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DBA-RM-Chapter 9

Key Account Management (KAM) is an approach that aims to optimize relationships between suppliers and key buying organizations. It involves identifying strategic partner customers, developing long-term relationships with them, and establishing cross-functional processes to service their accounts through customized products/services and activities like special pricing, information sharing, and joint workflow coordination. The goal is to increase supplier benefits like revenue and reduce costs, while providing buyer benefits such as lower prices and customized offerings, leading to mutual benefits like risk reduction and innovation. Relationships progress through early, mid, and partnership stages of the development cycle before potentially uncoupling. Careful key account selection and adding value through quality improvement, customization, and other activities are important for success. KAM

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Wan Muhammad Abdul Hakim
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40 views

DBA-RM-Chapter 9

Key Account Management (KAM) is an approach that aims to optimize relationships between suppliers and key buying organizations. It involves identifying strategic partner customers, developing long-term relationships with them, and establishing cross-functional processes to service their accounts through customized products/services and activities like special pricing, information sharing, and joint workflow coordination. The goal is to increase supplier benefits like revenue and reduce costs, while providing buyer benefits such as lower prices and customized offerings, leading to mutual benefits like risk reduction and innovation. Relationships progress through early, mid, and partnership stages of the development cycle before potentially uncoupling. Careful key account selection and adding value through quality improvement, customization, and other activities are important for success. KAM

Uploaded by

Wan Muhammad Abdul Hakim
Copyright
© Attribution Non-Commercial (BY-NC)
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Download as PPTX, PDF, TXT or read online on Scribd
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Key Account Management

KAM defined
Management practice aimed at optimising the
relationship between supplying and buying
organisation.
KAM is used interchangeable with National Account
Management (NAM), Strategic Account Management
(SAM), and Account Management (AM).
There is no significant distinctions between meanings
of the four terms.
KAM Practices is characterized by:
Identification of customers who will equate to
strategic partners. KAM programmes must employ a
mechanism for selecting these key accounts based on
organisation objectives.
The development and maintenance of long-term
relationship.
Establishment of cross-functional processes for
servicing accounts.
KAM Activities
Homburg et al. (2002) identified the activities:
Special pricing
Customisation of products and services
Development of special products or services
Joint coordination of workflow
Information sharing
Taking over the customer’s business processes
The rationale of KAM
Supplier Benefits Mutual Benefits Buyer Benefits

Increase Risk reduction Customised


turnover Shared products/
Reduce cost resources services
Increase Innovation and Price reduction
profitability learning
Social relations
The key account development cycle
Pre and early KAM
It is known as scanning & attraction stages.
(McDonald et al. (1997).
Concern with the identification of potential key
accounts, and gaining key accounts, and gaining
information.
It also depends on willingness of the supplier to make
adjustments to its standard offering.
The key account development cycle
Mid-KAM
Focus of the relationship begins to shift to process, as
trust and commitment develop between two parties.
In this stage, both view the relationship as long term,
thought the buyer will still maintain contact with
alternative suppliers.
The number of contact points between the two
companies will increase, and the management of the
account will tend to shift towards more senior levels of
the organisation.
The key account development cycle
Partnership and synergistic KAM
The boundary between 2 companies reduces as the
social and structural bonds become strengthen.
There is sharing sensitive information and joint
problem-solving.
Formal and informal contacts will occur regularly at
all levels of both organizations.
It is described as “quasi-integration” –two operations
operate jointly.
The key account development cycle
Uncoupling KAM
Relationship disintegration at any stage.
According McDonald et.al. the relationship
breakdown is due to breach of trust.
Should be managed carefully to reduce the social and
economic impact on the organisation.
Implication of the key account development
cycle
Different stages of the cycle bring differing levels of
investment and varying returns.
Early and mid-KAM stages – demanding for supplier,
requiring investment in activities (information gathering,
communications and developing of value added services
in an attempt to gain the confidence of the buyer).
Later stage – major benefits where the bond and the
relationship is created.
Should ensure the balance of the relationship portfolio is
maintained, so that the superior returns from mature
relationships can fund the development of those in early
or mid KAM stages.
Identifying key accounts

Given the cost/benefit implications of the key account


development cycle, the need for the careful selection of
potential key accounts is critical.
Criteria for selection of key accounts:
1. Relationship theory – background of established account
2. Volume – sales volume as the key account (Krapfel et.al. 1991)
3. Profitability- total revenue from an account must exceed its
servicing costs within a given time frame.-
4. Status – reputable partner
5. Ease of replacement
6. Resource synergies
7. Strategic compatibility
Servicing Key Accounts: KAM Activities
Having identified the key accounts, the next stage in the KAM
is identify the means by which the relationship can be
developed.
Adding value for key account – discounting by listing cost
savings as one of the benefits to buyers of key account
relationships.
1. Quality improvement – focus from the outside is on internal
process quality rather than product quality.
2. Customisation – offer the buyer something that its
competitors cannot.
3. Conflict resolution and problem solving – flexibility of
supplier in accepting responsibility for resolving the buyer’s
problems was a key determinant of a buyer’s trust.
Servicing Key Accounts: KAM Activities
4. Information sharing – free exchange of commercially
sensitively information between two parties.
5. Resource sharing – mutual advantage, stimulate
bonds between organisation.
6. Communication – nature and extend of
communication channel between two organisation.
Relevance of KAM to RM
Specific Application of RM
Theories of KAM has been develop in high value, low
volume, business to business market, usually as
extension to RM marketing theory
Need for senior Management Support
Empirical data shows both need Senior Management
support for the success of implementation. In early
stages RM initiative must be champion by influential
members of the organization to succeed.
Relevance of KAM to RM
Need for cross functional coordination
KAM relationship involves a move away from the
focus on rigid structures producing standardized
offerings and towards a more flexible network
structure which can adapt to changing customer
requirement
The Importance of communication
Finally, KAM literature underlines the central role of
communication in building and maintaining the trust
on which the relationship depend.

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