A Stage Model for Transitioning to Kam Essays

A Stage Model for Transitioning to Kam Essays A Stage Model for Transitioning to Kam Essay A Stage Model for Transitioning to Kam Essay A stage model for transitioning to KAM Iain A. Davies, University of Bath, UK* Lynette J. Ryals, Cran? eld School of Management, UK Abstract This paper investigates the under-researched area of key account management (KAM) implementation through a systematic review of the literature, syndications with a panel of industry exemplars, and a survey investigating how organisations implement KAM. Through this we identify a stage model that identifies not only how companies currently transition to KAM in practice, but also suggests how they could improve their chances of success in transitioning to KAM. We demonstrate the fundamental elements of a KAM programme and the extent to which companies feel KAM has met their pre-implementation expectations. Keywords Key Account Management, Strategic Account Management, Sales management, Industrial marketing, Implementation INTRODUCTION Key Account Management (KAM) has emerged, over the last 30 years, as one of the most significant trends in business-to-business marketing practice (Abratt and Kelly 2002; Homburg et al. 2002). It focuses on adding value to relationships and creating partnerships with a company’s most important and strategic customers (Ewart 1995; McDonald et al. 2000). The emergence of KAM has been driven in companies of all sizes by an increase in large, powerful, global, centralised purchasing customers becoming the norm across multiple industries; KAM provides our current best model for servicing these customers (McDonald et al. 997). Despite the rapid growth in the use of KAM by companies, research into the process of KAM implementation and how companies transition from traditional sales to KAM orientation has been scarce (Kempeners and Hart 1999; Napolitano *Correspondence details and biographies for the authors are located at the end of the article. JOURNAL OF MARKETING MANAGEMENT, 2009, Vol. 25, No. 9-10, pp. 1027-1048 ISSN0267-257X print /ISSN1472-1376 online  © Westburn Publishers Ltd. doi: 10. 1362/026725709X479354 1028 JMM Journal of Marketing Management, Volume 25 1997; Sengupta et al. 997; Wengler et al. 2006; Zupanic 2008). This is a gap that urgently needs to be filled. Without some agreement about which approaches to KAM implementation work (and which do not work, called for by Zupanic 2008), there is a danger that companies will continue to struggle or even fail to implement KAM appropriately (Homburg et al. 2002; Napolitano 1997). In this paper we use empirical evidence to develop a cross-industry stage model of how companies transition to KAM, including what elements of a KAM programme they implement through this process and the success this has led to. We identify the elements of KAM implementation programmes through an in-depth systematic review of the literature. Using a survey based on this input we investigate 204 companies with explicit, formal KAM programmes and build a model of the key principles important to KAM implementation over time. A syndicate of seven leading companies was also used in isolation of the results of the survey to add context and analytical input. The synergy between the two methods provides a robust and original contribution to both KAM practice and literature. KEY ACCOUNT MANAGEMENT The emergence of relationship marketing in the late 1980s led to a growing interest in getting and keeping customers through relationship management (e. g. Christopher, Payne and Ballantyne 1991; Gronroos 1994, 1997; Sheth and Parvatiyar 1995; Aijo 1996; Gummesson 1997). Relationship marketing was extended and developed during the 1980s and 1990s, particularly in business-to-business markets where formalised programme s of customer management have gained increasing importance including: national account management (Shapiro and Moriarty 1980, 1982, 1984a, 1984b; Stevenson 1980, 981; Tutton 1987; Wotruba 1996; Weilbacker and Weeks 1997; Dishman and Nitze 1998); major account management (Barrett 1986; Colletti and Tubridy 1987); and, more recently, to manage the most strategically important relationships of the business, KAM (Wilson 1993; Pardo, Salle and Spencer 1995; Millman and Wilson 1995, 1996, 1998; McDonald, Millman and Rogers 1997; Abratt and Kelly 2002; Homburg et al. 2002) or even Global Account Management (Yip and Madsen 1996; Millman 1996; Millman and Wilson 1999; Holt 2003). For ease of use we will continue to use the acronym KAM to refer to these related bodies of work. KAM is a systematic process for managing business-to-business relationships that are of strategic importance to a supplier (Millman and Wilson 1995). It first emerged as a response to the pressures placed upon supplier companies by globalisation, increasing customer power, procurement sophistication and the need to find new ways to work with the most important customers (Pardo 1997; Wengler et al. 2006). It involves the adoption of collaborative ways of working with customers rather than traditional transactional and adversarial relationships (McDonald Woodburn 2007). Therefore it represents a fundamental change in the way companies operate their sales and marketing functions, not leading to a tactical shift in operations, but a more broad ranging change management programme (Storbacka et al. 2009). Studies in the early 2000s found a substantial concentration of supplier business into a decreasing number of key accounts, and that the service demands of such key accounts were increasing (Gosman and Kelly 2000, 2002). The ability to extract better service levels and, possibly, lower prices from suppliers meant that the benefits Davies and Ryals A stage model for transitioning to KAM 1029 to the customer of being given preferential treatment are clear and indeed there is evidence that customers may demand or instigate KAM amongst their suppliers for such reasons (Brady 2004; Homburg et al. 2000; Wengler et al. 2006). Therefore close collaborative relationships with suppliers are thought to yield between 10% and 100% more value than less collaborative nes for the customer (Hughes Weiss 2007). The benefits of KAM to the suppliers are less clear-cut, since customers may try to â€Å"bargain away† benefits in the form of lower prices (Kalwani and Narayandas 1995) sometimes resulting in relationships with the largest customers becoming unprofitable for suppliers (e. g. Cooper and Kaplan 1991; Reinartz and Kumar 2002). Napolitano (1997) goes as far as to suggest that the majority KAM programmes a ppear ineffective as a result. This shows that the benefits to suppliers of KAM are not automatic and require careful management. Although evidence exists that long-term relationships with larger customers can pay off for suppliers through higher revenues and faster growth rates (Bolen and Davis 1997), even where power asymmetries are considerable (Narayandas and Rangan 2004), we still lack a clear generalisable view of how companies implement KAM, and the respective levels of success this achieves (Kempeners Hart 1999; Sengupta, Krapfel and Pusateri 1997; Wengler et al. 2006). We therefore explore this in our next section. IMPLEMENTING KEY ACCOUNT MANAGEMENT There is limited research on how KAM is implemented. A few scholars have attempted synthesis of the existing research to form frameworks and surveys for further research on KAM implementation (Homburg, et al. 2002; Wengler et al. 2006; Zupanic 2008) and a similar process has been undertaken for this paper. Table 1 (overleaf) represents a synthesis of the elements that the literature suggest firms implement as part of their formal KAM programmes. Broadly speaking, these elements represent the core components to most KAM implementations, with suppliers doing more or less of certain activities at different stages of the KAM programme’s life cycle. In Zupanic’s (2008) synthesis the elements of KAM are separated into the activities of the individuals within the organisation (Operational KAM) and those at the organisational level (Corporate KAM). Although a neat separation, the activities of the individual in a formal KAM program are likely to be driven from an organisational level decision and as such we have not separated these out in our analysis because we are interested in what the organisation is attempting to implement. Furthermore, we have not differentiated the elements of KAM based on the A-R-A model (Activities – Resources – Actors) as undertaken in the seminal work by Homburg et al. (2002), because we are interested in the elements of KAM that companies are implementing, rather than the artefacts or interested parties which result from implementation. This is a fundamental difference in how we look at KAM in this paper compared to both Homburg et al. (2002) and Zupanic (2008). We are investigating KAM as an ongoing transitioning process rather than the pre-existing, fully implemented programme assumed in these previous works. For instance, of the eight typologies which result from the Homburg, et al. (2002) synthesis and survey, only two types of KAM [1] Top management KAM and 4) Cross-functional dominant KAM] represent effective KAM programmes and there is little explanation of what these KAM programmes are like or how the organisations achieved them. 1030 JMM Journal of Marketing Management, Volume 25 TABLE 1 Elements of KAM implementation in the literature Elements of KAM Implementation Senior manager buy-in Papers Brady 2004; Homburg et al. 002; Montgomery et al. 1998; Napolitano 1997 Napolitano 1997; Workman et al. 2003; Yip and Madsen 1996 McDonald et al. 2000 Description Manger buy in is necessary for success Increased overall knowledge of KAM improves A pioneer often pushes KAM through the organisation Company wide knowledge of KAM A KAM Champion Active involvement of top management in KAM An organisational culture that supports KAM Napolitano 1997; Millman and Manger buy in and active Wilson 1999 ; Workman et al. involvement is necessary for 2003 success Homburg et al. 002; Millman and Wilson 1999; Pardo 1999; Workman et al. 2003 Culture is one of the three biggest influences on KAM implementation in MW and HWJ discuss espirit de corps Espirit de corps Everyone in the organisation understanding KAM Defined key account selection criteria Homburg et al. 2002; Brady 2004; Reisel et al. , 2005; Workman et al. , 2003; Yip and Madsen, 1996 Gosselin and Bauwen 2006; McDonald et al. 2000; Ojasalo 2001; Spencer 1999; Wong 1998 Gosselin and Bauwen 2006; McDonald et al. 2000; Ojasalo, 2001 Customer portfolio matrix Clearly identified key accounts Individual key account plans Identify those accounts that are growth attractive McDonald et al. 2000; Ojasalo, Each account should be 2001; Ryals and Rodgers, planned separately to ensure 2007 appropriate service Evaluation procedure in KAM is lacking Social exchanges such as KAM can provide competitive benefits Strategic relationship can lead to mutual investment Look at the lifetime value of customers Evaluation procedure in KAM is lacking Cont’d A well developed Napolitano 1997 feedback process with key customers Joint activities with key accounts Joint investment with key accounts A business case for KAM Targets for key accounts Koka and Prescott 2002; Workman et al. , 2003 Koka and Prescott 2002; Ojasalo, 2001 Reinartz and Kumar 2000, 2002 Napolitano 1997 Davies and Ryals A stage model for transitioning to KAM 1031 Elements of KAM Implementation Benchmarking against other organisations for KAM Measurement of the performance of the KAM programme Appointed Key Account Managers Fully trained Key Account Managers Papers Napolitano 1997 Description Evaluation procedure in KAM is lacking Evaluation procedure in KAM is lacking Skill sets for KAMs are different to those in sales Montgomery et al. 1998; Napolitano 1997; Ojasalo, 2001 McDonald et al. 1997; Weeks and Stevens 1997 McDonald et al. 1997; Ojasalo Skill sets for KAMs are different to those in sales 2001; Shetcliffe 2004; Weeks and Stevens 1997; Yip and Madsen 1996 Alonzo 1996; Guenzi and Pardo 2007; Arnett et al. 005 Clear move since the mid1990’s towards teams of sales and account managers Account managers are usually rewarded with higher salary and less bonus KAM organisations should be differently structured to Sales organisations formalised arrangements for accounts lead to improved co-ordination Key accounts are better served and therefore the managers need influence over gaining the necessary service levels Key account should get higher service levels Key account should get higher service levels KAM teams Specific motivation and Ryals and Rodgers 2006a; reward schemes for Weilbaker 1999 Key Account Managers Changes in organisational structure to accommodate KAM Coletti and Tubrity 1987; McDonald et al. 1997; Millman and Wilson 1996; Pardo 1999 Established policies Gosselin and Bauwen 2006; and procedures for McDonald et al. 2000; Senn handling key accounts 1999 Key Account Managers having good access to internal resources Ojasalo 2001, 2002; Workman et al. 003; Ryals and Humphries 2007 Differentiated and higher service levels for key accounts IT support for KAM Workman et al. 2003; Ivens and Pardo 2007 Brady 2004; Ojasalo 2001; Workman et al. 2003 The other six typologies [2) Middle management KAM; 3) Operating level KAM; 5) Unstructured KAM; 6) Isolated KAM; 7) Country Club KAM; 8) No KAM] represent either highly inefficient KAM (typologies 2, 3, 5 and 6) or are not a formal KAM programme (Typologies 7 and 8). This may be an artefact of the sampling method because only 9% of the respondents were actually Key Account Managers (Kams), but this still leaves us with little understanding of how companies could implement KAM better, or move from one of these inefficient models to a better performing, more robust model. Wengler et al. (2006) provide us with a detailed exploration of some of the 1032 JMM Journal of Marketing Management, Volume 25 rationales for companies implementing KAM, as well as a limited exploration of what the programmes can look like. Indeed Wengler et al. (2006) indicate this same tendency to view KAM implementation as a long transitioning process when they suggest â€Å"Implementing Key Account Management thus requires a lot of coordination effort and intensity (Moon and Gupta 1997) and often seems to be a long-lasting, laborious process† [p. 108]. They are also able to identify that companies are utilising customer prioritisation processes, changing the role of Kams in the organisation and defining different levels of responsibility for the KAM programme. However their low respondent numbers (only 49 respondent companies had actually implemented KAM) and limited exploration of the different elements of KAM still leave us with few generalisable indicators of how companies transition from sales-led to KAMled organisations. This considerable gap in the previous research is explored in this paper RESEARCH APPROACH AND METHOD To meet our exploratory research objective of understanding how companies transition to KAM we developed a 7-point Likert scale survey applicable across industries based on the literature summarised in Table 1. We specifically targeted companies with existing formal KAM programmes and sought information around three research questions: Why they implemented KAM; to what extent the elements of a KAM programme were implemented; and, how successful their KAM programme had been. The aim was to gain broad insight across multiple industries. For a field of research in its third decade it is surprising that the KAM literature has still produced few generalisable empirical insights. The majority of the extant literature is conceptual (Cheverton 2008; Ojasalo 2001, 2002; Pardo et al. 2006; Piercy and Lane 2006a+b; Ryals and Holt, 2007 etc. ), with the majority of empirical work preferring case studies (Helander and Moller 2008; Natti et al. 2006; Rogers and Ryals 2007; Ryals and Humphries 2007; Spencer 1999) or interviews (McDonald, Millman and Rogers 1997; Pardo 1997; Zupancic 2008), which, although useful for building rich context and new insights, offer little in the way of generalisability. Much of the existing quantitative research, as summarised in Table 2, suffers in terms of generality due to small sample sizes (most too small to use with ANOVA, MANOVA, SEM or LCM packages effectively without data augmentation through bootstrapping), and surprisingly few studies actually investigate key account managers (Kams), preferring to focus on customers or colleagues to gain insights. Both of these could be explained through the difficulty in identifying Kams within organisations because: they rarely have KAM in their title, are few in number compared to their sales or marketing equivalents, and are sometime not well known within their own organisation as distinct from either of these two groups. Problems of this sort affected earlier pilots of this study and to overcome this we targeted Kams specifically through executive education programmes, as did Guenzi et al. (2007, 2009), McDonald et al. 1997), Montgomery et al. (1998), Ryals and Rogers (2007) and Wengler et al. (2006). The survey sample comprised attendees at a series of KAM-specific executive educational programmes, making it a highly purposive sampling method. To gain a large enough sample size the data took 3 years to collect; analysis of variance (ANOVA) tests between the years of collection suggested no significant differences Davies and Ryals A stage model for transitioning to KAM 1033 TABLE 2 Summar y of quantitative studies in KAM Authors Guenzi, Georges Pardo Ivens Pardo Ivens Pardo Ryals Rogers Guenzi, Pardo Georges Gosselin Bauwen Wengler, Ehret Saab Reisel, Chia, Maloles Arnett, Macy Wilcox Homburg, Workman Jr. , Jensen Georges, Laurent; Eggert, Andreas Workman, Homburg Jensen Abratt Kelly Homburg, Workman Jr. , Jensen Montgomery, Yip Villalonga Sengupta Krapfel Sharma Year Survey’s target Sample Size 127 297 297 37 127 115 91** 353 60 385 102 385 190 385 191 176 109 % of Which KAMs 100% 0% 0% 43% 100% 100%* 1 8. % 0% 50% 9%†  0% 9%†  48% 9%†  0%†¡ 100% 0% 2009 KAMs 2008 Purchasers 2007 Purchasers 2007 International companies + customers 2007 KAMs 2006 Account Managers 2006 Sales Engineers 2005 Operations 2005 Selling teams 2002 Head of Sales Organisation 2003 Purchasers 2003 Head of Sales Organisation 2002 KAMs and Customers 2000 Head of Sales Organisation 1998 Senior International Execs. 1997 NAMA members 1997 Purchasers 100% is assumed as the actual figures are unreported, the evidence shown elsewhere however may suggest this assumption is in error ** Only 54% actually had a KAM programme †  49% of the sample were Sales and Marketing VPs indicating a responsibility for KAM, however 171 (45% of the sample) had no formalised KAM Programme according to the results of the Homburg et al. , 2000 paper. †¡ GAM survey with only 136 reported using GAM between collection years. Over the 3 years a total of 286 delegates attended these events and 212 surveys were returned, eight of these indicated they did not yet have a formal KAM programme leaving 204 usable surveys (71. 3% response rate). Surveys were handed out before the commencement of the course to be completed during registration and collected as the course began, to minimise the impact of the course on the responses (Table 3, overleaf, shows descriptive statistics for the respondents). 1034 JMM Journal of Marketing Management, Volume 25 TABLE 3 Descriptive statistics on respondents Number Region of companies UK North America Northern Europe Southern Europe Middle East and North Africa Australasia Industry Service Professional Financial Service Industrial Complex Manufacture Manufacture Unknown Years in Sales/KAM 1-5yrs 6-10yrs 10-15yrs 15-20yrs 20-25yrs 25-30yrs Years of KAM Programme 6 48 48 41 49 18 204 49 63 40 36 12 4 204 77 46 53 28 204 113 22 38 18 9 4 204 DATA TESTING AND ANALYSIS A second method was used to add greater depth and clarity to our definitions and understanding of transitioning to KAM through a year-long syndication with senior representative of seven mixed-industry companies with a strong track record of KAM (although not identified in this research for reasons of commercial sensitivity, some of these companies have previously been used as exemplars in other scholars work, including Yip and Bink 2007; Ryals and McDonald 2008 and Eccles et al. 2009). All were companies with established KAM programmes and they cooperated with the principle aim of identifying a process for implementing KAM that could be transferable across industries. They provided a 5-phase model of implementation running through Scoping KAM (Yr 1), Introducing KAM (Yr 2), Embedding KAM Davies and Ryals A stage model for transitioning to KAM 1035 (Yrs 2-4), Optimising KAM (Yrs 4-6), and Best Practice / Continuous Improvement (Yrs 6 and over). They were adamant that, across all their industries, it takes at least this long to have a properly-established KAM rogramme and that, especially in the later years, re-engineering KAM was always needed. They did however admit that the Scoping KAM period is a theoretical â€Å"ought to happen† stage as, in reality, it happens in parallel with, or even after, implementation. We therefore merge Scoping and Introducing KAM phases and show them as one initial 2 year Introducing KAM phase. These insights were used to segmen t data for analysis purposes and provide structure for demonstrating the process of transitioning to KAM. Analysis was conducted using mean comparison tests to identify differences between groups within the data. ANOVA assumes normality of data, which rarely occurs with Likert scales. Kolmogorow-Smirnov and Shapiro-Wilk normality tests demonstrated that 18 of the 25 elements of KAM distributions were probably not normal, mostly cause by -/+ kurtosis. However, visual inspection of the Normal QQ diagrams suggest that 20 of the elements appeared evenly distributed and 16 of the items passed the Levene test, again suggesting fairly even distribution. Bearing all these in mind we conducted and compared both Kruskal-Wallis H nonparametric and Games-Howell Post-Hoc ANOVAs as they both have reduced distribution assumptions. We found almost unilateral agreement between the two tests so report the more powerful and more easily interpreted Games-Howell Post-Hoc ANOVA. RESULTS The first important result from the data was the lack of significant differences based on industry. We found the only major area of difference amongst the four industry groups was in relation to how successful the respondents thought their companies were at KAM, with the professional and financial services companies rating themselves significantly higher and manufacturers significantly lower than the other groups. This suggests that at least the elements of KAM are similar across industries. The main area of difference however emerged when we segmented the data based on the timescales suggested by our transitioning syndicate, breaking the data into four groups based on the age of their programme (Table 4 shows the Games-Howell results for the elements of the KAM programme and Table 5 shows the success measures). We discovered that, as the syndicate had indicated, there was a general progression of gearing up and implementing, rejuvenating and expanding the KAM programme which provide a statistically significant ifference between groups in the different stages of transitioning to KAM. On the vast majority of scales the companies were implementing elements of KAM at a noticeably increasing rate over the life span of the programme. This indicates that, firstly, the programme takes many years to put in place and, secondly, that there is a progression through the different elements the organisation focuses on in each stage. Figure 1 synthesises what the syndicate said and what the data represent about the transition to KAM. Figure 1 (overleaf) shows KAM to be relatively slow to take off when introduced but then builds up rapidly during the Embedding and Optimising stage before slowing into a process of Continual Improvement. We also see this pattern replicated in Table 4 (overleaf) where the extent to which companies are implementing different elements of KAM is limited all the way up to the end of year two, but then begins to rise rapidly, before slowing after six years. The best example of this is Senior manager 1036 JMM Journal of Marketing Management, Volume 25 FIGURE 1 Transitioning to KAM summary High Revise program to new knowledge Restructure org. and processes Involve top Mgt. Redefine program Become customer centric Rejuvenate program Become more selective Expand knowledge in org. Continuous Improvement Capability Gear up Locate Champion Build the case Appoint KAMs Define KA’s Introducing KAM 1 2 Embedding KAM 3 4 Time (yrs) 5 6†¦ Train specialist KAMs Indiv customer plans . Targets and Measurement Optimising KAM Low buy-in (4th from bottom) where the average extent of buy-in within Introducing KAM companies is relatively low, before a significant (at the