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2006 | Buch

Key Account Management in Business-to-Business Markets

An Assessment of Its Economic Value


Über dieses Buch

Key account management as an alternative organizational form of marketing management became increasingly popular in many companies during the last years. In its beginning, key account management was particularly applied in the consumer packaged goods industry with respect to wholesalers as well as large department stores; for some time, key account management has also been applied time by suppliers in industrial markets as well as by companies offering product-related services in order to serve their most important customers. Despite its practical relevance in marketing management, the implementation of key account management as well as its integration within the supplier's organization is hardly realized on an adequate economic evaluation. Similarly, key account management controlling of an already implemented key account management organization is also lacking. These organizational units are, once implemented, neither controlled nor evaluated concerning their economic performance. With respect to these rather surprising findings in marketing management practice the author develops a theory-based decision support model, which seems capable of overcoming the previously described deficits. Based on a comparative analysis, the efficiency of alternative key account management organizations is evaluated using criteria developed from transaction costs economics. This decision model enables companies to evaluate each organizational key account management alternative on the basis of transaction cost economizing effects. In addition, set-up costs which arise due to the implementation of the organizational unit are also included in the cost-benefit calculation.


1. Introduction
Key account management as a management concept is widely known and well established in theory and practice. Most aspects of key account management have already been discussed;1 and key account management research covers a wide spectrum of related issues like the organizational design of key account management [e.g. Shapiro/Moriarty 1984a, 1984b; Barret 1986; Diller 1989; Kempeners/van der Hart 1999; Cannon/Narayandes 2000], its tasks and objectives [e.g. Shapiro/Moriarty 1982; Barret 1986; Kleinaltenkamp/Rieker 1997; McDonald et al. 1997; Cannon/Narayandes 2000], the determination of key accounts [e.g. Stevenson 1980; Plinke 1989a; Pels 1992; Rieker 1995; Napolitano 1997; Boles et al. 1999] as well as performance aspects of key account management [Weitz/Bradford 1999; Homburg et al. 2002].2
2. State-of-the-art of key account management in academia and science
In the marketing management literature, key account management is a well known marketing management conception for managing business relationships. The late 1970s and early 1980s have seen a rise of interest in key account management research22 which further increased in the 1980s and 1990s together with the growing interest in relationship marketing [Berry 1983; Spekman/Johnston 1986; Gummesson 1987; Webster 1992; Morgan/Hunt 1994].23 Key account management, which developed alongside and out of the relationship marketing literature, is defined as a “marketing management program focusing one customer” and has ultimately to be seen as the result of an increasing market orientation. Due to key account management’s various research streams no coherent concept of key account management exists in the marketing management literature so far. As many different research areas in key account management emerged over time, each key account management approach draws upon different theoretical and empirically tested constructs without aiming at establishing a coherent as well as consistent concept of key account management.24
3. Key account management controlling
In the previous chapter on relationship marketing and particularly on key account management it has become clear that the underlying motivations of implementing a customer-focused marketing organization like key account management is not meant to merely create value for customers, but profit for the supplying company, which has to be seen as “a consequence of value creation” [Reichheld 1996, p. 3].168 Although customer satisfaction, i.e. meeting the customers’ often individualized needs, appears to be the prime force for being market oriented, customer focus advocates have never left real doubt as to why organizations should focus on their customers: to generate customer loyalty and a stream of future profits and growth [Boyce 2000, p. 657]. As a consequence “[…] from the firm’s standpoint, not all relationships should be pursued” as they may not be economically sensible either for the supplier or for the customer [Blois 1996b, p. 181; Hogan et al. 2002b, p. 6].169 “What is needed is a model that optimizes the firm’s strategy by balancing the customer’s desired level of relationship against the profitability of doing so.” [Hogan et al. 2002b, p. 6].170
4. Analyzing key account management from the perspective of transaction cost economics
The previous chapters have shown that key account management is a widely known and used marketing management concept, but research on the various aspects of key account management mostly lacks a thorough theoretical foundation. In contrast to the relationship marketing literature, which does not offer any idea or only inferior techniques concerning the selection of the most efficient and effective organizational marketing management design, transaction cost economics seems to be an adequate theoretical approach to fill in this gap. Transaction cost economics [Williamson 1975, 1979, 1985b, 1988, 1996; Klein et al. 1978; Klein 1980, 1988; Klein/Leffler 1981; Teece 1980; Alchian 1984; Joskow 1985, 1988] is mainly concerned with the analysis and the evaluation of the most efficient organizational mode of completing and executing a transaction or a related set of transactions — on the basis of transaction costs [Williamson 1975, p. 8]. It is a comparative institutional approach to the study of economic organization in which the transaction is made the basic unit of analysis [Williamson 1985b, p. 387].
5. Challenging the organization: the implementation of key account management
Managing market relations includes — besides other aspects — an organizational dimension [Day 2000, p. 29]:335 the supplier’s key processes must be internally integrated and externally aligned with the corresponding processes of the customer. For integrating and aligning processes with their most important customers, companies often implement key account management. However, the implementation of key account management seems to be rather challenging for the company’s organization: new teams for individual customers are set up, resources are re-allocated and responsibilities are redistributed.336
6. Determining the economic value of key account management in business relationships
In the previous chapters Williamson’s approach on transaction cost economics has been explained in depth and the various challenges have been described which arise within the internal organization due to the implementation of a key account management program. Drawing upon these insights, a comprehensive approach for analyzing and evaluating the correct marketing organization, i.e. in our case the correct key account management organization, needs to be developed.
7. Management implications
The decision model proposed in the previous chapter has demonstrated the various transaction cost economizing effects of alternative key account management organizations. Each organizational option has been assessed according to its ability to economize on specific transaction cost economics characteristics. However, these economizing effects have scarcely been put into a management context, i.e. a comprehensive discussion of the costs (set-up costs) and benefits (transaction cost savings) of implementing one of these decision alternatives.
8. Conclusion
The present research study focuses on the efficacy of the marketing management organization in business relationships. With respect to the most important customers, the decision on the implementation and the design of the key account management organization are of prime interest. Based on transaction cost economics a comprehensive decision-model on the implementation of key account management has been developed which allows companies to base their future marketing organization decisions on objective criteria.
9. Bibliography
Key Account Management in Business-to-Business Markets
verfasst von
Stefan Wengler
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