Marketing Management

The Role of Key Account Management in Marketing and Sales Intelligence Key account management systems aim at handling strategically important customers through specifically adapted processes and resources. Few companies actively integrate key account management into marketing and sales intelligence. The authors argue that well implemented key account management systems give access to a wealth of strategically important information relevant in marketing and sales intelligence.

Björn Ivens, Catherine Pardo

32 Marketing Review St. Gallen 4 | 2014

Schwerpunkt | Informationgewinnung

Many companies today have introduced key account management (KAM) as a differentiated unit in their marketing and sales organization. Yet there is little agreement about what precisely KAM’s task should be. As a conse- quence, there are tremendous differences between the way how KAM is im- plemented in different firms.

Frequently, KAM is primarily seen as a specific sales approach for large customers. The key account manager’s job, then, is to bring back large con- tracts from customers that either represent a major share of the firm’s total turnover or that provide important contribution margins. Other companies implement KAM to better coordinate their sales from a complex product portfolio and improve their own cross-selling performance with major ac- counts. In the latter case, KAM is often designed to improve the company’s performance in offering solutions rather than individual products.

However, though they represent important managerial practices for en- hancing performance, none of the two KAM situations described above un- leash the entire potential of KAM programs. Few companies, for instance, realize the tremendous contribution that modern KAM approaches can make to marketing and sales intelligence.

In fact, key account managers and their teams are typically highly quali- fied specialists with a strong focus on the needs and requirements of impor- tant customers. These customers often are key players on their respective markets. In professional KAM organizations, the KA managers will analyse the account, its resources, structure, processes, and strategic logic in depth. Beyond the key account, they need to fully understand the account’s market environment. Hence, KA managers somehow work similarly to “special agents” who collect information about targets and distribute this informa- tion inside their own organization in order to improve their own organiza- tion’s performance.

The purpose of the present article is to show the vital impetus that KA managers and well-implemented KAM systems can potentially give to their own organization through their role in marketing and sales intelligence. This momentum not only drives performance in the relationship with “their” key account. It may also bring competitive advantage to the firm as a whole in its work on all potential markets.

Because of the specificity of its position in a company – being both the fa- cilitator of relationships with the KA and a facilitator of internal relation- ships within the company – KAM’s status with respect to marketing and sales intelligence is unique. KAM may appear at the forefront for all aspects of in- formation generation (due to a specific anchoring to the KA customers and the KA customer’s network). Internally, the KA manager is in a particularly well-suited position to support the dissemination of information. He is, by the very nature of his mission, in contact with different parts of the compa- ny. Finally, he can not only generate and disseminate information, he is in a position to respond to the information (by making decisions and implement- ing action plans) as it is part of the KAM mission to be not only a coordina- tor but also the “manager” of the relationship with the KA customer.

Prof. Dr. Björn Ivens is Chair of Marketing, University of Bamberg, Bamberg, Germany E-mail: [email protected]

Prof. Dr. Catherine Pardo is Professor of Marketing, Department for Markets & Innovation, EM Lyon Business School, Ecully, France E-mail: [email protected]

33Marketing Review St. Gallen 4 | 2014

Schwerpunkt | Informationgewinnung

This article is structured as follows. First, we describe how KAM as a concept can contribute strongly to a better under- standing of customers, customers’ customers, general trends on markets, possible technology shifts and other changes that impact performance. Second, we discuss the conditions (such as top management support and internal alignment with other firm units) that are required for KAM to be able to become a central element in a firm’s marketing and sales intelligence system. We illustrate these points through ex- amples.

Marketing and Sales Intelligence Marketing and sales intelligence (MSI) refers to the process of a firm exploiting the potential of integrated data from diverse internal and external sources. Typically, firms hold informa- tion in categories such as market intelligence (e.g., customer segments, purchasing motives, or customer satisfaction), competitive intelligence (e.g., types of competitors, strategic initiatives, or prices), product and brand intelligence (e.g., sales volumes, market shares, brand image), and customer in- telligence (e.g., CRM data about individual transactions, pur- chasing frequencies, or customer-specific costs).

The information contained in these types of data constitutes a potentially valuable and rare resource (Hunt 2000). It may

allow the firm to better predict business opportunities as well as threats arising in its environment. It supports the entire marketing and sales management process in terms of analy- ses, planning, implementation and controlling. MSI data are used to prepare and make business decisions at the level of the entire firm, business units, or subunits such as individual brands or customer relationships.

Through MSI, firms translate into practice what academic research refers to as “market orientation”. Market orientation has been defined as “the organization-wide generation of mar- ket intelligence, dissemination of the intelligence across de- partments and organization-wide responsiveness to it” (Koh- li/Jaworski 1990). Numerous studies have shown the close link that exists between market orientation and firm performance. Hence, efficient and effective MSI is a key driver of firm prof- itability.

The Scope of MSI on Business Markets Companies that implement and use KAM structuresare typi- cally located up-stream in an industry value chain and often do not serve the value chain’s final customers directly. They operate on business markets. This is the case for • consumer goods manufacturers serving consumers through

retailers and/or wholesalers,

Source: authors´ illustration

Fig.1 Different Scopes of Analysis and Information Tasks in KAM

KAM without analysis and information tasks

KAM with analysis and information tasks

within the scope of the KA relationship

KAM with analysis and information tasks within the

scope of the KA relationship and beyond the relationship.

The company uses this information for MSI in general

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• manufacturers of industrial goods that are later used for purposes that are closer to final customers (e.g., manufac- turing, packaging, logistics),

• manufacturers of ingredient material that is used in the pro- duction of consumer or industrial goods,

• providers of B2B services such as logistics, consulting, or fi- nancial services.

The fact that final customers are often situated two, three, or more tier levels down the value chain implies that it is hard for firms to anticipate where the market is going. The more strongly their customers’ customers (or even their customers’ customers’ customers etc.) have an impact on the business of the direct customers, the more problematic the distance to the final decision maker on the market.

For example, a producer of natural and artificial flavours may supply a manufacturer of ice cream who, in turn, supplies a large international retail company. The retail company sells consumer goods to final customers. The final customers are three tiers down the value chain. Any changes in preferences for flavours, whether this concerns the specific flavours (strawberry, apple etc.) or the type of flavour (natural vs. ar- tificial, organically grown etc.) may be highly relevant for the flavour producer. The challenge is to identify this piece of in- formation early enough and to understand its implications for the flavour manufacturer’s business.

In short: More, better, and faster information about market dynamics across the whole value chain improves the firm’s strategic responsiveness to its competitive environment. How- ever, in many instances companies do not dispose of a direct information link with the final customers in their value chain. To protect themselves from potential damage caused by the distance to final customers, they need a high-performance MSI concept. Arguably, key account managers can play a cen- tral role in this concept.

Moreover, the understanding of customers’ behaviours can also be built on a thorough and rapid analysis of external forc- es not located directly downstream in a value chain. Examples are general trends like societal changes or new regulations.

They may explain changes in purchasing criteria or behav- iours.

Key Account Managers: Potential Corner- stones of MSI When thinking about MSI, managers often intuitively put a strong emphasis on IT systems or software packages. And in- deed, hardware and software do play a critical role in organ- ising and analysing data. However, although they may be nec- essary components of MSI, they are by no means sufficient.

In fact, whether a company collects, structures, analyses or interprets data, no computer can replace the skills of human beings. They are the ones who define the amount and type of data to collect. They understand the decision making situa- tions in which data are required. Finally, they decide where to collect data and how this should best be done. Hence, employ- ees may constitute valuable resources for MSI and may be cru- cial in establishing a deep market orientation within a com- pany. From this perspective, when companies define their MSI concept, well qualified and trained employees who have a profound understanding of customer expectations as well as customer processes should be seen as centrepieces or corner- stones.

KA managers are typically among a firm’s high potential tal- ents. They serve strategically important customers. They manage complex customer relationships. They need to coor- dinate functions and people inside their own company in or- der to create value for their key account (Homburg et al. 2002). To do so, they typically develop a profound under- standing of their own company.

Moreover, in order to achieve their tasks, KA managers need highly developed analytical and communicative skills – skills also required in MSI. KA managers work with strategi- cally important customers on a daily basis. They are in con-

Management Summary Key account management (KAM) is mostly seen as a sales concept aiming at increased value creation for and with strategically important customers. The authors ar- gue that a wealth of important information can be drawn from KAM. This requires an enlarged view of KAM and a systematic linking of KAM and marketing and sales intelligence.

“Few companies realize the tremendous contribution that modern KAM approaches can make to marketing and sales intelligence.”

35Marketing Review St. Gallen 4 | 2014

Schwerpunkt | Informationgewinnung

stant interaction with their customer company, more precise- ly with different people, functional areas, hierarchical levels, organizational units, and geographic areas inside their cus- tomer company. Within the scope of their job profile, KA managers need to conduct in-depth analyses of their custom- er’s business and, ideally, their customer’s downstream de- mand chain, and more generally their key account’s networks. They need to understand the account’s strategic orientation as well as the role of individual people and units in the cus- tomer’s pathway to his objectives.

In short, KA managers generate and hold an important amount of information. They generate this information through systematic analysis of published secondary data about their account, such as business reports, analyst reports, industry data, and market research data. They also gather pri- mary data through informal channels, by talking to people in different areas within their account – and by putting small in- formation chunks together to see the key account as a big pic- ture. In this process, they should not only develop an under- standing of the account itself, but also of the key account’s market, its customers and competitors, and its environment. Figure 1 shows that depending on the breadth of information generated and disseminated by KAM into the company, KAM and MSI are linked in different ways.

In summary, in their daily job KA managers generate a wealth of account-specific information. There are at least two reasons why companies should align KA managers and their information with their MSI concept: • First, because the KA manager is responsible for managing

the relationship between a firm and a strategically impor- tant account, the information generated in relation to this account is likely to be important for the firm’s future devel- opment. If the KA is important to the firm, then the knowl- edge about the KA is critical for the firm’s future develop- ment in general.

• Second, due to the extensive time they spend working on single accounts, the information generated by KA manag- ers is so rich that it contributes to a fundamental under-

standing of market mechanisms, opportunities and threats as well as strengths and weaknesses of a firm. The key ac- count can be seen as a SWOT mirror to the supplier firm. A firm’s major strengths and critical weaknesses are often uncovered through the challenges raised by strategic cus- tomers. At the same time, these customers may serve as in- dicators of future opportunities and threats in the custom- er portfolio in general. Exploiting the potential of KA managers’ information is a

strategic opportunity. Not exploiting it is often inefficient, since generating the same type and quality of information from other sources (e.g., through market research firms) typ- ically implies additional costs for data that is already available from KA managers.

The length of the relationship with a key account has an important impact on the nature of information a KA man- ager is able to gather. It allows contextualizing information by placing it in longer-term history. Events that appear as disconnected at first sight may in fact reveal different aspects of the same history. Often it occurs that the duration of a re- lationship between a company and its key account is totally embodied in the stability of the key account manager in its position while high turnover rates are observed for his/her counterparts. In such circumstances the information the KA manager is in possession of not only is important for him/ her but also for the KA customer. And a newly appointed purchasing manager may consider the KA manager as a pre- cious source of information even for his/her own purchas- ing business.

Another aspect of the KA manager’s mission makes it an important MSI potential. It is the coordinative “total vision” of the KA customers he/she is developing. A good KA man- ager deals with an enlarged buying centre at the KA custom- er company. While in the previous point we were emphasiz- ing the capability to link in time two events and consequent- ly provide and enrich information, the point at stake here is the ability to link two events “in space”. A selling action that has been conducted successfully with one KA customer’s branch can serve as an important reference to develop busi- ness with another branch. This requires that both information flows (the success with one branch on the one hand and the on-going sales action to address another branch on the other hand) are brought together at one moment. However, these flows may have been initiated by two distinct geographical ar- eas, or two different departments. Only a KA manager whose task it is to develop a “total” vision of the KA customer is in a

“Well implemented KAM may bring competitive advantage to the firm as a whole in its work on all potential markets.”

36 Marketing Review St. Gallen 4 | 2014

Schwerpunkt | Informationgewinnung

position to bridge such information flows and thus contrib- ute directly to facilitating business.

Moreover, KA managers’ role as internal coordinators in- side their firms is equally related to MSI. Marketing intelli- gence and sales intelligence need to be integrated with one an- other. This supposes that both the marketing and the sales de- partment develop means of collaboration. But this is far from being systematically the case. Situations of isolation of one de- partment from another – or even situations of open conflict – are still present today in companies. A KA manager who ful- fils a “real” KAM task is in a position to act as an “integrative device” between different departments and people within his/ her company, in particular between the marketing and sales departments.

Finally, to fully understand what KAM can bring to MSI, it may be necessary to come back to the very nature of KAM. KAM is not about selling. KAM is about managing long-term relationships. Long-term relationships are the context where “big sales” may occur. The very objective of KAM is about long-term relationship management. And this has a specific impact on which kind of intelligence a KA manager is able to bring. More than the needs of the KA customers, what a KA manager is dealing with are the KA customer’s behaviours. These behaviours are comprised of processes, competences, organization structures, and culture. These aspects are not ex- pressed in terms of needs or demands, they are just the way the customer company lives! The role of the KA manager is to bring these behaviours closer to his/her company resourc- es and identify what can be done to create value for the KA customer. Offerings may already exist at the supplier compa- ny – or not. In the latter case, the KA manager must initiate

the condition of collaboration between his/her company and the KA customer to co-create an offering. So the information that the KA manager is looking for at the KA customer is of a specific nature and thus is highly complementary to market- ing intelligence and sales intelligence.

Why KA Managers’ MSI Potential Often Is Not Exploited Although there are good reasons to see KA managers as cor- nerstones of a company’s MSI, in many firms KA managers do not contribute to the generation, dissemination and use of marketing and sales intelligence. Why is that the case?

A first reason is that – in certain firms – a KA manager is not really a KA manager. What does this mean? Today, we find many employees with “key account manager” or similar terms (such as “national account manager”, “strategic account man- ager” or “corporate account manager”) in their job title. How- ever, in reality, they are often sales people in disguise. Their customers certainly have high importance for their firms. But the KA managers merely serve as “super sales reps”. They of- ten have twenty or more customers that are labelled key ac- counts. Because their weekly time budget doesn’t allow any- thing else, their job consists of contacting the customers and selling. Arguably, this is not what the KAM concept stands for. KAM implies a much broader and strategic portfolio of tasks in the job description. In effect it comprises analytical tasks, internal coordination tasks and planning tasks that sales reps do not fulfil. Hence, when a KA manager serves too many cus- tomers, when he is not a KA manager but a sales rep, his firm cannot imply him in MSI in a meaningful way.

Such a situation is far more detrimental for MSI than it may appear at first sight. Without a clear distinction between KAM missions and traditional sales missions, the risk is high to open up a more or less direct competition between KA man- agers and salespeople that may result in a conflicting situa- tion. Conflicting situations will make it more difficult for KA managers to act as internal coordinators. Implementation of actions in a KA relationship often implies traditional sales-

Main Propositions • Key account managers have direct access to many valuable contacts at their customer’s. From their inter- action with these contacts they generate valuable know- ledge. • This knowledge concerns the customer as well as his knowledge about competitors and other market actors. • By linking KAM and MSI, this information can be made available for a firm’s strategic planning. This re- quires a thorough definition of KAM/MSI interfaces and processes.

“Through marketing and sales intelligence, firms translate into practice what academic research refers to as ‘market orientation’.”

37Marketing Review St. Gallen 4 | 2014

Schwerpunkt | Informationgewinnung

people (those, for instance, who are working with different lo- cations of the KA customer). Their implication and commit- ment to the KA strategy would be very limited in case of con- flict with the KA manager.

A second reason is that – in other firms – the KA manager is not aligned with the MSI concept. This ensues where top managers have fully understood and implemented KAM as a strategic concept, but have not realised that the information a KA manager collects about his key account (as well as about his key account’s business) may be of value beyond the busi- ness relationship with the key account. Here, the KA manag- er conducts in-depth analyses of his customer; he reports the customer-specific information inside his company, to his su- periors and to other functional areas. However, his insights are not interpreted as having relevance beyond initiatives di- rected at the key account.

In both cases, companies neglect the valuable information a skilled employee such as the KA manager may generate. Conceptually, the company does not establish the link be- tween professional KAM and MSI. In order to overcome this problem, firms need to (i) implement true KAM structures instead of “super sales reps” and (ii) align their KAM concept with their MSI concept.

How to Link KAM and MSI When linking KAM and MSI, firms make the second step in developing their market orientation as expressed in the three steps of information generation, information dissemination, and responsiveness to information.

In the first step, KA managers gather information about customers and markets as described above. As indicated, the role of KA managers at this “information generation” stage is all the more important given that the information they bring back is highly complementary to information provided by regular marketing and sales people.

In the second step, firms need to put in place processes through which the KA managers’ valuable knowledge can be- come disseminated internally and become part of the corpo- rate MSI concept. Only then can the organization be respon- sive to this information in the third step. The processes need to be documented in order to render them effective.

Aligning KAM with MSI is not a simple task. This should not come as a surprise since implementing KAM is not a sim- ple endeavour in the first place. In many firms, KA managers experience barriers even in their more classical KAM tasks, and not only when disseminating their knowledge. Several reasons exist why this is the case: • One point is that KA managers often have no hierarchical

power over other units inside their firm. Hence, even if the KA manager wishes to share his MSI knowledge, he often does not find open ears for this type of information. Rath- er, many KA managers complain that other units see them as the person who disturbs regular customer processes by asking for exceptions or adaptations for their key accounts. Or they feel that other units ignore them. The KA manag- er faces a situation where the disposition to accept his/her input concerning the general development of a market is low in functional areas or geographic subunits.

• Another point is that – in some companies – the work of the KA manager is not well known. If KAM alignment is poor, then other units inside the company may not know or understand the KA manager’s tasks and role. This situation creates a distance between KAM and other units that is not beneficial to the dissemination of strategically relevant in- formation. Instead, the potential contribution of the KA manager to MSI is occulted.

• On the other hand, it is MSI that sometimes is not well im- plemented inside firms. Where MSI is not defined in the or-

Lessons Learned • Management should assess the type of marketing and sales intelligence information their firm’s key account managers may generate. • Next, they should define the processes through which this information flows into the firm’s marketing and sales intelligence system. Responsibilities and reporting frequencies need to be defined. • Finally, a regular evaluation of KAM’s contribution to marketing and sales intelligence should be discussed. Management should see this as a major change process for KAM.

“Efficient and effective marketing and sales intelligence is a key driver of firm profitability.”

38 Marketing Review St. Gallen 4 | 2014

Schwerpunkt | Informationgewinnung

ganizational chart or where it only exists vaguely in the minds of some top level manager, the KA manager typical- ly does not find an appropriate outlet for his knowledge. He would require a structure to which, and processes through which, he is able to systematically report knowledge gener- ated in his function. Against this background, KAM and MSI need to become

closely aligned by defining the link between both areas offi- cially, clearly and consistently.

Official alignment requires that top management defines the processes through which KA managers need to dissemi- nate their knowledge inside the organization. Top manage- ment support is important because of KA managers’ lack of hierarchical power. In most situations, the link between KAM and MSI will not establish itself if all units involved in MSI do not understand the relevance of KAM information for the strategic development of a firm. This relevance must be com- municated by top management, initially as well as regularly at later stages. Only if it becomes clear that the board sees KAM information as a centrepiece of MSI will all units involved ac- cept that they can not only profit from working with KAM but that it is expected that they cooperate with KAM.

Clear alignment means that there is an explicit definition of how KAM contributes information to the firm’s MSI. By de- fining exactly the categories of information KA managers re- port as well as the units that receive the information, the fre- quency and form of reporting and the appropriate feedback, firms allow all parties involved to understand KAM’s role in MSI. Clarity also requires that all relevant functional and ge- ographic areas within the company be informed about KAM’s contribution to the firm’s MSI concept.

Consistent alignment is established when KAM’s contribu- tion to the MSI concept is coordinated with other units’ con- tribution. A core challenge in gathering marketing and sales intelligence consists in establishing information flows that en- sure comprehensive coverage of all required areas of data while avoiding redundancy in information collection. To achieve this, there needs to be an integrated MSI concept in which all actors and all activities have well established roles. It must be defined who contributes what type of information at what time to which receivers in what quality and quantity and in what form.

In order to not only establish the link between KAM and the firm’s MSI concept on paper, but to bring the concept alive, KA managers need to be both enabled and motivated.

Enabling KA managers to contribute to the firm’s MSI con- cept requires that they bring along fundamental analytical skills and/or that they be trained in applying necessary ana- lytical tools. Moreover, KA managers also need to dispose of time budgets in their total work load that they can dedicate to the required analytical tasks. Given the broad job description for most KA manager positions it is clear that account analyt- ics can only represent one task among others. However, the KA manager needs to know that he is expected not to empha- size other tasks (such as time spent with the customer, inter- nal coordination etc.) at the detriment of his analytical work. He should have the possibility, in terms of work load, to con- duct his analytical contribution to MSI at a high qualitative level. Both aspects, KA managers’ analytical qualification as well as their time budgets for analytics, refer to the informa- tion generation task in the market orientation concept. Ena- bling them to disseminate the results of their analytical work requires that they have access to and be integrated in the firm’s MSI communication tools. These tools comprise data bases and knowledge management systems, CRM systems, but also meetings, task forces and similar organizational arrange- ments.

Motivating KA managers to contribute to the firm’s MSI concept is the flipside of the coin. As known from similar con- texts, employees do not always see incentives for sharing knowledge they hold. When firms first started introducing CRM systems, many had high hopes that were quickly shat- tered. It turned out that sales representatives did not contrib- ute to the aim of documenting the firm’s knowledge about in- dividual customers, their characteristics, preferences and his- tory as well as the firm’s interactions with the customers – at least not as comprehensively as intended by their superiors. One key barrier resided in sales reps’ fears that by sharing their customer-specific knowledge with the entire firm they might forego their implicit job insurance, i.e. it might become easier for the firm to substitute one sales rep by another. Cer- tain KA managers may see comparable risks for themselves

“Aligning KAM with marketing and sales intelligence is not a simple task. This should not come as a surprise since implementing KAM is not a simple endeavour in the first place.”

39Marketing Review St. Gallen 4 | 2014

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Von der Verlagsredaktion empfohlen Biesel, H.: Werkzeuge zur effektiven Unterstützung des Key Account Managements, in: Biesel, H.: Key Account Management erfolgreich planen und umsetzen, Wiesbaden, 2013, Seite 235-249.

www.springerprofessional.de/4134300

Kumar, V., Reinartz, W.: Implementing the CRM Strategiy, in: Kumar, V., Reinartz, W.: Cus- tomer Relationship Management, Heidelberg/Berlin, 2012, pp. 55-85.

www.springerprofessional.de/3569738

when asked to become core actors in the firm’s MSI concept. Hence, firms need to consider which incentives may motivate the KA manager to take over this role. Goal agreements and a dedicated category in a compensation plan for the KA man- ager are among the classical tools.

Motivating KA managers to contribute to their company’s MSI is an important step. However, it is not always an aspect of the KA manager job definition that is clearly emphasised. Many KA job definitions still put an (sometimes exclusive) emphasis on the ability for a KA manager to interact with his customer. Of course this is fundamental. But the internal tasks of the KA manager are also fundamental. Among them, the obligation to function as a source of information for different departments and persons within his/her company must ap- pear as a key task.

Summarizing the above, in order to exploit the valuable re- source that KA managers’ account-specific knowledge repre- sents companies need to approach the challenge as a manage-

ment project. They need to dedicate time as well as resources to the integration of the KA manager into the MSI concept.

Conclusion Although this may not be an intuitive thought, KA managers may be extremely valuable contributors to companies’ MSI ac- tivities. The extent to which this potential is actually exploit- ed depends on whether a firm understands the potential con- tribution KA managers may make as well as on how precise- ly they implement KAM. When recruiting KA managers, this aspect should become an integral part of the profile defined for candidates. Moreover, making KA managers become re- sponsible for tasks beyond sales interactions and trouble shooting is also an approach that may be valuable when try- ing to show them career opportunities or to keep them inside the firm. Hence, there is a close link between AKM, MSI and also aspects of HR management.

References Homburg, C./Workman, J.P./Jensen, O. (2002): A Configurational Perspective on Key Account Management, in: Journal of Marketing, 66, 2, pp. 38-60.

Hunt, S. (2000), A General Theory of Competition: Resources, Com- petences, Productivity, Economic Growth, Thousand Oaks, CA.

Kohli, A.K./Jaworski, B.J. (1990), Market Orientation: The Construct, Research Propositions, and Managerial Implications, in: Journal of Marketing, 54, 2, pp. 1-18

“Key account management and marketing and sales intelligence need to become closely aligned by defining the link between both areas officially, clearly and consistently.”

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41Marketing Review St. Gallen 4 | 2014

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