INCON13-Mkt-040

KEY ACCOUNT MANAGEMENT (KAM) in B2B SEGMENT w.r.t

INSTRUMENTATION INDUSTRY
SAMIR GOVIND BUWA,
M.B.S (Mktng)
Student (MBS-Finance) I.B.M.R.
Email- Samir.buwa@gmail.com / Samir.buwa@yahoo.in
Mobile-0091 94220 08134

ABSTRACT

This Paper is to explain concept of Key Account Management (KAM), importance of this
valuable concept in modern marketing management, selection criteria to find out key
accounts from existing customers, categorising it from prospecting customers list & from
competitors customers list, benefits to both purchasers and sellers, various stages of KAM
relationship building process, terms & conditions where purchaser or seller agrees, risks
involved at the level of both the parties. Critical Key Success Factors, challenges faced in
implementing this concept and relevance to various industrial marketing in various sectors&
segments of industrial verticals& in particular to Instrumentation industry,

It will help in formulating right strategies to achieve Sales Budgets & subsequent Business
Plans of ever ambitious global corporations across the globe, where global customers are
expecting same kind of service where they operate in. It will also help corporations may be
small or big in size to make focused approach, thinking beyond 4Ps of traditional marketing
&it will ensure long term development & retention of strategic customers.

In the era of globalization, no company can afford to ignore KAM. This is that tool which will
build trust & partnership kind of relationship between buyers & sellers across the continents
where customers are going & suppliers are just following them to satisfy their global clients
needs & to find our more business opportunity locally.

Understanding the Customers need, Making perfect plan of KAM, following it up

systematically, measuring, monitoring & taking corrective actions at the appropriate time
with value proposition in industrial marketing will lead to faster & sustainable growth
achievement of every business entity in terms of Top & bottom line. Collecting field inputs
from customers by using relationship & giving the same to R&D department for future
product development, securing future & thus reducing the gaps of need & supply is also the
important work of KAM.

This paper explains how important to use KAM in instrumentation industry & Key Account
Management (KAM) is the tool used to optimise the available resources, where resources
itself are limited & Sales Budget pressure is high & adding value to buyer & supplier
relationship.

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KEY WORDS-

KAM, Globalization, Trust, Partnership, Relationship, Gaps, Top Line, Bottom Line, Future.

OBJECTIVE

1. To explore the possibility of optimizing Top Line by using KAM.

2. By using KAM, with minimum resources, achieve improved Bottom Line.

3. Development of Strategy with usage of KAM.

4. Development& Management of Future with the use of KAM in modern age business.

5. New Customer Acquisition, Retention of existing ones, development of change

management in the organization.

6. Strategic suppliers development by applying KAM.

7. KAM is also a route to Sustainable Competitive Advantage (SCA)

INTRODUCTION & CONCEPT

The Key Account is an account that you can count on for repeat business over time.

Key Account are considered to be the accounts which can have a positive strategic effect on
business. Particularly they are our best & biggest customers.

The concept of Key Account Management was introduced in decade of 1950 in Americas &
Europe. The basic assumption for a key account management model is the correct
classification of the key accounts. A basic model often used in the period of 1950-1970 was
the classification model of Webster, this model has been adapted by Milman and Wilson into
a two dimensional model and was paramount in the period of 1970-1990. Bensaou has tested
this model empirically by his research of carmakers in the United States and Japan and
corrected the fundamental flaws.

De Blick synthesized the adaptations into the 4S-model, which is at present the dominant key
account classification model.

Key Account Management is an important method to create value through implementation of

the processes targeted on the most important customers. Modern companies aim to
permanently increase their value by the means of customer orientated change development
and retention of them. Moreover, the relationship marketing literature suggests over hauling
the economic decline through focusing on the business with the main contributors to a
companys budget.

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In the era of globalization, no company can afford to ignore KAM, this is that tool which will
build trust & partnership kind of relationship between buyers & sellers across the continents
where customers are going & suppliers are just following them to satisfy their global clients
needs & to find our more business opportunity locally.

Understanding the Customers need, Making perfect plan of KAM, following it up

systematically, measuring, monitoring & taking corrective actions at the appropriate time in
industrial marketing will lead to faster & sustainable growth achievement of every business
entity in terms of Top & bottom line. Collecting field inputs from customers by using
relationship & giving the same to R&D department for future product development, securing
future & thus reducing the gaps of need & supply is also the important work of KAM.

It is an business fact that 80 per cent of revenues come from 20 per cent of your customers in
most of the business segments. It therefore paramount important to pay focus on those key
customers.
Key Account Management (KAM) is one of the best ways to ensure repeat purchases,
additional purchases and referral to other prospective customers like themselves.

Key account management includes sales but also includes planning and managing the full
relationship between a business and its most important customers. An account manager who
works in this role will engage in a variety of tasks including project management,
coordination, strategic planning, relationship management, negotiation, leadership and
innovative development of opportunities, keeping record of transaction of sale and purchase
goods. Some companies have more seasoned account managers. These can be called global
account managers or named account managers

So lets see how does it work? It should be started by dedication of a KEY ACCOUNT
MANAGER whose role is to lead and manage the key account process effectively. How
the key account sees the role of the manager is also importance.

The key account will expect the Key Account Manager to:
Be the main link into your company for all issues

To understand its business, market needs and competitive environment

Help sell them products/services that achieve Customers business objectives

Add value in the relationship to their business by, for example, advising on issues

Relevant to their business & giving them complete solution inplace of mere

Help exploit market opportunities and identify new challenges

Act with integrity and professionalism.

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KEY ACCOUNT MANAGER TRAITS, ROLES & RESPONSIBILITIES

A Key Account Manager is not a mere Sales Manager or Account Manager, this is not the
role of only selling but it is all about long term relationship building & most importantly trust
building between buyer & seller, as we aim to consider buyer should consider seller as
partner, & in this thinking shift KAM manager plays very crucial role.

KAM Manager TRAITS

KAM Manager needs to have following traits

1. He/She must have Expert Product knowledge.

2. He/She must have Expert Product knowledge w.r.t. application of Key accounts technical
process requirements.

3. He/She should have the knowledge of the key accounts business domain & industry
vertical.

4. He/She must be good in personal selling.

5. He/She must have eye on detail & should posses analytical brain

6. He/She must have problem solving approach

7. He/She must be good at relationship building

8. He/She must be good & comfortable at communicating at all levels of customers

hierarchy

9. He/She must have cross functional knowledge of complete business of both parties

KAM Manager ROLES

a)Managing the account & current activities with smooth flow of operation at every level

b) Building & developing relationships

c) Developing industry knowledge pertaining to key accounts business sector

d) Solving day to day problems at customer & at own end

e) Selling, Negotiating

f) Promoting company as brand & its business

g) Quick internal communication

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h) Managing Local, Regional & Global team of KAM Managers

i) Training & education to customer who would be end user

j) Other related activity

KAM MANAGER - RESPONSIBILITIES

To improve top line & bottom line significantly with respect to specific time, acquire & retain
strategic customers.

General Practise of Market is based on  TRANSACTIONAL SALES

SOURCE-http://www.marketingteacher.com/lesson-store/lesson-loyalty-ladder.html#
accessed on 30 Dec 2012

METHODOLOGY
Explorative Redesign Study is based on one of the Japanese MNC for which name is not to
be disclosed (Industrial Instrumentation &Analyzer company)
The researcher has its own 15 years of experience in the field &is a major input on which
findings are based. Study period is around 3 years i.e. from Jan 2010 to Dec 2012.

REVIEW OF LITERATURE-

PROCESS OF DEVELOPMENT OF KEY ACCOUNT MANAGEMENT

A. Segmentation
B. Selecting Key Accounts &Categorizing Key Accounts
C. Development Phases & Risks involved
D. Profiting from Key Accounts

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A. SEGMENTATION
Segmentation means  A market Segment is a grouping of customers with similar buying
needs, attitudes & behaviours

Here we see first joy & first headacheIts all about making choices & that is the art &
science of segmentation. How to go for Viable segment? Here are some test questions by
which one can determine proper viable segment---
Is it large enough to justify focused attention ?
Are the customers needs attitudes & behaviours similar enough to be distinguishable
from other segments?
Is it possible to design an appropriate Marketing Mix for the segment?
Is the segment reachable? Can it be identified, measured, analyzed, communicated to,
and sold to discretely from other segments?
Positive answers, will take you close to freezing Viable segment.
By preparing a different & specific marketing mix for each segment ,the business ensures that
it will meet the needs of each grouping of customers in more focused way. It enhances its
opportunity for maximizing profits through premium pricing or differentiation or the offer of
a lowest cost options-whatever the dynamics of the particular segment demands.
Method of Segmentation- Customers Mapping method

Who buys what ? How ? When? & Where?

Answer will help in Viable segmentation.

B. SELECTING & CATEGORIZING KEY ACCOUNTS

We have to be careful in identifying key accounts & selecting them out from customer
databank.
Let us consider this matrix to figure out key accounts Attractiveness---

It consist two set of factors, do you like them? & theirs (Customers) do they like you?

Expectation of Returns
High High

Key Development Account Key Account

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Opportunistic Account Maintenance Account

Custo
mer
Attra
ctive
&
ness
&
Alloc
ation
of

Low Low High

Relative Strength

Selection & Category decision can be done by following factors - -

Size, Volume, Value, Profit Opportunity
Growth Potential
Ease of Access- Geographically & Openness
Financial Stability-Credit Rating checking, future possibility of same credit rating
Current Ratios, Profit Margin, Their Credit Period, Report about the same.
Closeness of existing relationships
Strategic Fit-Do they see the world the same way we do? Will they allow me to go
where I wish to be?
Are they early adapters? Do they pick up new ideas & experiment it? Or they wait for
others to test it?
Their market standing- Industry Leader or Follower, Prestige, Ethics, Image
Competition- How competition placed? If less then its more attractive.
Our own business plan alignment with Key accounts business inclination
Are they in political stable environment?
By this way one can find Customer attractiveness, Select it properly & categorize
them for focused approach.

*RELATIVE STRENGTH - -
It means our strength in customers eye & we have to access what are they looking
for? This is really difficult task but following points will help us to derive Relative
Strength from customers perspective.
Price
ServiceOn time full measure or Just in Time requirement etc
Technically innovative product
Speed of Response
Quality
Value in use i.e. Value in supply chain, Total Acquisition cost etc
Long term sustainability

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Relationships & Attitudes

Investment in the industry
Trust & Confidence i.e. ethical standards & Behaviour
Our (suppliers) image in his eyes in terms if reliability, flexibility etc

Besides this we have to pay attention to

Global Key Accounts

Regional Key Accounts
The Business Units Key Accounts
The National Key Accounts
Local-Sales Engineers Key Account

*Types of Accounts
1.Maintenance Account
They are good customers & loyal to us kind of customers, but they give us very less
margins, but we need such kind of customers to maintain our cash flows.

2.Opportunity Account-
These are the customers we may not consider to service because they remember us
only when they dont get any other suppliers & their buying frequency is almost
negligible.

3.Key Development Account

These are those accounts where we need to give more focus on making them eligible
for Key accounts as they have great potential in terms of volume, profitability etc.
Allocate higher resources on those accounts where our image building process is
going on, which will benefit us in future.

4.Key Account-
These customers are giving you maximum benefit & are critical to our future & they
deserve energetic attention from KAM Managers to keep them on top of change. They
are more susceptible than any others as our competition is also vying them always.

C.a) DEVELOPMENT &PROGRESSION PHASES OF KEY ACCOUNT-

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Phase 1- Basic Level-

This is the phase of new customer acquisition, operational relationship gets
developed wherein transactions are handled efficiently, smoothly & quickly.

Phase 2- Co-Operation& Interdependence Level-

Over the period of time with repeat orders, cooperation is done by both the parties for
reduction of risk and enhancing ability to forecast, reduction in ordering costs, inventory
carrying cost by JIT(Just in time delivery Model). We can club Interdependence phase here
as this gives more confidence level to both parties as customer ask product without much
assistance from his side as he trust suppliers capability.

Phase 3- Integrated Level- In this phase, both the parties realise fullest potential. The
characteristics of integrated key account management are; i) buying and selling
processes/systems and strategies are integrated by both the key account buyer and seller, ii)
there exists complementary and mutually dependent relationship between buyer and seller,
iii) dedicated cross boundary, functional/project team is setup on both sides which are
socially bonded. iv) There are high exit barriers for both the parties. v) Even if there is an exit
by either party, the exit is traumatic, as substantial time, energy and resources are invested by
both the parties. For a buyer, in order to change a supplier several types of costs are involved
such as psychological, physical, and economic costs which may act as a barrier for switching.

FINDINGS
PROFITING from KAM - -
Low Business development costs : Both the parties join hands and leverage their
contacts to make new assignment successful as stakes of both are tied.
Cost reduction & sharing on R&D front
Cost effective design for New Products
Right information at right place at Right time
Reduced uncertainty
Reduced Protection measures
Better logistics management with proper supply
Cost savings getting from most trusted partner
Assured Quality of goods.
Improved Supply Chain Efficiency
Low investment high returns in less time
Faster decline in costs to serve for key customers than for non-key customers
Leading to improvements in Bottom Line
Bonding/Improvements in relations with key customers
Improvement in satisfaction ratings with key customers
Loyalty strength increased, customer becomes advocate for us

NON FINANCIAL BENEFITS of KAM :

 Good knowledge about customer requirements
 Leading to think for innovations, Out of Box thinking
 Ease in joint formulation of strategy thus managing the future
 Hassle free implementation and help from clients
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 Comfort in dealing with Key customers

 Better customer portfolio management leading to inclination towards us
 Top management support as when required

C. b) RISKS INVOLVED 
 EXETERNAL RISKS
 Price Pressure
 New technology demand always
 Key Customers order book is down, so is ours..

*INTERNAL RISKS
 We may build capacity for key customer, but if he fails to lift that much material??
i.e. inappropriate asset building
 He may be opportunistic with us, can play with others
 Inappropriate strategy formation, driven by Key customers
Above internal & external risks can be mitigated by applying proper care &
mechanics.

*RELEVANCE TO INSTRUMENTATION INDUSTRY 

Industrial process control & analytical industrys selling activity was always a
challenge for every sales person, because it involves technical engineers as well
commercial officers from purchase department. As customers are ever demanding on
technological front, we need to have KAM Managers to address customers concerns
about pre & post purchase in terms of project management.

BEFORE KAM Implementation in Instrumentation Industry

PURCHASE
MANAGER
SALES
MANAGER
INSTRUMEN
TATION
MANAGER

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AFTER KAM implementation in Instrumentation Industry - -

PURCHASE
SALES OFFICE
MANAGER CONTACTS

(All level)

CORPORATE INSTRUME
STRATEGY
KAM -NTATION
DEPT. DEPT&
MANAGER PROJECT
DEPT

R&D INSTRUME-
NTATION
DEPT.
DEPT @
FACTORY
LEVEL

CONCLUSIONS
In my paper I analysed the business context of the Instrumentation industry and
identified the need of introducing a managerial concept that would raise the customer
inclination and profitability in highly competitive environment, & I found that Key Account
Management (KAM) is the most appropriate technique to use for.

An introducing of an KAM as an appropriate marketing-management concept would

help the industry to increase its earnings, would offer to effectively concentrate on its
customers, emphasising the partnership model based mutual benefit to both parties with
optimum usage of resources considering limited resources available.
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Strategic accounts & its ever increasing complexity can be addressed by KAM technique.
Proper understanding of the Key accounts by KAM Managers will enable modern business
corporations to address each individual accounts needs & develop solution as per the
complex requirement of those demanding customers & derive financial value from them.

References 

McDonald, M. and Woodburn, D. (2007): Key Account Management: The

definitive guide, (2nd edn), Amsterdam, Elsevier

Peter Cheverton (2004):Key Account Management

Stephan Scheffman: Mastering Your Key Accounts (ebook edition)

www.iimahd.ernet.in

www.wikipedia.org

Some websites related to marketing

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