Key Account Management This page intentionally left blank Key Account Management The Definitive Guide Second edition Malcolm McDonald and Diana Woodburn AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Butterworth-Heinemann is an imprint of Elsevier Butterworth-Heinemann is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA First published as Key Customers 2000 This second edition published 2007 Copyright © 2000 Malcolm McDonald, Beth Rogers and Diana Woodburn All rights reserved Copyright © 2007 Malcolm McDonald and Diana Woodburn Published by Elsevier Ltd All rights reserved The right of Malcolm McDonald and Diana Woodburn to be identified as the authors of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (ϩ44) (0) 1865 843830; fax (ϩ44) (0) 1865 853333; email: permissions@elsevier.com Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book is available from the Library of Congress ISBN–13: 978–0–7506–6246–8 ISBN–10: 0–7506–6246–8 For information on all Butterworth-Heinemann publications visit our web site at http://books.elsevier.com Typeset by Charon Tec Ltd (A Macmillan Company), Chennai, India www.charontec.com Printed and bound in The Netherlands 07 08 09 10 11 10 Contents Foreword Acknowledgements The purpose of this book Before you read this book! List of figures and tables vii ix xi xv xvii 10 11 12 23 51 83 109 141 169 201 237 281 313 339 The crucial role of key account management Selecting and categorizing key customers Relationship stages Developing key relationships The buyer perspective Key account profitability Key account analysis Planning for key accounts Processes – making key account management work The role and requirements of key account managers Organizing for key account management The origins of key account management Further reading Integrated fast track Index 357 363 383 This page intentionally left blank Foreword I find it truly amazing that it is only in the past decade that key account management (KAM) has emerged as a major discipline in its own right Even more surprising is that most business schools resolutely refuse to include it in their curriculum, preferring to stick with the perennial four ‘Ps of marketing’, which, whilst still relevant, are totally dependent on getting the strategy right for the new breed of powerful, global customers, who now demand seamless service from their suppliers in every country of the world where they operate Cranfield is a shining exception to the rule In 1996 the first structured research was done on best practice key account management under the leadership of Professor Malcolm McDonald and Diana Woodburn The current KAM Best Practice Research Club is a sophisticated extension of those exciting, earlier forays into best practice key account management The implications for suppliers of the enormous power of buyers today are felt across the entire corporate spectrum, and after a decade of research at Cranfield, we can now truly say that instigating best practice key account management implies a substantial programme of change management and simply cannot be achieved by tinkering with the salesforce The sequence of events is as follows: Select the correct accounts to be included in the key account programme Categorize them according to their potential for helping us to grow our profits continuously Analyse their needs Develop strategic plans for and with each of them Get buy-in from all functions about their role in delivering the agreed value propositions This involves IT, manufacturing, logistics, HR, finance, operations and R&D This way, these functions will be customer-driven Get the right organization structure to serve the selected key accounts’ needs Get the right people and skill sets in the key account team Implement the plans on an annual basis viii Foreword Measure the success of the plans, particularly in respect of whether they create shareholder value added 10 Reward individuals and teams for their success Malcolm McDonald and Diana Woodburn have done a remarkable job in capturing all their research and practical experience in this excellent book and I commend it to you Martin Lamb Chief Executive IMI plc Acknowledgements We are extremely grateful to Beth Rogers, now of Portsmouth Business School, who for many years helped us with our research and our thinking Her part in earlier versions of this book, and particularly her work on the origins of key account management, was invaluable We would like to acknowledge the contribution of Professor Tony Millman on the original key account management research report, back in 1996 Special thanks are due to him for his enthusiasm for the topic His previous work, and that of Dr Kevin Wilson, was invaluable in creating frameworks for understanding the development of supplier/customer relationships Our thanks are due to other colleagues for their help and support: particularly to Dr Sue Holt, for allowing us to include some of her research; to Professor Nigel Piercy of Warwick Business School, for stimulating our thinking on several topics; to Dr Nikala Lane for her contribution to the section on teams; and to Professor Lynette Ryals for her overall support Huge thanks are due to Steve Doubleday and Peter Mouncey for their major contribution to the editing process We should certainly not forget our spouses for their endless forbearance during the writing process Lastly, too numerous to mention individually, are all the practitioners and their companies who have helped to develop our understanding of key account management, shape our thinking and validate our ideas: through the Cranfield KAM Best Practice Research Club, its focus syndicates and other practitioner forums, through participation in research and in KAM development consultancy projects, and through help with the case study insights distributed throughout the book Integrated fast track 375 need to understand operational processes and be alerted to deviations from expectations, but should not be part of the daily machinery or they will never anything else Each process should be broken down into its component steps, and the role of the key account manager and others identified at each stage This exercise demonstrates how the process works, and also builds up a picture of what their job should be Senior management is responsible for a number of processes in successful key account management, and if they are not aware of that at the outset, the requirement and the means to fulfil them should be identified for them at an early stage The key account manager’s role is mostly provision of information to these processes, so he or she needs to be aware of them, how they work, and what should be contributed The strategic processes include: ● Selecting attractiveness criteria and key customers ● Managing the customer portfolio ● Considering implications of customer strategies ● Incorporating account plans in business planning ● Allocating/prioritizing resources ● Assessing and managing risk to the company ● Sponsoring key customers ● Coordinating across boundaries ● Enabling organizational learning Key account managers have another set of processes with which to work ‘Developing’ occurs frequently in this list, because their job is to add value to both organizations by managing change: ● Analysing key accounts, developing strategy and planning ● Developing relationships with customers ● Developing business, capturing opportunities ● Selling and negotiating ● Pricing ● Developing new products ● Customizing products and service ● Managing the product mix ● Developing marketing programmes ● Developing the supply chain ● Developing transaction handling 376 Key Account Management ● Providing customer training ● Developing internal relationships ● Providing information Below is a simplified list of operational processes, which run day in, day out Key account managers, whether they like it or not, are held responsible by the customer for the delivery of what they have promised, so they need a process of two-way communication with operations by which they can brief operations with information they get from the customer, and operations can brief them as appropriate, about good and poor performance ● Selling ● Processing orders ● Manufacturing/operations ● Servicing customers ● Delivering to customers ● Collecting payment A good deal of sales activity belongs at this operational/transactional level, and may be carried out by the field salesforce or telesales, rather than the key account manager Measurement should be fit for purpose: it does not come free Measurement is closely related to processes and is often about processes, so it fits alongside them at the three layers of the company identified earlier: ● Strategy: Measurement of profit to support making the right strategic decisions ● Strategy realization: Measurement of value and progress to support the alignment of implementation with strategy, including the ‘amount’ of key account management (KAM) invested in the customer ● Operational/transactional: Measurement of cost and performance to support improvements in efficiency and productivity Key customers in different categories, treated to different strategies, should clearly be measured differently Performance objectives should reflect these different expectations CHAPTER 10 The role and requirements of key account managers In order to determine the role of key account managers, suppliers first need to ask themselves what they intend the role of key account management (KAM) itself to be That should decide what its ‘agents’, the key account Integrated fast track 377 managers, have to The objectives for KAM and the route to achieving them should be worked out in some detail Normally, the prime driver will be the marketplace and leading customers in it, so the company should have a view on how KAM will work from their point of view Specifying the role that KAM plays in the supplier’s strategy is of the greatest importance, and one often underestimated or misunderstood Initially, KAM is about making reciprocated commitments to customers, but that quickly needs to be followed by fulfilment of those commitments, so companies should anticipate the issues in operations and adapt In fact, they will find that adaptation means changing the organization and culture, as well as plans and processes The question then arises of ‘who does what?’ Obviously, key account managers are responsible for a great deal of the activity, but the company is also responsible for supporting them, by providing resources, communicating organization-wide, tackling barriers and making decisions that are beyond the remit of the individual The scope of the KAM initiative will highlight the breadth of the key account manager’s role At the simplest level, the key account manager has two roles: implementation of a business strategy with the customer, and facilitation of that implementation through building the relationship The relationship is not an end in itself, but should be employed to create and implement strategies that will develop business with the customer These two roles go hand-in-hand: success requires both Exactly how the key account manager plays these roles depends on the nature of the customer and the overall strategy allotted to it Streamline customers allocated a ‘manage for cash’ strategy should receive different treatment from strategic or star customers, so the key account manager’s role must be adjusted accordingly The first require a tough negotiator who will need to manage costs and operations rigorously, while the latter require someone to create a vision of the future and work to make it happen The key account team, however, can take on part of the role The team can apply its expertise to fulfil some elements, though some, like team leadership, cannot be separated from the key account manager Unfortunately, key account managers’ experience of team-working is often very limited, and they make poor team leaders unless they receive proper training and support for this part of their role To make matters worse, the members of the account team normally not report directly to the key account manager, but still remain within their function or region Nevertheless, the key account team should be an on-going group of people committed to the same objectives for the customer’s business, not a project team or other transient group of people Important customers expect team support and increasingly are getting it from suppliers 378 Key Account Management Generally, there are two key account teams that exist simultaneously: the head office, cross-functional team, which is concerned with current delivery of commitments to the customer and also with how to adapt and develop new value; and the regional sales team, which supports customer strategic business units (SBUs) in the field and applies the deals agreed centrally Such a broad role demands a wide range of competencies and attributes Regrettably, in many cases, suppliers have automatically appointed senior salespeople to the role without considering the competencies needed, and then found later that a substantial proportion of them not have and are unable to acquire them Indeed, ‘selling’ is a comparatively minor part of the role, and not one that should be used exclusively for determining the right people for the job To make appropriate appointments, suppliers should ideally start by establishing an ‘inventory’ of their key customers, categorized into four types according to the strategy selected for them Clearly, customers should be managed by a key account manager who is suited to applying the strategy selected for each of them, i.e an ‘entrepreneur’, ‘business manager’, ‘customer manager’ or ‘tactician’ Once the supplier has assembled its customer inventory, it can see how many of each of four types of key account manager are needed Different competencies and attributes are demanded by each of these roles, although they also have some in common Competencies are defined as behaviours required to achieve high levels of performance, whereas attributes are more about the way people think and the values they hold, though they also affect behaviour Attributes are harder to learn and to change The competencies and attributes that relate to each of the four roles have been worked out, so that individuals can be profiled and matched to the role they would perform best Such an approach can be used as a foundation for a conversation with the key account manager to discuss how he or she can develop to achieve personal and organizational objectives, now and in the future CHAPTER 11 Organizing for key account management Key account management (KAM) is essentially a boundary-crossing initiative Many of the benefits accrue from crossing boundaries, whether they are internal ones or those in the customer’s organization ● More interesting and powerful propositions with hard-to-match competitive advantage can be achieved by integrating offers from different parts of the supplier organization ● Substantial growth can be won by developing business with new parts of the customer’s organization Integrated fast track 379 Companies need a clear organizational structure, understandably, especially as they become bigger and more complex, but the structure should be used positively to enact the company’s strategy, not to frustrate it Any structure has its advantages and disadvantages, which can be offset by a genuine will to work across the structure, whatever it may be Unfortunately, structures and their boundaries are often reinforced by a culture of ownership and defence of a territorial power base, which is not helpful in KAM Suppliers need to be aware of how the structure can operate to produce ‘blind spots’, such as an inability to aggregate customer information that will obscure the identity of potential key customers; the ways in which they are organized; and how they make their decisions The supplier’s structure is not the only consideration in deciding how to organize for KAM Obviously, the customer’s structure must be taken into account as well For example, whether the supplier is a global or local organization, and whether its customer is global or local, produces a number of different forms of KAM In a traditional, country-based organization, the key account manager and hence the customer is several layers away from the top of the company, so communicating their strategies and gaining attention for their needs at a high level is very difficult, and not what key customers expect if they have been invited to participate in a strategic relationship This form of organization also makes the management of key customers as a portfolio more or less impossible In fact, if there is no clear process which brings them together in the same framework and authorizes the same person or people to make decisions about them, then portfolio management is not happening The ultimate form of organization for KAM is a central unit which has its own resources, with a director of key accounts who reports direct to the main Board rather than a national or divisional Board Key account managers in a central unit should have the authority to make central or global deals, albeit in consultation and with a defined approval process In all forms of organization, however, the local company or region will have to support and service the deal on the ground, so it is always important that they back it Successful suppliers employ various mechanisms to deal with this tricky issue In fact, it is the company’s targets that are often responsible for many of the conflicts that arise between different parts of the organization Suppliers that can properly align their targets will avoid many of the problems frequently encountered in KAM, just by resolving that single issue The origins of key account management While key account management (KAM) has a great deal of its origins in sales, the philosophy has come a long way from there, and this chapter tracks CHAPTER 12 380 Key Account Management the development of KAM in academic research and in practice Needless to say, the two are often not synchronized, and while research has established best practice some considerable time ago, many companies lag well behind, even now Perhaps understanding the origins of the KAM philosophy will help you to appreciate why KAM is interpreted differently in different companies which are operating different evolutions of the concept The identification of the decision-making unit (DMU) in industrial buying was an important breakthrough in the 1960s It established the complexity of the industrial buying decision compared with a consumer decision, and demonstrated the importance of developing relationships with multiple contacts in the customer who had different interests and viewpoints Most salespeople, however, had only a single contact in each customer and, at that time, were not adept at developing more The Industrial Marketing and Purchasing Group developed the concept of interacting with the customers and developing relationships aimed at customer retention as a deliberate strategy There has been much debate about when relationship marketing is and is not appropriate, but there is at least general agreement that it is not for all customers, even if which customers the suitable is disputed Relationship marketing looked longer term and introduced the idea of customer lifetime value, secured through high levels of customer satisfaction The KAM philosophy fundamentally believes that collaboration with customers is better for both than confrontation, and seeks to overcome the traditional view of buyer–seller relationships as adversarial The suspicion has always been that the financial interests of the organization will be threatened by the other party, but evidence suggests that: ● Adversarial behaviour adds costs (e.g 30 per cent in the construction industry) ● Collaboration creates opportunities for saving costs ● Suppliers not know how much they make from their customers anyway The drivers of KAM are numerous, from globalization and political pressure for corporate responsibility to the speed of change in business, but all factors ultimately tend to give ever larger customers increasing choice and power Successful KAM carries with it the risk of increasing business dependence, but as the marketplace consolidates few can withstand the trend Suppliers and key customers will become increasingly committed to each other in integrated supply chains which can deliver better, faster and cheaper, and which compete with other integrated supply chains rather than individual competitors In spite of some high profile casualties of Integrated fast track 381 interdependent buyer–seller relationships, it is hard to envisage a return to hands-off exchanges that cannot respond to the requirements of today’s customers Now you should have a good idea of the whole content of the book, either to whet your appetite before reading it, or to remind yourself of the entirety of what you have just read in much greater depth Try reading it again as a reminder at a later date This page intentionally left blank Index Activity links 97 Activity-based costing Added value 88, 99, 256, 262 Agreement 192 Amazon 131 Amstrad 160 Annual report summary 184, 185 Anorexia industrialosa 205, 210 Applications portfolio 198, 199 ASDA Group 161 Assessment 192 Asymmetric organization 322 Atlantic Computers 160 Attributable costs 155 Audit 147 external 181 internal 181 supplier processes 244 Balance of power 136–9 Balanced contact profile 103 Basic relationships 52, 58–9, 64–7, 91–2 advantages and disadvantages 66 characteristics of 65 Bejam 160 Beta 143 Blue Arrow 160 BOC 27 Body Shop 160 Booth, Graham 265 Boundaries 316–21 external 319–21 inter-SBU 317–19 internal to SBU 317 Boundary spanners 290–1 Brands 147 British Airways 161 British Steel 161 British Telecommunications 161 BSR 160 Business development 257–8 Business extension 272 Business partnership process 179 Business planning 251 Business relationship networks 113 Business risk 152 Buy classes 195 Buy phases 192 Buyer-seller match 157 Buyer-seller relationships 348, 351 Buyers 114 contact with sellers 70 information exchange with sellers 74 perceptions of relationships 133 risk perception 124 strategy independence 126–7 Buying power 12 Buying process 189–96 external pressures 193–6 internal pressures 194 personal pressures 194 Canada Dry Car industry 149 Central billing 326 Centralization 329–33 Centralized coordination 322 Change impact of 14–15 pace of 7–8, 21 Citibank 332 Client’s objectives 184 Coercion 326 Combined business development and compensation 326 Commoditization 10 Common interest 138 Communication 265–8, 291–2 lines of 264 planning 267–8 reasons for 266 384 Index Competence trust 87 Competency 308 Competition 10 monitoring of 293 Competitive advantage Competitive comparison 196–7, 198 Competitor strategy 198 Complacency 104 Complete exit 44 Complexity of products 191 Conduit role 291–2 Contact mapping 93–6 Contractual trust 87 Control systems 181 Cooperative relationships 52, 59, 67–71, 92, 152 contact between buyers and sellers 70 exit management 70 information exchange between buyers and sellers 74 visualization of 69 Coors Brewers 87 Corporate strategy 26–7 Cost measurement 273 Cost mix 188 Cost reduction 117–22 Cost-saving 123 Costs 191 high fixed 217–18 low fixed 218 Critical success factors 170 Cross-boundary working 254 Cross-functional integration 112 Cross-functional teams 299–300 Customer asset value 271 Customer attribute-based criteria 34 Customer drivers 113–16 Customer focus, lack of 159–61 Customer lifetime 150 Customer loyalty 147 Customer loyalty ladder 346 Customer managers 294 Customer organization 93 Customer portfolio 250 Customer power 2, 11–12 growth in 6–15 Customer relationships see Relationships Customer satisfaction 12, 272 Customer strategies 250 Customer structure 321–3 asymmetric 322 centralized coordination 322 decentralized/autonomous 322 Customer’s team 302 Data Protection Act 95 Decentralized structure 322 Decision-making levels 335 Decision-making unit 191, 339, 342–3 Delivery service levels 216 Dependency 136 Development strategy 319 Directional policy matrix 165, 178 Disintegrating relationships 79–80 Downsizing 10 Driving forces 178–83, 351–4 Effectiveness 210 Efficacy 210 Efficiency 120–1, 270 Electronic commerce 21 Electronic data interchange 346 Employees, training and development 354 ENRON 147 Environmental considerations 193 Escalation point of contact 292 Exits 43–5, 70 complete 44 to next tier down 44 Expert in the customer 289 Exploratory relationships 51, 59, 60–4 Extended enterprise thinking 131 Facilitation 281, 289, 290–2 Failure rates 273 False economy 273 Financial analysis 184–6 Financial expenditure 191 Index 385 Financial performance indicators 185 Financial risk 152 Focal point of contact 292 Forecasting 334 Functional re-design 188 General Motors Geographical sales/support team 300–2 Gestetner 173 Gillette 148 Global accounts 323–6 Global businesses 20–1 Global markets 115 Global suppliers 260 Globalization 2, 14, 115, 352 Goodwill trust 87 Halcrow 278 Heede, David 87 Hewlett Packard 133 Hierarchy of key relationships 56–60 High contact ratio 104 High fixed costs 217–18 Holding inventory cost 215, 216 IBM 89, 173 ICI 161 market segmentation 175 IMI Cornelius 11, 89–90, 254 Implementation 240, 281, 289–90, 354–5 In Search of Excellence: Lessons from America’s Best-Run Companies 159 Incentives 320 Individual contacts 98 Individual needs 58 Industrial Marketing and Purchasing Group 339, 343 Industry driving forces 178–83 Information exchange 122 provision of 261–3 Information systems 181 Information technology 21, 115 Innovation 87, 114 Innovation partners 33 Intangibles 148, 188 Integrated relationships 52–3, 59, 76–9, 92, 152 Integration cross-functional 112 supply chain 115, 130–2 upstream 118–19 Integrity, lapses in 104–5 Intercompany relationships 15–20, 96–7 joint commitment 18 misconception and disappointment 18–20 risks of 16 satisfactor return on 17 Interdependent relationships 52, 57–8, 59, 71–6, 92, 296–7 building 99–101 characteristics of 73 contact between buyers and sellers 70 features of 100 information exchange between buyers and sellers 74 visualization of Internal relationships 261 Internal value chain analysis 186–9 International Marketing and Purchasing Group 124, 125 Internet 115–16 InterTech 154–5 Jackson, Barbara 344 Jaguar 160 Joint commitment 18 KAM Best Practice Research Club 200 KAMScope 305, 310 Key account analysis 178–97 PEST analysis 178–83 preplanning 183–97 Key account managers 281–311 attributes 308–9 competency 308 customer allocation 305 customer-facing roles 292–5 386 Index Key account managers (contd) internal roles 292 and processes 246–8 requirements of 304–11 roles and skills 1, 6, 284–7 Key account planning 212–19 objectives and strategies 213–19 planning hierarchy 213 Key account selection matrix 37–40 Key account strategy matrix 294 Key account teams 295–304 cross-functional team 299–300 customer’s team 302 geographical sales/support team 300–2 nature of 298–302 role of 295–8 success factors 303, 304 team leading 302–4 Key accounts categorization of 4–5, 23–49 classification of financial expectations 277 selection of 1, 4, 23–49 Key customers attractiveness of 249–50, 272 buying process 189–96 categorization of 37–49, 334 consolidation of 20 expectations of 86–8 identification of 30–2 needs analysis 1, 5, 116 needs-based criteria 34 optimum number of 28–30 outcome-based criteria 34 profitability 17, 71, 146, 148–59, 272 reducing numbers of 44 retention 146, 148–59, 272 selection criteria 26–7, 30–7 selection of 26–7 service costs 13 short-term classification 217 star customers 24, 38, 39, 281 understanding of 88–91 see also Customer Key Industrial Equipment 13 Key performance indicators 270 Kotler, Philip 172 Lack of growth 10 Laker, Freddie 153 Lasmo 160 Latham, Michael 349 Layers of activity 245 Leaking profitability 106 Lean supply 7–8 Limited contact 103 Lines of communication 264 Lists 45–6 Local accounts 323–6 Low fixed costs 218 Low margins 10 Marconi 161 Market definition 173 Market growth performance 154–5 Market mapping 173, 174, 176 Market maturity 1, 10–11 evolution of 15 Market saturation 10 Market segmentation 169, 173–6 importance in key account planning 177 Market structure 173 Marketing, the Challenge of Change 7, 351 Marketing due diligence 147 Marketing knowledge 147 Marketing objectives 180 Marketing strategy 180 Marketplace, redefining 10–14 Markets, understanding of 171–3 Marks & Spencer 153, 161 Matching strategies 132–3 Maxwell Communications 161 MFI 160 Micro segments 173–4 Middle management 102 Modified rebuy 195 Monitoring 192 Multilevel relationships 101–3 Napolitano, Lisa 287 National Westminster Bank 161 Negotiation 258–60 Net free cash flow 217 Net present value 145, 215 New buy 195 Index 387 Nokia 31, 32 Novelty value of products 191 On time in full delivery 215 Operational processes 263–5 Operations/transactions 102, 237, 239 Opportunism 57, 105 Opportunity 271 Organization 98 role of 287–9 Organizational learning 254–5 Organizational structure 313–38 drivers of 316–26 implications of 326–8 mismatch 325 Outsourcing 77 Over-capacity 10 Partnership 131, 352 Pascale, Richard, Managing on the Edge: How Successful Companies Use Conflict to Stay Ahead 205 People bonds 96–7 Performance measurement 268–79 measuring input 275, 276 purpose of 270 Performance monitoring 275–9 Perry, Michael 172 PEST analysis 178–83 market factors 182–3 Peters, Tom 172 Planning 181 hierarchy 213 Point of accountability 290 Points of contact 292 Polly Peck 160 Porter, Michael Competitive Strategies 179, 186 industry five-forces analysis 178, 179 Portfolio 45–6 analysis 165 applications 198, 199 customer 250 Portfolio analysis matrix 214 Portfolio management 333–6 Potential key accounts 61 Power balance 322 Power sources 137 Price measurement 273 Pricing 260 Proactive maintenance 319 Problem definition 192 Problem identification 192 Process data capture 247 Process re-design 8–10 Process refinement Processes 237–79 audit framework 244 importance of 241–2 key account manager’s role 246–8 nature of 242–6 stepwise structure 243 strategic 237, 248–55 Procter and Gamble 148 Product development 121, 354 Product lifecycle 11, 188 Profit, quality of 156 Profitability 141–67 customers 17, 71, 146, 148–59 key accounts 1, leaking 106 model 163 Purchasing 112–26 cost reduction 117–22 customer drivers 113–16 risk reduction 124–6 trends 288 R&D 122 Racal 160 Rebuffs 43 Relationship development 83–107, 256–7 choosing relationship stage 91–3 contact mapping 93–6 model 151, 203, 204 relationship-building strategies 96–9 Relationship management 101–6 multilevel relationships 101–3 Relationship marketing 343–7 Relationship perception gap 55 Relationship traps 104–6 388 Index Relationship-building strategies 96–9, 101 Relationships 51–82, 272 basic 52, 58–9, 64–7, 91–2 buyer-seller 348, 351 complexity of 20–2 cooperative 52, 59, 67–71, 92, 152 disintegrating 79–80 exploratory 51, 59, 60–4 hierarchy 56–60 integrated 52–3, 59, 76–9, 92, 152 intercompany see Intercompany relationships interdependent 52, 57–8, 59, 71–6, 92, 99–101, 296–7 internal 261 monitoring and measurement 354 multilevel 101–3 necessary information 55–6 risk factors 166 strategic 147 Relative business strength 40–3 Resource allocation 46–8, 251–2, 334 Resource investment 56 Resource management 292 Resource miscalculation 47 Resource ties 97 Resource waste 56 Restructuring 315 Retention of customers 146 Return on investment 271 Revenue/volume 273 Reverse auction 259 Risk 126, 271 business 152 financial 152 measurement 162–4, 272 and return 143 Risk assessment 252–3 Risk management 252–3, 292 Risk reduction 124–6 Ryals, Lynette 164 Sales history 196, 197 Salesperson role 292 SAMA 287 SAP 285–6 SBU see Strategic business units Search 192 Selection 192 Selection criteria 32–5 application of 35–7 scaling and scoring 36 Selection of key accounts 1, 4, 23–49 identifying customers 30–2 selection criteria 32–5 Selection of key customers 26–7 superior returns 27–8 Sellers 112 contacts with buyers 70 information exchange with buyers 74 perceptions of relationships 133 response to customer strategy 127 risk perception 124 Selling 258–60 Senior management 102 Service levels 273 Shareholder value 148, 162–4 Short-term customer classification 217 Siemens 253 Similar point of contact 292 Single company thinking 131 Single point of contact 292 Sky Train 153 Snehota, Ivan 96 Solution specification 192 Sponsorship 253 Star customers 24, 38, 39, 281 Status key customers 24, 38 Straight rebuy 195 Strategic alliances 21–2 Strategic business units 254, 282 Strategic customers see Star customers Strategic market planning 1, 5–6, 100, 203–11 plan content 208 Strategic marketing plan 205, 206 development of 219–35 evaluation guidelines 220 model plan 221–35 Strategic and operational planning 207 Index 389 Strategic orientation 211 Strategic point of contact 292 Strategic processes 237, 248–55 Strategic relationships 147 Strategic suppliers 129 Strategy direction matrix 127–30 Strategy independence 126–7 Strategy realization 237, 239, 255–63 and KAM measurements 271–2 Streamline key customers 24, 39, 281 Superior returns, selection for 27–8 Supplier delusion 4, 55, 133–4 Suppliers capabilities 293 management strategies 90 relationships with 129 Supply chain integration 115, 130–2 Sustainable competitive advantage 143–8 SWOT analysis 169, 197, 199, 207 Tactical marketing plan 205 Tactical orientation 211 Target alignment 336–8 Team leader role 292 Team leading 302–4 Team-based relationships 96 Telecommunications 115 Traditional structures 326–9 Training 354 Transaction-weighted contact profile 103–4 Trust 57–8, 62, 72, 75–6, 110, 134–6 competence 87 contractual 87 customer expectations 87 definition of 135 goodwill 87 TSB Group 161 Unit cost 121 Upstream integration 118–19 Value 344 Value chain 9, 187, 288 analysis summary 188, 189 sources of differentiation 187 Value developers 289 Value-added pricing 120 Value-based prioritization 334 Valuing of key accounts 164–7 Vertical integration 118–19 Virgin Airlines 153 Visibility 270 Waterman, Robert, In Search of Excellence: Lessons from America’s Best-Run Companies 205 Weighted average cost of capital 143 Wellcome 161 Wilson, Charles, Profitable Customers: How to Identify, Develop and Keep Them 158 Xerox 297 ... for key accounts Processes – making key account management work The role and requirements of key account managers Organizing for key account management The origins of key account management Further... evaluation guidelines Summary of measurements for key account management Measuring key account management input The role of key account management The role of the organization in key account management. .. understood in matching the right key account manager with each key account Chapter 11: Organizing for key account management There is no perfect structure for key account management as it is essentially