FEATURE | KEY ACCOUNT MANAGEMENT
KEY IN FOR A BRIGHT FUTURE
Forty years on, key account management is still working, says BETH ROGERS
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he term “key account management” first appeared in Europe in the 1970s, sometime before “national account management” was being discussed in the US. As a practice within business-to-business suppliers, it began to develop in the 1980s. There was always the risk that it might be another short-lived fad, but slowly and surely it became a way of companies successfully differentiating themselves through a strategic approach to selling. By the time I was writing up Cranfield School of Management’s first major study on key account management in 1994, there were several case studies of best practice to inspire me, and it was fascinating to examine them from the perspective of the supplier and the customer. Since then, I have met many organisations that are achieving great things with their strategic customers, but also many companies that find managing them very difficult. Recent research has demonstrated that, besides the advantages that can flow from key account management, there is also a dark side to close relationships with powerful customers. So, 40 years after its first appearance as a topic of serious study, what is happening to key account management? The factors in the business environment that were perceived to be driving suppliers towards closer relationships with customers, such as globalisation and the growing power of the purchasing profession, are still relevant today. Although conditions in some sectors are stable, most are dynamic, if not volatile. Expectations of suppliers are high and seem to get higher. Sellers have to be lean and cost-effective while providing an ever higher quality product and service experience. These expectations are not unique to key accounts, but it would be impossible to 34 WINNING EDGE
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imagine customers that know they have power over suppliers not wielding it to get more value. Some are proactive about driving mutual value, as good suppliers are worth keeping, others less so. With more and more information available to purchasing decision-makers, some observers perceive that there is more temptation for them to play off strategic suppliers against new competitors. If key accounts are losing their lustre, are there other segments in customer portfolios that could be more attractive? COSTS TO SERVE REMAIN CRITICAL To monitor the business case for a management structure for strategic customer relationships, you first of all have to know what the costs are. Some purchasing professionals think that they have to drive suppliers into managing them as key accounts, and if that happens without a plan for realising a return, there is potential for perpetuating loss-making business. In the early days, account managers struggled to get customer-specific costing information. Financial systems were geared to providing per-product or per-geography information. One of the advances in the past two decades that has been extremely useful to key account managers is activity-based costing (ABC), a method of allocating costs to products, services or customers based on the actual resources they consume. The upside of having detailed financial information about the costs to serve major customers is that it can reveal new opportunities for process innovation, which can help to secure customer commitment. For example, a logistics company serving a mail order company decided to allow it to self-invoice the thousands of transactions that passed between them every day. It was costly to let the sales ledger and bought ISMM.CO.UK
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