

Retaining and developing key accounts is vital to the survival of selling companies. In mature markets where the only growth comes at a competitor's expense, the use of key account management as a strategic route to sustainable competitive advantage and stabilising operations is widely recognised. It was clear from this study that there has been a ^lift from key account selling to a much more sophisticated, value management approach from selling companies to buying companies. It is expeded that, whilst some pxxkets of transactional and adversarial negotiation will continue in supply chains, the general trend in businessto-business markets is towards higher levels of partnership between selling companies and buying companies, to the extent that company boundaries become blurred. Those dyads already practising partnership are convinced of its contribution to reducing costs and improving quality. Key account management requires process excellence and highly skilled professionals to manage relationships with strategic customers. For most companies, this represents a number of revolutions. A revolution is needed in the way activity is costed and costs are attributed, from product or geographical focus to customer focus. Currently, few finandal or information systems in companies are sophisticated enough to support the higher levels of key account management. A transformation is needed in the way the professional with responsibility for a customer relationship is developed, from an emphasis on selling skills to management skills, induding cross-cultural management skills. Lastly, a revolution is needed in the way exp)ertise within companies is organised, from an emphasis on departmental structures and geographies, to multi-disciplinary teams devoted to particular key accounts.

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