DBA-RM-Chapter 9

8/7/2019 DBA-RM-Chapter 9

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KAM definedy Management practice aimed at optimising the

relationship between supplying and buying

organisation.y KAM is used interchangeable with National Account

Management (NAM), Strategic Account Management(SAM), and Account Management (AM).

yThere is no significant distinctions between meaningsof the four terms.


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KAM Practices is characterized by:y Identification of customers who will equate to strategic

partners. KAM programmes must employ a

mechanism for selecting these key accounts based onorganisation objectives.

y The development and maintenance of long-termrelationship.

yEstablishment of cross-functional processes forservicing accounts.


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KAM Activitiesy Homburg et al. (2002) identified the activities:

y Special pricing

y Customisation of products and servicesy Development of special products or services

y Joint coordination of workflow

y Information sharing

y Taking over the customers business processes


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The rationale of KAMSupplier Benefits Mutual Benefits Buyer Benefits

Increaseturnover

Reduce costIncrease

profitability

Risk reductionSharedresourcesInnovation and

learningSocial relations

Customisedproducts/servicesPrice reduction


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The key account development cyclePre and early KAM

y It is known as scanning & attraction stages.

(McDonald et al. (1997).y Concern with the identification of potential key

accounts, and gaining key accounts, and gaininginformation.

y It also depends on willingness of the supplier to makeadjustments to its standard offering.


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Mid-KAM

y Focus of the relationship begins to shift to process, as

trust and commitment develop between two parties.y In this stage, both view the relationship as long term,

thought the buyer will still maintain contact withalternative suppliers.

y The number of contact points between the twocompanies will increase, and the management of theaccount will tend to shift towards more senior levels ofthe organisation.

The key account development cycle


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Partnership and synergistic KAM

y The boundary between 2 companies reduces as the

social and structural bonds become strengthen.y There is sharing sensitive information and joint

problem-solving.

y Formal and informal contacts will occur regularly at all

levels of both organizations.y It is described as quasi-integration two operations

operate jointly.



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Uncoupling KAM

y Relationship disintegration at any stage.

y According McDonald et.al. the relationshipbreakdown is due to breach of trust.

y Should be managed carefully to reduce the social andeconomic impact on the organisation.



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Implication of the key account

development cycley Different stages of the cycle bring differing levels of

investment and varying returns.

y Early and mid-KAM stages demanding for supplier,requiring investment in activities (information gathering,

communications and developing of value added servicesin an attempt to gain the confidence of the buyer).

y Later stage major benefits where the bond and therelationship is created.

y Should ensure the balance of the relationship portfolio ismaintained, so that the superior returns from maturerelationships can fund the development of those in earlyor mid KAM stages.


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Identifying key accounts

Given the cost/benefit implications of the key accountdevelopment cycle, the need for the careful selection ofpotential 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 itsservicing costs within a given time frame.-

4. Status reputable partner5. Ease of replacement

6. Resource synergies

7. Strategic compatibility


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Servicing Key Accounts: KAM

Activitiesy Having identified the key accounts, the next stage in the

KAM is identify the means by which the relationship canbe developed.

yAdding value for key account discounting by listing costsavings as one of the benefits to buyers of key accountrelationships.

1. Quality improvement focus from the outside is oninternal process quality rather than product quality.

2. Customisation offer the buyer something that itscompetitors cannot.3. Conflict resolution and problem solving f lexibility of

supplier in accepting responsibility for resolving the buyersproblems was a key determinant of a buyers trust.


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Servicing Key Accounts: KAM

Activities4. Information sharing free exchange of commercially

sensitively information between two parties.

5. Resource sharing mutual advantage, stimulatebonds between organisation.

6. Communication nature and extend ofcommunication channel between two organisation.


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Relevance of KAM to RMy Specific Application of RM

Theories of KAM has been develop in high value, low

volume, business to business market, usually asextension to RM marketing theory

y Need for senior Management Support

Empirical data shows both need Senior Management

support for the success of implementation. In earlystages RM initiative must be champion by influentialmembers of the organization to succeed.


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Relevance of KAM to RMy Need for cross functional coordination

KAM relationship involves a move away from the

focus on rigid structures producing standardizedofferings and towards a more flexible networkstructure which can adapt to changing customerrequirement

y

The Importance of communicationFinally, KAM literature underlines the central role ofcommunication in building and maintaining the truston which the relationship depend.

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DBA-RM-Chapter 9