Key account management has been around a long time. Obviously, business people from time immemorial have recognized the importance of their big buyers, but it took academics a while to acknowledge this simple fact; indeed, it is possible to accuse marketing in academia, which is overwhelmingly focused on consumers, of some responsibility for losing sight of it. Nevertheless, research into key account management kicked off in the 1980s, arguably initially in the USA and soon after, in Europe, fuelled by the Industrial Marketing and Purchasing (IMP) Group's work. At the same time, Citibank's first attempt at global account management (GAM) had been tried, proved successful with customers, been defeated by country managers and reinstated under pressure from strategic customers, all by 1985 (Buzzell). So it is surprising that many companies think key account management/key strategic account management is new, and that there is not a bigger body of research and greater recognition of the economic importance and potential for academic interest in it. We believe that the time has come for both business and academia to give KSAM the position it merits: hence this book.

We suppose that business-to-business (B2B) marketing is overlooked in favour of consumer marketing because anyone may have personal experience of the goods and services explored and the brands are household names, but we have no explanation for why the enormous wallets and life-giving or life-taking demands of key strategic customers have not attracted more attention from B2B marketing and sales research. Losing such a customer because it has not received the treatment it wanted, or keeping it at too great a cost, can both have devastating effects on suppliers, even large companies. For example, the knitwear manufacturer Baird was forced to close 14 factories in the UK and three in Sri Lanka when Marks and Spencer ended their 30-year relationship (Chapman 2004). Uniq (previously Unigate) made an operating loss of £3.6m on a turnover of £736m in 2007 when Marks and Spencer represented nearly 30% of the company's sales and other major retailers contributed most of the rest (Hawkes 2008). Marconi's loss of the BT contract signalled the demise of that business in 2006.

Key strategic customers may be few in number, but the inexorable developments in their increasing power and sophistication, globalization, consolidation and market maturity mean that they are crucial to suppliers in terms of present and future profit. These buyer–seller relationships are arguably the most interesting because of the scale of the rewards and risks and the organizational complexities involved. It really is inappropriate to subsume these relationships into general customer relationship management (CRM) research. KSAM should be seen as a business and research domain in its own right, albeit learning much from other areas of business research, including relationship marketing, selling, management and organizational theory, supply and demand chain management, to list just some of them.

The domain has probably not been helped by the failure to agree a name for it: key account management (KAM), national account management (NAM), global account management (GAM) and strategic account management (SAM) have all been used fairly interchangeably. In the USA, management of the most important accounts is termed SAM or GAM, and key accounts are somewhere down the customer pyramid below national accounts. Elsewhere in the world, KAM is taken to include all the most important accounts, with subdivisions into strategic, global and national accounts. The widely accepted definition of key accounts was formulated by Millman and Wilson (1995a) as ‘customers in a business-to-business market defined by selling companies as being of strategic importance’, linking the terms ‘key’ and ‘strategic’ together. Removing issues of geography, i.e. ‘global’ and ‘national’ (these customers are not necessarily key or strategic, although the size and complexity of global customers means they are more likely to be key strategic accounts), we therefore wish to propose a term for universal use for the activity under discussion in this book: key strategic account management, or KSAM.

A definition of KSAM

Clearly, KSAM requires a definition, and the literature is curiously lacking in this respect. While descriptions of good practice and full interpretations abound, they go well beyond a definition of the minimum that qualifies as KSAM. Furthermore, since the treatment of individual key strategic accounts will depend on the nature of each account and vary considerably, we feel that the definition should be positioned at the level of the organization. Companies can then see whether they are, or are not, implementing KSAM, by definition. They may be doing it well or badly, but it should be possible to be clear about whether they are executing what is generally agreed to be KSAM, rather than key account selling or something else. We believe that such a definition does not currently exist, and we therefore offer the definition of KSAM as follows:

This is, we feel, a ‘necessary and sufficient’ definition of KSAM. Adoption of a definition is important because the lack of it leads to misunderstanding of the requirement, development of inappropriate processes, and problems in operationalization when new processes are not adopted.

KSAM is supplier-led because it is a strategic initiative adopted by senior managers in the supplier organization, who choose which customers are strategically important now and in the future. Customers cannot force their suppliers to offer KSAM, although they may threaten to defect (not always as easy as either side thinks). So the choice of accounts is the supplier's initially, but it needs to be reciprocated: the customer has the choice of collaborating with the supplier, or not. They will need to perceive, or have the potential to perceive, that the supplier could be strategically important to them, too. If they have no wish to collaborate, they should not be a key account, since it is not in the supplier's interests to invest resources where the customer is unresponsive and the return will be poor. For the relationship to work, the benefits must be equitably distributed between both supplier and customer.

KSAM is a process, not a general idea that is open to individual interpretation at any time, parts of which may sometimes be applied and sometimes not. It is a process through which value is created, and sustainable KSAM requires that both customer and supplier should gain value from it. Given the variety and complexity of situations and businesses, it is most unlikely that the value will not be unique, so although there may be parts replicated for other accounts, the total combination of propositions will be different for each key customer.

In order to determine appropriate value for the customer and viable activities that also deliver value for the supplier, the two must work together to determine what exactly that will be. The process involves inter-organizational collaboration because KSAM is not something you do ‘to’ customers but ‘with’ them, and therein lies the major difference between KSAM and key account selling or standard account management. Even so, many suppliers are more comfortable with developing ideas internally for, but independent of, the customer and are then disappointed that they do not achieve a better reception when presented.

We would like to qualify this definition with a concept that additionally expresses the purpose and the principal means of operationalization:

The purpose of KSAM is ultimately profit in a profit-motivated organization (there can be alternative objectives in not-for-profit organizations). KSAM works through a process of investment and return on that investment, which means that its performance must be judged over a sufficiently long term to embrace both. Many elements of KSAM take time to put into place, both in terms of the constituents of the programme on the supplier's side – such as building the competencies of key account managers, modifying and developing new processes, and communicating with and involving the wider organization – and with the customer, building big relationships within their company, gaining a deep understanding of their business, and learning how to work well with them; and in the execution of value-adding projects, to plan, cost and gain approval for them and then to carry them out.

The key account manager is the expert in the customer who gains that deep understanding and from it, working with the customer, determines what value can be created. It is, however, largely the rest of the company that delivers that value, hence the deployment of multi-functional capabilities; indeed, the lack of cross-functional effort has often led to the failure of KSAM since, effectively, nothing has been delivered to the customer. Where functions each provide what they see fit for the customer, without coordination, the impact on the customer is patchy and confusing for them, and unlikely to lead to the required response. Most functions will be involved in some way in the realization of synergistic value in the form of cost benefits, quality enhancement, product development, market exploitation, process enhancement, etc.

Questions for research

In spite of the impressive body of knowledge of KSAM presented herein, there is much that is not yet understood. Ideal KSAM may readily be described, but it would sound like a utopia of altruistic and productive activity which we have never encountered in reality. Underneath the skin, even of programmes that are successful, is a mass of individual insecurities, organizational politics, ignorance of key facts and inertia that will never be examined by relationship marketers and CRM researchers.

Still unanswered are questions such as why, if companies can use their up-to-the-minute systems to determine the profitability of products and regions, they cannot properly account for the profitability of even their most strategic customers? This information is surely critical to the management of accounts that have an alarmingly strong influence on the overall profitability of the supplier's company, and yet our research (Woodburn 2004) questions whether they even want to know, such is the general poor performance in this area. Myths and assumptions abound on this subject which would not be tolerated in other areas of the business.

Although we all know that power has switched from the post-war supply side to the customer side in the 21st century, many companies' customer-centricity is hollow window-dressing. Where claimed, it is often more like sales-centricity, as the customers would attest: constant attendance by sales-targeted individuals is not what customers mean by customer-centric. We have yet to understand how to make the change from competitive, suspicious, defensive cultures towards genuine collaborative approaches throughout an organization. Is it a matter of industrial legacy or human psychology?

The ideal key account manager would have the competencies and personal attributes of a chief executive. Realistically, which of them are essential and which optional? Can missing competencies be adequately covered by members of an account team, or does that undermine the key account manager's credibility? Although key account teams are increasingly an intrinsic part of KSAM, we know little about their functioning and how to optimize this resource.

Very little is clear about how to incentivize KSAM activity, which is made more problematic by its long-term nature. While all are agreed that ‘fairness’ is paramount (Woodburn 2008b), there seems to be no agreement on how to achieve fairness, except by removing incentives altogether. While companies that had incentives wished to minimize them but were unable to stop them (which some would consider unfair) the companies that had none wanted to introduce them, so no-incentive situations are unlikely. Indeed, in addition to a near-total lack of understanding about how to reward KSAM, little is agreed about what good performance in KSAM is and how it should be measured as well as how it should be rewarded. The whole question of measurement in KSAM is open for research.

A concern for academics, however, is the pressure exerted by journals favouring papers based on quantitative research. While empirical research in KSAM is much needed, the number of key accounts is small, by definition, and when surveys include large numbers of accounts in order to yield statistically significant results, they are almost certainly including non-key accounts. The findings cannot then be confidently extrapolated to key accounts, and since we have identified substantial differences between other customers and the nature and behaviour of key accounts in close relationships with suppliers, there is good reason to believe that they would differ significantly. Consequently, we would expect qualitative research to be much more valid and practical, as well as more informative, than quantitative methods in researching KSAM. Needless to say, however, research projects that can be matched with a sound quantitative design would be very welcome, but we hope that journal editors will appreciate and readily publish qualitative, appropriately researched material on KSAM.

In summary, we are indebted to all 41 of our authors, who have done much in these papers to illuminate this important, challenging and fascinating area, but there is more we desperately need to know about it. The welfare and continued survival of many businesses depend on how they handle KSAM and they are, generally, woefully unprepared to implement it: they really need the knowledge and understanding that academic research could bring to them. This book hopes to stimulate both academic and practitioner interest in progressing our insight into KSAM, which will yield substantial benefits for both ‘sides’.

Section 1: Strategic dimensions of KSAM

To many, the case for KSAM is clear and compelling. For those considering the extent of the shift in mindset and culture and the scale of the internal changes required, and for others more detached from the marketplace, the case needs to be made extremely obvious and compelling. Capon and Mihoc make the point that companies, in order to be successful in their fundamental mission to ‘make profits today and promise profits tomorrow … must attract, retain and grow customers’, which they can do only if they create more value for customers than the competition. It then follows that ‘if a large percent of revenues derive from a small percent of customers, then those relatively few customers should receive a disproportionately large amount of firm attention and resources’. KSAM is about the optimal application of those resources and management of the outcomes.

However, while it is hard to contradict the logic of this argument, many companies and their senior managers find it difficult to swallow the consequences: sometimes because they seem to hold a naive belief that all customers and all account managers should be treated equally; sometimes because they cannot or do not wish to accept the changes to the existing organization that will ensue; sometimes because KSAM requires a degree of trust between trading partners that is simply alien to them. Indeed, in their paper, Piercy and Lane discuss the risks of KSAM, which should be considered alongside the drivers and the opportunities.

Companies are addicted to optimism and tend to assume that they can continue indefinitely as they are, which makes change just one option among others, even a dangerous frivolity to some. Depicting a future of decline is too uncomfortable, even though that would be the logical consequence of failing to adapt to the new reality of market conditions. Across a wide range of sectors, this reality means fewer, larger, globalizing customers seeking more value for their money: especially better integration with their total supply chain, and therefore suppliers with more capabilities operating over a wider geographical area. A supplier denying the impact of such factors is endangering the whole company by delaying the changes needed to protect its business.

Capon and Mihoc set out the pressures in the business environment that demand a KSAM response, together with those from key customers, from smaller, non-key customers, and from the ‘new’ role of procurement and the application of its techniques. It is critical that everyone in the supplier company embraces the KSAM programme, so they need to understand and fully accept why their company is introducing it – the drivers of KSAM are also the focus of Brehmer and Rehme's paper.

While companies yearn for simplicity, from the outset Brehmer and Rehme recognize its increasingly common presence in bigger businesses and in KSAM. They make an important link between complexity and the form of the KSAM programme designed to respond to it; indeed, they see that KSAM is often introduced to deal with complexity and uncertainty. The nature and source of the complexity – structural and/or operational – will affect KSAM differently, and they identify different types of KSAM programme accordingly:

• Standard sales situation: low complexity in both dimensions, not requiring KSAM.
• Proactive KSAM programme: high operational complexity, initiated by the supplier internally for coordinating product offers, and driven by sales opportunity.
• Reactive KSAM programme: high structural complexity, driven by external, customer demands for a more coordinated contact and management approach (e.g. international coordination).
• Organization-based KSAM programme: high complexity in both dimensions, driven by belief in customer-centric organizational units.

As they point out, the last of these, i.e. the organization-based KSAM programme, requires the strongest commitment from corporate leadership. Brehmer and Rehme studied ABB over several years, prompting their observation that often ‘KAM programmes are established by top management with the notion to increase sales to already established customers in local markets’. As customers become more international, or increase their range of activity or rate of growth, or become more complex in other ways, they demand a more coherent and coordinated approach. The supplier is then drawn towards organization-based KSAM, which is designed to deal with both internal and external issues and complexity, finally requiring its integration into the corporate structure. In her paper Woodburn charts a similar journey, in different terms, of transitioning to KSAM.

Whether KSAM is part of strategy or structure can be debated, and generally suppliers begin by trying to confine it to strategy, often ignoring the impact on structure that, almost inevitably, it will produce, as the company endeavours to work with it. As Brehmer and Rehme say, ultimately ‘KAM is both a strategic platform for the sales organization and a part of the overall organizational design’. Perhaps suppliers should recognize the structural implications of what they have started earlier, or accept the limitations of what they can achieve without structural adaptation.

The linkages between strategy and structure occupy a large space in the minds of suppliers and KSAM researchers alike, including Woodburn in her paper on making the transition to KSAM. It would be naive to expect that a stated strategy is automatically embraced by an organization, and KSAM strategy is often diluted or negated by lack of genuine commitment and by general inertia and inability to carry through any kind of organizational change. Development of an effective KSAM programme has to run the gauntlet of a number of cultural factors which frequently frustrate progress, such as a lack of understanding of the difference between sales and KSAM, which can occur both within the sales organization and outside it among the rest of the company.

Resistance is not always owing to misunderstanding: KSAM may be understood but its implications for sales structure are not accepted, when it challenges current allocations of territory or sales results. Sales managers see a loss of status or even of financial incentives if key accounts are removed from their jurisdiction, and they argue against organization-based KSAM even where the customer is seeking this approach. At best, excessive layers of organization slow down appropriate responses to customers and, at worst, prevent KSAM happening. Customers read their importance to the supplier from the distance between their contact and decision-makers on the supplier board.

While suppliers and many academics consider KSAM to be a sales strategy, delivering the value that is intrinsic to KSAM, as discussed by several Handbook authors (e.g. La Rocca and Snehota), it has implications for other company strategies, such as product/service strategy, R&D strategy, logistics strategy and financial/investment strategy. Clearly, the rest of the company needs to accept KSAM and its part in fulfilling the commitments generated, but often other functions stick to their own agenda, which may not be aligned to key customers or to KSAM. A major element in successfully making the change to KSAM is communicating with the rest of the company, understanding and responding to their needs and concerns, and winning their pro-active cooperation.

Woodburn charts the journey towards ‘best practice’ KSAM taken by companies across a number of sectors (leaving out the cul-de-sacs and errors that they may have entered into along the way) in terms of the actions to be executed to achieve the new way of working. A large, perhaps rather daunting, range of actions needs to be specified and implemented within major streams of activity:

• Strategy and planning: consisting of goals and strategy, planning and objectives, and research.
• Organization and people: addressing key account managers, key account teams and the KSAM community, and the wider organization and senior management.
• Processes: making adaptations in key account manager activities, other KSAM-linked activities and core processes (such as manufacturing, customer services, budgeting, etc.).
  
  

Suppliers progress through a series of phases of increasing KSAM sophistication. Many of the early decisions will need to be reformulated and improved as the company learns through its experience of KSAM, and realizes that it and its key customers have outgrown the initial approach, which no longer meets either's needs, as Brehmer and Rehme predicted.

Sengupta, Krapfel and Pusateri tested the common assumption, which clearly some buyers and sellers still harbour, that if the costs of changing a supplier were high, the customer would be obliged to stay with that supplier, to the disadvantage of the customer because the supplier would take advantage of the customer's dependency. This expectation is obviously a significant barrier to developing closer and more cost-consuming relationships; in other words, it undermines the whole concept of KSAM. However, Sengupta et al. were not convinced that this ‘rule’ applied in KSAM, so they set out to examine the impact of switching costs (the psychological, physical and economic costs a customer faces in changing a supplier) on both the customer and the supplier, for better or for worse.

Perhaps not surprisingly, switching costs were increased by the customer's relationship-specific investment, but they were also increased by the supplier's adaptations and the incentives it offered to the customer. It might be expected that customers would resist investing in a supplier relationship in order to avoid this vulnerable position, but in longer-term relationships, in which the parties get to know and trust each other, the customer may choose to invest: in products, processes or dedicated people. Higher switching costs increase the importance of the relationship to the customer and its interest in maintaining a high-quality relationship for longer. Sengupta et al. found that higher switching costs resulted in better performance for both supplier and customer, i.e. a win–win situation, rather than the supplier win–customer lose outcome often assumed by customers – and therefore feared and avoided – derived from adversarial relationships. There seems to be a balancing mechanism at work, in which the supplier makes adaptations alongside the customer's investments.

Interestingly, Sengupta et al. also found that ‘customers seem to value adaptation in a long-term relationship more than short-term incentives’. They concluded that spending on adaptation was a better use of a supplier's resources than short-term financial incentives such as discounts and sales promotions. So creating high switching costs is a good thing for the supplier, and not a bad thing for the customer. Therefore, logically, key account managers should be considering how they may be increased, even though it is likely that such increases for customers will be matched by the supplier. Although that looks like a job for the key account manager, Sengupta et al. saw it as the responsibility of the whole organization because problem-solving resources will be engaged across the company.

Croom expands on Sengupta et al.'s consideration of the customer's point of view and reminds us that the customer has its own perspective, which suppliers overlook at their peril. Indeed, most of this book takes the perspective of the supplier and looks at the customer through the eyes of the supplier, as the name KSAM implies. In fact, KSAM has always been a customer-driven approach, arising from their exasperation with, as they see it, the short-sighted, short-term, tunnel vision of suppliers. Croom exposes powerful reasons why customers seek KSAM from their key suppliers, many of them emanating from ‘new’ purchasing practices that buy more intelligently than in the past.

Purchasing professionals now employ two kinds of competencies: operational/technical skills and relational/interaction skills. They have enhanced their capabilities in both areas, e.g. financial literacy, where they are now more interested in total cost and life-cycle cost analysis than price levels, and at the same time they increasingly focus on ‘softer skills associated with building long term, collaborative relationships to drive innovation’, even though the primary motivation may still be cost reduction. However, we should consider whether KSAM professionals have upgraded their competencies similarly: our experience does not convince us that they have. Most key account managers' financial and analytical skills are still quite poor, and while they would claim superior relationship-building skills, many relate to only a narrow band of contacts in the customer, and especially lack credibility with senior managers.

Importantly, Croom touches on the impact of trust in these relationships: without trust between business partners, very little can be achieved. Trust is often discussed as if it were a binary concept, simply ‘on’ or ‘off’, whereas high- and low-trust relationships can be observed, with all gradations in between. High trust has an economic benefit that can be traced through the speed and efficiency of responses, resulting in lower costs and higher revenues, which is reversed in low-trust situations.

Companies need to be internally aligned before they can reasonably expect to align with external partners, but Croom observes that ‘even the firm itself may not understand their true capabilities’, which is a significant hindrance to achieving internal alignment. ‘Alignment between the activities of suppliers and buyers … is increasingly considered to be the fundamental strategic role for purchasing’, but poor communication and low trust are important restrictions in to reaching that goal.

Some key account managers discount the customer's business logic and claim that good relationships are built on their personality and effort, but Croom demonstrates a rational approach to relationships on the customer's side, in which they are clear about the economic benefits they expect. Purchasing professionals, when asked for their reaction to the mantra ‘people buy from people’, said: ‘Amateurs buy from people, and we are professionals.’ Another, asked whether liking for the key account manager entered the buying equation, said: ‘I like a man who gives me what I like.’ Even in cultures that have traditionally placed more emphasis on personal empathy, the key customers are increasingly either global accounts importing well-embedded professional purchasing practices, or the most sophisticated local key accounts. As Croom says: ‘The dynamic purchasing executive seeks out suppliers who can articulate a clear relationship development strategy and has developed a strategic account plan in collaboration with their customer.’ And if that is not the kind of purchasing executive found in the customer, then whether there is any point in nominating them as a key account has to be challenged.

Finally, Piercy and Lane sound a note – a symphony, in fact – of caution. They suggest that ‘the perceived moral intensity of these relationships is commonly low’ and therefore ‘propose the need for greater transparency and senior management questioning of the ethical and moral issues implicit in strategic account management’. They challenge the ethical position of ‘benefiting the few (large, strategic customers) at the expense of the many (smaller customers and other stakeholders)’. The counter-argument would be that B2B markets are increasingly dominated by a few large players; that in order to survive, businesses are obliged to accept, operate in and respond to the market environment that surrounds them; and that if any single supplier does not service a market leader as they require, the whole business could be lost. Nevertheless, they identify the substantial risks in high levels of dependence on strategic customers and raise some very valid issues which suppliers would do well to consider.

Piercy and Lane suggest that no single business is likely to be big enough to cope with the complex and diverse demands of huge, global customers, which are then supported by networks of alliance partners, in which success depends heavily on effectively matching the capabilities of the participating organizations with benefits and trade-offs in the relationship that are favourable for each of the partners. However, they argue that ‘this process of matching … and realignment of goals and processes is likely to create serious weaknesses … and behaviours which would not otherwise be undertaken or … regarded as attractive or even acceptable corporate practices’.

Also of concern is the impact of a failed relationship on a company's remaining ability to compete and survive. Certainly, suppliers are acutely aware that the higher the level of dependence on a partner organization, the greater the strategic vulnerability created if the relationship fails. Sengupta et al. suggest that such dependency increases the quality of and commitment to the relationship, but not all relationships endure nevertheless, and the consequences of disruption must be recognized and, ideally, mitigated. With the survival of the company potentially at risk, moral and ethical values may not come to the fore. Indeed, executives may not perceive any ethical dimension in this or ‘believe that they or their organizations should consider moral issues as a significant context for collaboration’.

However, mutual trust depends on ethical behaviour between the partners, so in that respect a successful relationship may be self-regulating in that respect to some extent, which is not to say that the collaboration itself might not behave unethically towards other parties. Piercy and Lane identify three aspects of SAM which they consider to ‘pose moral and ethical dilemmas: (1) the impact of seller strategy which favours a few customers at the expense of the many; (2) the potentially harmful, though sometimes unintended, consequences of the strategic account relationship; and (3) the dilemmas faced in implementing the strategic account manager role, as it relates to information sharing across organizational boundaries, trust between partnered organizations and the principle of ‘keeping promises’, and the hidden incentives encouraging unethical behaviour which may be implicit in some strategic account management models’. The editors do not agree with the totality of their analysis, but all concerned should give careful consideration to the issues they raise and determine an appropriate response.

Section 2: Value creation through KSAM

Central themes in KSAM are the concepts of value and value creation. A common view is that KSAM programmes are initiated in the expectation that the potential supplier value embedded in relationships with strategically important customers, represented by turnover or profitability, will be protected and grown by offering buyers enhanced reciprocal value through preferential treatment in respect of prices, terms and individual attention. The contributions to this section suggest that this may be an oversimplified view.

A number of value-related sub-themes can be traced in this section, which suggest that value and value creation are not only central elements of KSAM programmes but also complex issues that are often poorly understood, particularly by senior management.

Some key questions are addressed in this section:

• What is value? (La Rocca and Snehota, Henneberg et al., Ivens and Pardo, Lacoste, McDonald and Woodburn, Lemmens and Vanderbiesen).
• Who creates it and who appropriates it? (La Rocca and Snehota, Henneberg et al., Lacoste, Ivens and Pardo, Lemmens and Vanderbiesen).
• What are the strategic and planning issues in creating value in KSAM? (La Rocca and Snehota, Lacoste, McDonald and Woodburn).
• How is the process managed? (La Rocca and Snehota, Henneberg et al., McDonald and Woodburn).
• Is the value created quantified and sufficient? (La Rocca and Snehota, Lemmens and Vanderbeisen, McDonald and Woodburn).
  
  

The idea that value is created by the supplier and appropriated by the buyer is challenged by La Rocca and Snehota, who build upon both the IMP tradition and the more recently emerging concept of service-dominant logic. KSAM from the seller's perspective is about profit, not just about growing revenue, but how to grow profits and how to manage strategic customer relationships are seldom made explicit. Profit is associated with the value created in the relationship between customer and supplier, and traditionally account management has been credited with creating value for customers, by identifying needs and coordinating the activities of the seller organization to meet those needs with bespoke value propositions.

A radical shift has occurred in sales management from transactional to relationship selling and this has been mirrored in KSAM, which has also, until recently, been largely occupied with increasing revenue and share of wallet. The recent change of emphasis towards relationship management is a response to increasingly complex inter-organizational relationships that require higher levels of inter-organizational coordination by account management, and an ability to create new solutions that customers value. The argument put forward by La Rocca and Snehota is that value is created with rather than for customers. This insight, they claim, is not reflected in the literature.

If value creation is not exclusive to sellers, neither is its evaluation. Value has traditionally been associated with the ownership of goods, and the seller's task has been to discover needs, develop solutions and deliver them to customers in exchange for something else. Value derives from the use of products and services, not solely from their ownership, and value can be determined only from the perspective of the receiver; even then, value assessment will change with the change that occurs in individual and organizational perceptions, understanding, evolution and experience.

Within a B2B context, value does not derive from goods and services but reflects an ongoing process of problem resolution through interdependence, interaction and value creation. Value created through interaction has both costs and benefits to the customer and to the supplier, and solutions to problems may have immediate economic consequences in terms of performance, cost savings and so on, and increasing problem-solving capability.

Value is generated within the relationship, claim La Rocca and Snehota, yet interaction should not be viewed as the means of value creation but ‘the very process of value creation itself, which is produced in between parties’.

La Rocca and Snehota then go on to discuss how value is generated in business relationships, identifying four facets of the process:

This is a complex process involving many individuals from both organizations, requiring connections between customer and supplier organizations and their operations as well as interfacing many different resources and activities. The need is for coordination, both of the internal activities of the supplier and the joint activities with the customer, which suggests a need to go beyond coordination to relating (bringing the customer into the value-creation process) through a constant process of adaptation and co-evolution in their ways of working. There is a subtle distinction here that advocates the need to manage within the relationship rather than managing the relationship.

What of the skills required to manage this process? La Rocca and Snehota identify what they call the critical capabilities of SAM in light of the changing nature of the process which, they argue, are better perceived as organizational rather than individual abilities. These are presented as ‘interaction capabilities, rather than reinforcing analytical skills and practices inspired by a planning logic’. The interactive nature of the process suggests the need for collective (inter-organizational) action rather than individual action. Mutual dependence and the essentially co-creative nature of relationship solution-generating processes leads to a focus upon:

• Counterpart mobilization: engaging, mobilizing and integrating the customer in solution generation.
• Development agility: developing a tolerance of ambiguity and the ability to innovate and act on partial information while being open to review and reformulate earlier choices.
• Mindful experimentation: being willing to experiment/act in times of uncertainty and ambiguity.
• Persistency and resilience: the process is ongoing and constantly changing, and the need for adaptation is continuous. Commitment and persistency, if combined with development agility, tend to yield positive economic outcomes over time.
  
  

La Rocca and Snehota make a valuable contribution to our understanding of the nature of value in B2B markets, how it is created, how it is interpreted and how it can be managed. They make thought-provoking suggestions as to the nature and form of organizational and managerial competencies necessary to be successful in generating solution-based value within the process of interaction that have important implications for management and approach in KSAM.

Henneberg, Pardo, Mouzas and Naudé focus upon the management of portfolios of relationships. They also endorse the trend towards relationship-induced value management, the service-dominant logic of Vargo and Lusch, as opposed to the product-dominant logic of traditional marketing. They argue that relationship management processes and capabilities are not embedded in a single party to the relationship but represent dyadic strategic perspectives.

Much extant literature relating to value takes the perspective of the buyer and the value they receive from the seller. This is problematic in that collaboration implies mutual benefits and sacrifices. A dyadically grounded approach is adopted in this offering that takes into account the concept of co-production and mutual benefit, as well as recognizing the concepts of internal and external value.

Value in key relationships can be disaggregated into three levels – internal, exchange and relational:

• Internal proprietary value is created and appropriated by a single actor.
• Exchange value is created by the supplier and exploited by the buyer (or vice versa).
• Relational value is created and appropriated within the relationship.
  
  

Both buyer and seller are free to adopt any of these strategies unilaterally but the success of each decision is not independent of the strategic orientation of the dyadic partner. Indeed, some may not be viable or may require ongoing management and coordination.

Thus Henneberg et al. develop a taxonomy of nine relational strategy postures. Where strategies concur there is said to be a natural match. Where there are extreme differences between internal value and relational value orientations, then the dyadic relationship may be untenable. Managed relationships are perceived to exist where there is a minor difference between the dyadic partners' value orientation as between internal value and exchange value, and between exchange value and relationship value. Managed relationships occur where both parties in the relationship contribute to making the relationship viable. The four resultant managed relationship states require high levels of dyadic competence and their own specific set of dyadic strategies.

Henneberg et al. make the same point as La Rocca and Snehota, that dyadic competencies are developed not independently but within the context of the relationship, so they reside ‘crucially in the resources and activities shared by the dyadic partners’. This paper makes four contributions to our understanding of value creation:

While the future of KSAM may lie with increasingly collaborative, interdependent and interactive relationship strategies, the reality is that some buyer–seller relationships adopt a competitive stance and are adversarial, competing for transactional benefits. These opposing strategic approaches are argued to have different outcomes. A competitive approach, fuelled by a desire to achieve a greater share of limited transactional benefits, results in one or other party winning a greater share of the ‘value pie’. A cooperative strategy, focusing upon deriving benefit from the relationship, results in a larger pie with potentially greater value for both parties. Even where cooperative strategies are pursued, however, buyers often perceive value creation as positive only if they appropriate a larger slice of the value pie.

At either end of the continuum these two approaches are mutually exclusive, but firms often display both, as they operate under the tension of reconciling the need to collaborate to achieve long-term mutual benefit with the need to achieve short-term price transactional benefits. Lacoste identifies that some key accounts adopt hybrid strategies, combining cooperation and competition, in order to maximize their share of the value created. She dubs this relationship form vertical coopetition. It may be necessary for buyers to protect their independence of choice within the market rather than select a few dedicated suppliers, while at the same time capturing value from relationship benefits.

Adopting relational, cooperative strategies provides buyers with a range of benefits related to product (quality, innovation, etc.), service (supply chain optimization, supplier-specific know-how) and interaction (e.g. problem solving) that is largely non-economic. These benefits are generated through high levels of interaction and mutual knowledge. Competitive strategies, although short term, also deliver benefits to the buyer in the form of achieving best price/quality, at the same time as offering a good overview of the market and allowing them the opportunity to switch suppliers in order to take advantage of innovation or better terms and conditions. This allows the customer to remain relatively independent of individual suppliers.

Two dominant approaches were observed in the adoption of hybrid coopetitive strategies: competitive/cooperative and competitive/cooperative. The first is a primarily competitive approach to the market but with the tactical use of relational approaches, in order to reinforce the competitive strategies. Only after the largest share of pie has been won will non-economic benefits be considered. The second is primarily cooperative, but with the use of competitive tactics to manage a number of aspects of the relationship. For example, transactional approaches are used to deter suppliers from opportunistic activity and ensure competitive prices are maintained. Firms were observed to make use of both approaches. For example, it was found that even where an extreme transactional approach was adopted by the key account, some attempts were made to achieve relational benefits in problem solving by facilitating information exchange.

These observations serve to remind us that although the trend may be towards closer, more collaborative buyer–seller KSAM relationships, not all important customers adopt consistent strategies, whether collaborative or competitive. They can be expected to act in their own best (short- and long-term) interest, adapting their strategic approach to meet the conditions pertaining to individual relationships and market conditions. Suppliers should be aware that from time to time key accounts may adopt strategies aimed at conditioning them to support customers’ long- and short-term objectives.

While accepting that these types of customers exist and that many of them are key, the question arises as to whether these relationships are strategic in the sense that we have defined KSAM, or merely key? In some cases (see Lemmens and Vanderbiesen) even global key accounts attempt to extract concessions from their global suppliers for the very reason that they recognize how important they are to them. Evidently many suppliers who have KSAM programmes also have KAM or KAS (key account sales) programmes, highlighting the need for portfolio analysis when striving to create value with and for customers, and for development of different strategies that reflect the reality of relational potential.

Ivens and Pardo return to the idea that the core objective of KSAM programmes is to create value for both buyer and seller, not to increase prices or share of wallet. They point to a need for a different form of management on the part of suppliers in order to achieve the joint value creation potential that is perceived to be the primary objective of KSAM programmes. Drawing upon the literature, KSAM relationships are identified as delivering benefits in terms of reducing uncertainty for suppliers. A distinction is made between internal uncertainty (the supplier's difficulty in predicting the actions of the buyer) and external uncertainty (the supplier's difficulty in predicting change in down-steam markets).

The literature also suggests that KSAM relationships are characterized as having:

• Higher levels of relationship-specific investment by the supplier.
• Higher levels of supplier dependence.
• Higher levels of formal contract.
• Higher levels of coordination of the supplier's customer-directed processes.
• Longer duration than ordinary relationships.
• More actors in the relationship.
• Higher levels of financial turnover.
• Customers that pay premium prices.
  
  

However, not all of these characteristics of KSAM organization were supported by Ivens and Pardo's research. Specifically, there was no evidence that the supplier's customer-facing processes were better coordinated, that relationships lasted longer, that higher prices were paid or that there were higher levels of formal governance. These apparent anomalies are discussed and the following conclusions are drawn:

McDonald and Woodburn's paper addresses the need for capturing the value to be created in a form that both organizations can use and execute. They highlight the importance of planning in developing and delivering tangible value to strategically important customers. While their approach stresses the need for suppliers to be proactive, they also point out, citing Henneberg et al., that strategies can be diverse and that they may be aimed at creating different kinds of value, differentiated by who produces and who appropriates the value. The offering from La Rocca and Snehota argues that all value is essentially co-created, but it is perhaps useful to make the distinction that there are occasions when the seller should be proactive, even if only for the purposes of getting the strategizing process started, while acknowledging, as McDonald and Woodburn do, that close customer involvement will ensure greater levels of acceptance of the value offered.

Account plans provide benefits at several different levels. They allow customers to express what added value they expect, the supplier to understand how the relationship will contribute to the wider corporate mission, the account team to articulate and understand relational strategies, and opportunities for learning. For the account manager they also provide a clear roadmap for the management of the account.

Value needs to be shared: if either party is appropriating the lion's share of the value then the relationship has no long-term viability. Value, the authors suggest, is finally defined by the contribution it makes to the bottom line for both customer and supplier:

• For customers, the bulk of value creation by suppliers results in lower costs.
• For suppliers, the bulk of value creation by customers results in business growth.
  
  

Plans should therefore be aimed at ensuring customer long-term profitability, although McDonald and Woodburn suggest that available tools are often not used to good effect in gauging profit, either of KSAM as a strategy or the value of individual relationships.

They discuss in detail approaches to strategic account planning and propose a number of methodologies for assessing the value that those plans deliver. For KSAM programmes to succeed they need to be supported by quality strategic plans that the company can trust and invest in. McDonald and Woodburn are unsure that many key account managers have sufficient experience and expertise to develop such plans. They are also unsure of the commitment of many supplier companies to the development of these plans, even though they may have rigorous planning processes in other parts of the business.

Adopting a KSAM strategy involves major change in internal culture and alignment of functions, systems and processes to meet the needs and deliver the value promised by KSAM programmes. This cannot be achieved without planning, and effective strategies are unlikely to be developed or implemented without the right quality of people and support from the highest levels within the organization.

Assessing the economic value of relationships is difficult, but without that knowledge senior management, understandably, has a problem with committing and sustaining investment in programmes that, as we have seen, may cause considerable disruption to the existing organization. This issue is addressed by Lemmens and Vanderbiesen, whose work is designed to quantify the value created in terms of customer profitability. They consider the quantification of value from the supplier's side, admittedly, since it is probably even more difficult to quantify the value the customer receives. They challenge the received wisdom that long-term relationships and customer profitability are necessarily related. They cite the growth in strategic importance, power and professionalism of global procurement in acquiring added value from their suppliers and suggest that account management programmes are a response to the increasing market power of global customers.

Measuring customer and not just product line profitability is important because of the relational costs associated with serving customers through KSAM programmes. Large customers can be unprofitable, not only because of the preferential prices they may have negotiated, but also because of the additional demands they make for account management benefits. These costs may be difficult to identify and quantify, but identifying levels of customer profitability helps to allocate the right costs and revenues at customer account level, leading to a clear view on the profitability of the customers. Lemmens and Vanderbiesen propose that activity-based costing is the only method that can correctly allocate costs accrued through activity around customers and allow the assessment of customer profitability. They provide a number of worked examples that provide clear guidance as to how customer lifetime value (CLV) may be calculated.

Customer profitability can be used as a measure on its own but is also valuable in helping to assess the asset value of customers, the CLV, which is important because it allows customers to be classified into tiers based on their long-term profitability, so that decisions can be taken concerning the allocation of resources to individual customer relationships. CLV can be influenced by the activities of the key account manager in building a closer relationship that facilitates:

• Enhancing cash flows by increasing sales or reducing costs.
• Accelerating cash flows.
• Reducing cash flow vulnerability by increasing customer loyalty, satisfaction and retention.
• Developing servicing propositions and value propositions that provide a platform for future cash flows.
  
  

In addition, it is proposed that encouraging customers to participate in co-creation reduces costs and enhances value. The key strategic account manager occupies a central role in facilitating dialogue, ensuring access to information, making everyone aware of the risks and ensuring transparency between all parties involved. The higher the level of his/her engagement in the customer organization and the greater the attention paid to risk reduction, the easier it will be to shorten the decision-making cycle, reducing the time to money.

What is value in the context of KSAM? Ultimately all value in business markets is economic value in terms of profit, but the traditional view of value as being the simple product of economic exchange is too narrow. Increasingly, direct economic and non-economic value is created within the context of relationships and interaction between buyer and seller. ‘Non-economic value’, in terms of learning, knowledge transfer, process capabilities and innovation etc., translates in the long term into profits and may provide a sounder foundation for long-term growth, so should perhaps rather be seen as indirect economic value.

Value may be created by supplier or customer or jointly and can be appropriated by either party or shared. Traditionally in KSAM, value has been perceived as being created by the account management team for the benefit of the customer, but increasingly customers are drawn towards co-creation with their suppliers and a sharing of mutual benefits. This is not always the case, however; the tendency has been for buyers and sellers to act in ways that support their own, often short-term, best interests and to appropriate a bigger ‘share of the pie’ where they can. If companies are to benefit from the potential for value creation inherent in interaction and interdependence, this kind of opportunism may not be in their best long-term interests, and a culture of cooperation, trust and mutual interest needs to replace too-blinkered a culture of self-interest.

Section 3: Developing KSAM programmes

KSAM is a strategic relationship marketing initiative that requires its place within the organization and ways in which it can align as one organizational element with others which it relies upon to help deliver value to customers. The issues facing managers designing and implementing KSAM programmes are made more complex because the programme is new: it must ultimately find a way to fit with (or change) existing organizational functions, structures, systems, processes and personnel. A further complexity is encountered because often KSAM is fundamentally different from other elements within the firm, in that it is organized around customers rather than around function, process, technology, product or geography, as traditionally. As such it may challenge existing power bases within the organization and almost certainly challenges existing ways of doing business.

The design of programmes must also address the issue of what it aims to achieve, what it will provide to strategic customers that is not available to ordinary customers, and who will manage the process, both at a strategic level and at the level of the individual relationship. Where will they sit within the organization and how will they interact with other departments in order to coordinate customer-facing activities?

This section offers a number of different perspectives on the problem of how to organize for KSAM. The first two, from Homburg, Workman and Jensen and from Wengler, focus upon those approaches to KSAM that result in superior performance: KSAM effectiveness and overall market performance on the one hand, and economic performance on the other. Yip and Bink identify three GAM organizational configurations and explore one in depth through the medium of a case study. Storbacka offers a framework that emphasizes the interactivity and interdependence of KSAM organizational design elements, stressing the importance of their centrality to the firm. Atanasova and Senn explore the nature of global teams and their role in the GAM process. We see that KSAM is not a solo sales activity, and that teams are becoming increasingly important in its delivery, so their findings are important for KSAM generally. Finally, Guenzi offers a case study of change to KSAM which constitutes a practical look at a company making the transition to KSAM, while so many fail to make the change at all (Wilson and Woodburn 2014), bringing a note of ‘the real world’ to complete the section.

Homburg, Workman and Jensen have synthesized their seminal papers of 2002 and 2003 to present four decision dimensions relating to KSAM organization, drawing on a wide body of literature:

• Activities – those things that are done for strategically important customers that are different from what is done for ordinary accounts and which are initiated by the supplier.
• Actors – who are responsible for delivering these additional benefits as coordinators (key account managers), contributors (other functional specialists) and supporters/facilitators (senior managers).
• Resources – the access that the programme has to sales and marketing and non-sales and marketing resources.
• Formalization – the degree to which the programme is formalized.

They posited that decisions made in these areas shape the KAM programme and impact upon performance. These dimensions were further developed into 11 variables, which expand on those dimensions: for example, activities are refined into ‘activity intensity – the extent to which the supplier does more for key accounts than for average accounts’ and ‘activity proactiveness – the extent to which activities are initiated by the supplier’. They present an excellent discussion of these variables and their potential impact upon outcomes.

Homburg et al. drew respondents from companies from a variety of industries with turnovers of $15 million to $1,500 million, and from different levels within the KAM organizational hierarchy. They were asked to rate their KAM programmes on the variables and also to rate their company performance in terms of KAM performance and overall market performance. A taxonomy of KAM organizational clusters was developed, ranging from Top-Management KAM through Middle-Management, Operating Level, Cross-Functional, Unstructured, Isolated, Country Club and No KAM. Each cluster, displaying different levels and combinations of the 11 variables (for example, senior management involvement or formalization), was then associated with KSAM effectiveness.

Two of these clusters amounted to no KAM, i.e. No KAM and Country Club KAM, and two further forms were arguably not really operating KAM either, or at least not KSAM according to our definition, i.e. Unstructured and Isolated KAM. Positive findings included the importance of esprit de corps, proactivity in developing additional offerings for strategic accounts, and the involvement of senior management in the process. In an interesting but controversial finding, Homburg et al. claimed that high levels of formalization may tend to decrease KSAM effectiveness, which was later challenged by Storbacka. This apparent mismatch may reflect different aspects of formalization and the way that it operates: it should be positive for KSAM if it brings clarity to complexity, but it could also have negative connotations if it implies inflexibility and pressure to standardize.

These papers made an important contribution to our thinking about KSAM design and implementation and provided the foundation from which a great deal of further research evolved, including a contribution to the next paper in this section. It is surprising that before this article by Wengler, originally published in 2007, no attempt had been made to evaluate the economic effectiveness of KSAM strategies and organizational options by applying transaction cost economics (TCE) theory. TCE is one of the theoretical underpinnings of the IMP interactive, network and relationships approach to industrial marketing and purchasing, and KSAM may be viewed as the operationalization of the IMP approach from the supply side.

KSAM programmes remain popular, despite the difficulties of implementation which commonly result in poor levels of effectiveness and efficiency, because of increasing competition with other suppliers for customers in oligopolistic markets and customer expectations of closer, more collaborative relationships with strategic suppliers. This tension between profitability and competing effectively is accompanied by the tension between a generic KSAM organizational design and one that takes account of the demands of individual relationships. While the literature addresses the issue of different value propositions to meet the needs of different customers, little attention appears to be paid to organizing differently for each relationship. Wengler offers a decision model that he claims will ‘help in the process of choosing the most appropriate key account management organization with respect to the characteristics of a specific customer–supplier relationship’.

As a relationship marketing strategy, KSAM organizational decisions need to take account of both internal and external influences, with the consequent need to calculate transaction costs from both inter-organizational and intra-organizational perspectives. KSAM relationships essentially represent the bilateral governance form of economic organization, envisaged by Williamson (1985) as standing (theoretically) between the extremes of firms and hierarchies. TCE has largely ignored the question of internal organization, but Wengler extends the discussion of the traditional transaction costs associated with asset specificity, uncertainty and frequency to questions of intra-organizational design and the impact of organizational design options upon transaction costs. Start-up costs and the cost of organizational resistance to change should also be considered in making cost–benefit comparisons. A decision model emerges that allows companies to assess the appropriateness of existing organizational forms and to choose the most appropriate key account management organizational alternative.

Globalization is one of the most potent factors driving the shift from key account selling to key strategic account management. Global customer organizations are complex and suppliers face a number of inter- and intra-organizational problems in striving to meet global customer design. Global KSAM organizational decisions must address a number of issues: achieving a balance between central coordination and local flexibility; integrating the global programme into the wider organization in an attempt to create internal commitment; resolving global–local authority and power and reporting issues, etc. However, many of these issues also arise with non-global key strategic accounts and should be considered in any KSAM programme.

Yip and Bink outline the main elements of global KSAM organization – i.e. the global account general manager, global steering committee, global account manager, global team and local account manager – and discuss the importance of senior management commitment in terms of executive support and the central role played by information sharing in ensuring programme effectiveness. Global reporting structures and the use of customer councils at a global level are also addressed.

The global organizational elements may be configured in many different forms, but usually conform to one of three organizational designs:

• Coordination GAM.
• Control GAM.
• Separate GAM.
  
  

The nature of these different forms is discussed together with the benefits and problems associated with them. Yip and Bink observe that Control GAM appears to be the approach used most often, with companies tending to move from Coordination GAM to Control GAM. A few companies move on to Separate GAM, although this is not the norm. Control GAM appears to be the preferred form adopted by most companies because it provides the ability to balance global power with local knowledge and engage local managers effectively. These advantages and others are demonstrated through the use of a case study exploring GAM at Hewlett-Packard.

The need to integrate KSAM organizational structures within the firm is a central theme in the literature, and equally in this section. The term integration implies that something is designed to fit with existing structures, systems and processes, but it should be remembered that KSAM often represents a major shift in the firm's orientation that requires change of existing entities, in order for it to support the fundamental principles and objectives of KSAM. The co-creation of value implicit in organizing for KSAM demands integration and coordination of activities both within the supplier firm and with the strategic customer. KSAM must be viewed not as a sales strategy, therefore, but as a management strategy, geared towards achieving strategic goals as well as the identification of future growth opportunities through a deep understanding of the customer, aligning structures, systems and processes accordingly.

Using an iterative, abductive research process involving sales management experts, as well as participants drawn from a group of nine multi-national firms headquartered in the United States and several European countries, Storbacka identifies the design elements and related management practices of KSAM programmes and differentiates between then according to their impact upon inter- and intra-organizational alignment. His framework reflects the necessity for strategy, structure and systems to complement each other and to effect a high degree of internal fit, or configuration. It pinpoints the interconnectedness between different design elements and describes how effectiveness in KSAM programmes is achieved through configuration of the various elements. The research also demonstrates that a number of configurations can be successful, depending on the stage of development of the programme, differing strategic objectives, or industry logic.

Storbacka makes considerable contributions to our thinking about organizational design for KSAM and the conditions under which those designs may be successful. The paper goes beyond the identification of the elements of organizational design for KSAM. From an inter-organizational perspective the model emphasizes the interconnectedness and interdependence of the various elements, the degree to which the initiative is core, and demonstrates the centrality of the programme to the firm. An intra-organizational perspective makes evident the value of the bespoke value proposition, an underpinning collaborative customer focus, emphasis on flexibility, and the role of the account team. The value to managers is that the model affords them the opportunity to think through the systematic development of the inter-related elements of the programme in their search for effectiveness.

Atanasova and Senn continue the global theme with the development of an integrative model that sheds light on the performance determinants of global customer teams by combining concepts drawn from both customer management and organizational behaviour research. They see the area as under-researched compared with issues related to programme organization and individual account managers. Indeed, the emphasis in this section on the importance of interdependence, coordination and collaboration makes clear the importance of teams and teamwork in offering value to customers. Global KSAM teams may be structured in a number of ways, but they all involve high levels of vertical and horizontal interaction over multiple geographies, and demand interaction both inside and external to the organization.

The conceptual framework offered by Atanasova and Senn examines the relationship between team design, organizational context and processes and their impact on relational and financial performance. The value of this research is that it moves beyond structural issues to identify key performance indicators, while emphasizing the need for management to take a holistic approach to the composition and management of global customer teams. All of the team characteristics or contextual factors identified were found to have an impact upon performance and, as many of these fall under the control of senior managers, the model provides a practical tool for team design and performance improvement.

So far we have considered the structures and management practices that accompany the effective operation of KSAM programmes around issues of integration, collaboration, internal fit, configuration and so forth. The reality is that the adoption of KSAM nearly always demands radical change within the organization. This is recognized in the last contribution in this section. Guenzi applies the McKinsey 7S framework to an analysis of the change from sales-led to KSAM-focused strategy at Bosch Automotive Aftermarket Italy, which he calls the key accountization of the firm. The case study provides a number of general management rules for managing this change process effectively. Core to success is the involvement of senior managers in driving the process, changing culture to reflect customer orientation and stimulating interaction and collaboration between different functional areas. Verbatim comments illustrate many of the issues involved with transitioning to KSAM, but also encouraging responses to progress. The case study brings to life the theoretical contributions to KSAM programme development.

In concluding our review of the contributions to our understanding of the issues facing companies developing KSAM programmes, we note that there are still rich opportunities for further research. Much early research into KSAM has been descriptive and light on theoretical underpinning. Wengler argues that there is an opportunity and a need to carry out more theory-based research, drawing not only on transaction cost economics but also on organizational behaviour, network theory and so on. Storbacka identifies a number of possible avenues for further research and proposes, as do Atanasova and Senn, greater use of quantitative approaches to measure the impact of individual elements of KSAM programmes upon performance. Other areas that remain under-researched include the impact of different types of KSAM structures upon performance, the development of measures for elements that are normally viewed as subjective, what cultural issues might be involved and, perhaps most important of all, more dyadic studies. We have heard in this section that KSAM is of necessity about interdependence, interaction, collaboration, cooperation: so should there not be a focus in our research that takes the dual perspective of buyer as well as seller?

Section 4: Operationalizing KSAM

The principles of KSAM are clear and simple, but its implementation and implications are much more complex and challenging. Indeed, there are many KSAM failures where implementation has never really happened, where only a few cosmetic changes have been made and so, not surprisingly, key accounts have not perceived any material differences and therefore have not responded differently to the supplier either. In Section 1, Woodburn shows some of the common factors inhibiting the operationalization of KSAM, but it is still astonishing that suppliers can do so little to implement their strategy and yet believe that they are pursuing KSAM. Effective KSAM requires concrete change, certainly to attitudes and approaches but also to structures, processes and metrics, much of which is driven by company functions outside the sales and customer management departments. Often their drivers remain unadapted and at odds with KSAM, resulting in a deadlock which is frequently not observed by management; or it may be seen but is left unchallenged and therefore unchanged. This section addresses some of the key elements in KSAM implementation, though it cannot hope to lay bare all the decisions, goals and processes that need to be realigned if KSAM is to succeed.

At its most basic, KSAM could be said to depend on two central decisions: who gets it and what do they get? There is a good argument that key customer selection is a strategic issue, but it is also the key to implementation: suppliers often find that a good starting place is the decision ‘who gets it’, i.e. key account selection. A concrete listing of named key accounts helps them to move on from the concept of KSAM to actual implementation. On this decision hang many others, about structure, goals, offers, financing, measuring, manning and recruitment and much more. These decisions therefore should be made carefully, objectively and realistically – and often are not, resulting in suppliers with too many key accounts, which they cannot support, and/or the wrong key accounts, from which they will not get the response they require.

Buyers have long used a matrix approach to the categorization of their suppliers, while numerous KSAM academics have been fascinated by the construction of portfolios of customers, leading to the identification of the most appropriate as key accounts. At the same time, suppliers have generally overlooked all this knowledge and experience, using simplistic approaches that have generally not served them well. They commonly choose the largest customers, regardless of their nature and potential, so greater and very necessary sophistication can be brought to this selection, as Zolkiewski suggests. She looks at customer portfolios as the principal means of selecting key customers and managing relationships with them appropriately.

Customer portfolio analysis is not a trivial matter: it plays a central role in resource allocation decisions, so ‘different portfolio models are grounded in different perspectives on how resources should be allocated’. Zolkiewski provides a thorough review of portfolio methods of customer analysis, showing a wide range of factors that may be taken into consideration, and discussing the implications. Indeed, in the following paper, Gök describes in some detail how individual customer strategies, with their resource-demand consequences, are derived from customer portfolios, and Zolkiewski also shows how other authors have demonstrated significant outcomes driven by portfolio analysis.

The question is, then, how should suppliers’ construction and use of customer portfolios be improved? Three distinct phases may be identified:

• Determination of an appropriate model to use and the criteria to be assessed; collection of data and construction of the portfolio.
• Use of the portfolio to select key accounts.
• Focus on positions in the portfolio to develop individual customer strategies and assess their resource requirements.
  
  

Interestingly, Zolkiewski notes a distinction made by Terho (2009) between portfolio analysis, i.e. the activity of producing the customer portfolio view, and responsiveness, i.e. how the supplier reacts to it. In many cases, there is no specific response to the portfolio analysis, or the response is rather unfocused and dislocated from the portfolio, or no structure exists through which specific decisions and responses at portfolio level can be made, as Woodburn (2004) observed.

In theory, selection is simple: for profit-mission companies, the question to ask would be: ‘Over the next X years, which customers will bring us the most profit?’ (with X = 3+, depending on the nature of the industry). If that data were available, selection could be automatic; but of course, as all that data lies in the future, it is not available, so the job of the process of portfolio construction and key customer selection is to find indicators that will point to the best profit performers. It is, however, also confused by the influence that the supplier has on the outcomes, which will depend, to some extent, on their own actions, like how much they invest in the relationship and what investments they make, and on their position in terms of relationship, power and trust.

Zolkiewski and other authors highlight the importance of the relationship with the customer and with other members in the network, since these relationships are usually part of a web of interactions between individuals and groups. It may also be considered that the importance of the relationship, for a profit-focused entity, is determined by its capacity, sooner or later, to deliver profits to the supplier. Zolkiewski gives an excellent review of the pros and cons of numerous approaches. She exposes many of the ramifications of customer portfolio analysis: ‘Managers need to be aware that portfolios can be used on a number of different levels.’ KSAM is emphatically not a ‘one-size-fits-all’ strategy, and customer portfolios underpin the optimum application of that approach.

In his paper, Gök describes in some detail how individual customer strategies, with their resource-demand consequences, are derived from customer portfolios. He embraces customer heterogeneity and demonstrates how it can be managed, in contrast with suppliers which prefer to avoid complexity by pretending that simplicity and standardization can exist where they do not and cannot. Account portfolio analysis is designed to give prominence to customers to whom the company allocates strategic funds in the hope of developing future business, as well as to emphasize those customers on which the company is dependent. Portfolio analysis helps managers to evaluate customer relationships for development and control purposes, especially in ensuring their long-term profitability, and forces them to adopt a future-oriented perspective. It can also encourage the analysis of the supplier's needs and requirements from the proposed relationship before committing resources toward these objectives, which can easily get lost in the rush to introduce KSAM.

Through two case studies, Gök shows how the process of portfolio analysis can be applied to the development of strategies for each key customer. A multi-criterion, two-step model is used, whose virtues can be considered in the light of Zolkiewski's review, but Gök demonstrates clearly how such a model drives quite specific customer strategies. Two-step processes have been accused of complexity, but this shows that they are both viable and valuable, when approached systematically. Gök points out that account portfolio analyses are context-dependent, so the criteria used may differ. He also notes that collecting the data can be costly and time-consuming: on one hand, criteria should avoid being so difficult or abstract that the data captured is likely to be highly inaccurate or incomplete; on the other hand, criteria should avoid focusing so much on ease of collection that the analysis becomes primarily backward-looking, or simplistic and unrepresentative of important considerations. Good companies will collect much of the data required anyway as part of their market intelligence and customer insight.

In spite of the many potential criticisms that have been levelled at customer portfolio analysis, careful consideration of the criteria applied can avoid most of them, coupled with regular and active reviews of the portfolio. Companies need to be prepared to change customer positions in the portfolio and refresh their strategies when circumstances change, and to demote accounts when others are promoted, bearing in mind that any company has a limited capacity to offer KSAM treatment. While, in principle, resources should be allocated to high-potential and high-attractiveness customers, in Gök's view such suggestions are rather naïve in terms of addressing the actual direction of allocation and investment decisions, and a thorough account portfolio analysis can be used as a valuable decision support tool in KSAM.

The processes involved in KSAM seem to have received little attention from researchers, and yet many KSAM failures can be attributed to a lack of implementation rather than a lack of intent. We could suggest that if there is no process for doing something, it is not getting done: and this seems to be exactly the situation in many companies – KSAM is just not happening. For example, during a KSAM revival in his company, one key account manager asked ‘Are we actually going to ‘walk the talk’ this time?’ Directors tend to make decisions about what they want to see, leaving the ‘details’ to others, harbouring a surprisingly naive expectation that it will take place. Often very little is executed in reality, partly because of a failure to identify and deal with significant barriers or allocate necessary resources, but also because nobody has worked out the processes of execution. Modifications need to be made in both the supplier's decision-making processes and its delivery processes, since key accounts tend to require variations that involve changing some part of the supplier's normal processes, to offer something different, faster, more transparently, more interactively or whatever it is.

In KSAM, much of the ‘devil is in the detail’, but real knowledge in this area is rather scarce. So the extensive review of what has been written about KSAM processes provided by Ojasalo will be invaluable to those endeavouring to understand how KSAM actually works. It offers a great deal of food for thought and should prompt companies transitioning to KSAM to check whether all the processes he highlights have been identified and modified appropriately. It might also trigger the reflection that many of these processes are interlinked and should not be considered in isolation of each other, or of the impact of changing them on the rest of the company's activities. Through mapping KSAM processes at different management levels, Ojasalo emphasizes how critical the commitment and effort of the whole organization is to the success of the KSAM programme, a point that this book reinforces again and again in many different aspects of KSAM.

In order to organize this multitude of implementation activities, Ojasalo offers a three-level framework of processes involved in KSAM: those relating to the corporate level in a supplier company; to the relationships it manages with its key accounts; and to the annual level, which corresponds with the regular and ad hoc activities that deliver KSAM throughout the year. He discusses the hierarchical nature of these levels of processes and their different characteristics, and suggests that this hierarchy also implies an ‘order in which these processes have to be tackled if the company is interested in introducing a systematic SAM approach’. Our observations support this notion, since companies are often seen to introduce new processes to implement KSAM at relationship or annual/operational level without having changed corporate-level process, e.g. new account planning not coordinated with existing corporate business unit planning, resulting in misunderstandings and mismatches which cause unhelpful clashes, eventually necessitating a rethink and further changes that are confusing, frustrating, demotivating, exhausting and time-wasting.

Ojasalo notes that, not surprisingly, processes differ according to the task in hand. For example, at the corporate level, the processes involved are different when the company is considering whether to adopt a KSAM philosophy; deciding how to adopt KSAM; maintaining and improving its KSAM approach; or abandoning its KSAM programme. At the relationship level, processes should take into account the stage of relationship existing with the specific key account. At this level, there must also be processes for developing the value proposition tailored to that account, and selecting and managing the key account manager and team. Rarely considered are the processes that are involved in dissolving or partially unravelling a relationship, but these are also important if negative legacy issues are to be avoided.

According to Ojasalo, annual processes revolve around the annual plan, which is itself subordinate to the long-term relationship plan. The annual account plan details the value to be offered; the outcomes in terms of benefits to the supplier, and customer; relationship development and engagement activities; information exchange; and more. Overall, there should be an appropriate process in place to deliver whatever is specified in the account plans: otherwise, the danger is that they may only represent wishful thinking. KSAM-adapted processes are a fundamental element of implementation into which much more research is needed.

Frequent references to the relationship between buyer and seller in KSAM are made, but not much has been written about what is going on in these relationships and how they work, which, given their core centrality to KSAM, is curious. So Wilson's paper plays a valuable role in exposing what these relationships look like and how they should be managed. Several researchers have identified a series of stages in these connections which, although they may have different points of departure and different labels, are broadly aligned in their charting of the development of such relationships, from more distant and transactional relationships to much closer and more strategic and mutually-supportive relationships. Of these, Millman and Wilson (1994) is probably the most well-known, and Wilson uses that schema to link relationships with the problems addressed by the parties to the relationship through his Product, Process and Facilitation (PPF) model.

We all understand that our behaviour in a relationship is, and should be, strongly influenced by the atmosphere of the relationship: obviously, we behave differently with close family compared with acquaintances, whether we are cooperating together or dealing with conflict. Given that buyers can trade with a supplier without a close relationship, why either side should seek to develop a relationship and what is its purpose for each are valid questions: the reduction of uncertainty is one answer, the need to solve problems another. Wilson goes further and explores how these relationships address the problems identified by Håkansson (1982) of ‘limitation’, which represents the transaction costs incurred through elements like technology, organizational structure and knowledge; and ‘handling’, which relates to long-term development and management of the relationship, like power, dependency, cooperation and conflict.

Wilson puts problem resolution at the heart of buyer–seller interaction. There is a hierarchy of problems, some requiring more resources than others for their resolution, which are different according to whether they relate to product, process or facilitation needs. Solutions are more readily determined when the type of problem is understood in these terms. Wilson also links the nature of the problems to be solved with the stage of relationship reached: for example, where sellers concentrate on meeting only product-related customer needs, the relationship ‘will be essentially arms'-length, transaction focused and display low levels of customer involvement’, and they are unlikely to gain competitive advantage by these means alone. Suppliers that ‘can convince their customers of the value of addressing … process related issues tend to develop closer relationships with their customers and are less often the victim of competitor activity’.

Facilitation problems are about the way business is done, requiring adaptation on both sides, and their resolution is associated with the closer states of relationship. They involve activities like joint value creation, inter-organizational teamworking, and joint development of technology and markets. Through linking relationship stages and problem resolution together, the activities that drive the engine of these relationships can be observed, understood and executed more specifically and usefully and with a higher degree of sophistication than previously. Since a great deal of potential cost and profit depend on them, this understanding is extremely valuable to practitioners as well as to academics.

At the heart of the relationship with the customer is, of course, the key account manager. Once considered a solo, sales-focused role, we now know that successful key account managers lead an account team and contribute widely to the strategies of their own company and the customer's too, which brings the role to a higher, managerial level requiring a substantially different portfolio of competencies. Wilson and Holt show how understanding of the role has changed, partly as KSAM itself has developed, and partly as its implications in terms of the people who deliver it have become clearer. Nevertheless, many companies have yet to recognize that the job demands more senior managers with a much wider range of competencies, for which they will need to pay more.

Wilson and Holt highlight the differences between strategic key account managers and salespeople, which include the formers' need to work with both external processes, through multiple contacts within the client organization that span functions and hierarchical levels; and internal processes, to manage multi-functional ‘virtual’ teams, access resources and influence decisions impacting on client relationships. Even so, there is no single configuration of the role that strategic key account managers play: it depends on the relational context; the degree of relational intensity; organizational complexity and cultural diversity; and the customer's demands. Wilson and Millman (2003) summed up the role in the term political entrepreneur, which describes people who can recognize and realize the potential for innovation and value creation, and at the same time understand how organizations work, manage people and resources, and influence decisions through networking on both sides. Holt (2003), particularly, focused on the boundary-spanning requirements of strategic key account managers and the importance of their network connections.

Looking at the relational context of the role, it seems clear that various stages of relationship involve different internal and external interactions, different demands, different activities and different decisions, which are, not surprisingly, bound up with the nature of the strategic key account managers' role. Fortunately, since good strategic key account managers are scarce and expensive, that means companies can match their ‘inventory’ of key account managers with their ‘inventory’ of customer relationships, reserving their best-qualified and most KSAM-sophisticated key account managers for customers with the KSAM sophistication and business potential to warrant them. Human resources departments should be aware of the implications so that they recruit and develop people to fulfil ‘inventory’ needs, but many do not have an appropriate understanding of the role and continue to recruit salespeople to the position.

While there is much more to discover about the strategic key account manager's role, enough is already known to see that it changes and often challenges traditional organizational hierarchies and structures and ways of working. In order to carry out the expectations of both supplier and customer, the strategic key account manager needs a higher level of authority, participation in strategy-making, more resources (particularly in terms of an account team), more access to other functions and locations, and a different approach to remuneration, alongside accountability and the competencies to leverage those opportunities appropriately.

Clearly, positioning the strategic key account manager role in the company and making the changes that will allow it to work is a critical part of operationalizing KSAM, but so is identifying the right people for the job. Through demonstrating the scope of the role, Wilson and Holt show the breadth and depth of capabilities now required, while in their paper, Mahlamäki, Uusitalo and Mikkola present empirical evidence of some key personal characteristics that are positive indicators for role performance.

Many companies still recruit key account managers for their track record in sales, and even the more sophisticated suppliers seek a set of task-orientated ‘competencies’ that, although very important, are not the only factors influencing performance in the job. Personal characteristics affect outcomes too, and whereas competencies can be acquired, it is much more difficult to change personal attributes. A leading exponent of KSAM said her company ‘recruited for the attributes and trained for the competencies’ it needed in key account managers. However, most companies are wary about discussing personality elements, possibly because of employment legislation, but this reticence is mistaken: most legislation requires a demonstration of the objective relevance to the role, which Mahlamäki et al. have shown.

Using measures of overall job performance and two of its dimensions – relationship performance and sales performance – Mahlamäki et al.'s results suggest that life experience or experience working with customers do not necessarily lead to a better-performing strategic key account manager. Correlations between job performance and age, gender, education level, customer work experience and work experience with the company were not statistically significant, although the closest to significance were education level (negative, i.e. not relevant to performance) and work experience with the company (positive, i.e. useful). This suggests that suppliers can look at a wide range of demographic profiles from which to select their key account managers.

Mahlamäki et al. provide evidence that extraversion, agreeableness and conscientiousness contribute to better relationship performance, sales performance and overall performance, particularly extraversion. They also looked at emotional stability and openness to experience, but neither of these seemed to make a difference to job performance. Armed with this information, suppliers can prioritize some characteristics in key account manager candidates over others, which can be very valuable in the often difficult debates that surround selection to these crucial positions.

Clearly, there is much more work to be done to establish the ‘ideal’ profile for a key account manager, bearing in mind that, as Wilson and Holt showed, the role changes according to the relationship context and therefore also the skills required to fulfil it well, to some extent. Other personality elements, such as curiosity, creativity, gravitas and more, could usefully be exposed to empirical research, so that suppliers could be less dependent on the instinct and intuition of selectors.

While the Handbook has included key issues in operationalizing KSAM, there are others we have not covered which are also of interest: for example, rewards and performance measures should be different from those used in sales, but how? Key account managers' leadership of account teams is often poor, but how should it work? Customer profitability is crucial, but which systems provide good information with a manageable amount of effort? Many companies have made their decision to adopt KSAM and now the biggest questions are about how to execute it. Disappointment often seems to be more a failure of execution than of strategy.