Key Account Management and Ecommerce: Implementation and its effects on performance in large private sector firms in Kenya.

Abstract

Business firms are facing fierce competition in this era of rapidly changing business environment and especially with the globalization of markets. Many firms today have adopted Key Account Management (KAM) model in some form as a way of building, nurturing and maintaining strong bonds with their customers. Generally KAM involves the management and development of business relationship, in a formal or informal structure.

The key objective of an organization in adopting KAM as a marketing strategy is to have a competitive advantage over its competitors. This key objective can only be fully achieved if firms successfully implement KAM, otherwise it will be another failed strategy. By and large practicing managers as well as academicians seem to reach a consensus that strategy execution poses a greater challenge than formulating the strategy. (Alexander, 1985; Gluck et al,1980; Mintzberg,1995). In most firms as highlighted by Sharma (2003), the bigger percentage of revenue (and by extension profits) is generated through the key customers and therefore crucial to implement KAM strategy right, thus guaranteeing the higher revenues.

With the advent of Ecommerce, the business environment has even changed more drastically with many firms either intentionally or otherwise integrating ecommerce as a way of conducting business. As argued by Jukka (2001), it is naturally expected that ecommerce has had a significant impact on how KAM is practiced and implemented. This impact of ecommerce on KAM has not being researched and documented and therefore necessitating the research to link up the two.

With the advent of Ecommerce, the business environment has even changed more drastically with many firms either intentionally or otherwise integrating ecommerce as a way of conducting business. As argued by Jukka (2001), it is naturally expected that ecommerce has had a significant impact on how KAM is practiced and implemented. This impact of ecommerce on KAM has not being researched and documented and therefore necessitating the research to link up the two.

A review of existing literature reveals that little or no research has been done to specifically link up KAM and ecommerce and its impact as indicated by the comprehensive summary list of the recent KAM studies by Keith (2006). The researcher would then be interested in establishing how KAM strategy is implemented with the aim of addressing the key concerns of KAM. The other key objective will be to provide a conceptualization of the implementation challenge and suggest a model of overcoming the challenges. It is therefore of academic and managerial interest to study how KAM implementation has being successfully carried out and the impact of ecommerce on the same.

The theoretical frame work will be mainly developed from but not limited to the existing literature on relationship marketing, strategic business alliances, customer relationship management (CRM), E-commerce, E-marketing and personal selling among other areas.

The researcher intends to use an empirical study where a survey will be done to gather the necessary data. Both primary and secondary data will be used.


Introduction

Definition

The concept of KAM stems from the assumption that when the current level of sales of a customer are strategically important to a firm, this account calls for high level attention from a selected salesperson, Sanjit,(2000). A preview of the existing literature reveals the different terms, different authors have used to describe key accounts; among them are national accounts, large accounts, major accounts, strategic and corporate accounts, Sanjit et al,(2000). In view of this many different terms referring to the same item, the author will concur with Homburg (2002) and use the name key account as the most preferred label.

There are several and varied definitions of KAM, however most of them seem to capture similar key features. For example; Ojasalo, (2001) states that KAM can be viewed as "relationship oriented marketing management approach focusing on dealing with major customers in the business to business market" and the main issues involved include, systematic selection, analysis and management of current and potential customers, systematic setup and maintenance of necessary infrastructure, (Dirk,2008; Donald et al 1997)

KAM is defined by Homburg et al (2000), as the "designation of special personnel and or performance of special activities directed at an organization's most important customers". The other notable definition and worthy quoting is by Strategic Account Management Association (SAMA); which describes KAM as the "complex account with special requirements characterized by a centralized, coordinated purchasing organization with multi-location purchasing influences, a complex buying process, large purchases and a need for special services", SAMA, (2010)

From the above, the author will adapt the SAMA definition since it is the most comprehensive but with an addition to capture the changing business environment in terms of information technology. As observed by Schlegelmilch and Sinkovic, (1998) effective use of information technology will enable "firms to creatively implement their innovative marketing strategies". From a different perspective but directly related is Gosselin and Bauwen (2006) who point out that one of the major factors affecting KAM is the impact of information communication technologies. From the above the author strongly feels that the current definitions are lacking this crucial component of information technology which should be distinctively highlighted as it a major determining factor in the success or failure of KAM as a marketing strategy. The author will heavily borrow from SAMA, (2010) and define KAM as multifaceted account with special needs and requirements characterized by a centralized, coordinated purchasing organization with multi-location purchasing influences, a complex buying process, bulky purchases, an integrated ICT platform and a requirement for dedicated resources.


Key Changes in the Marketing Environment

In the recent past there are several fundamental changes that have occurred in the marketing environment. Nigel and Nakala (2006) observed that KAM is a strategic development which is becoming increasingly widespread, necessitated by a wide range of customer and market pressures. They identify five key factors which include; fierce competition, High customer concentration levels brought about by mergers and acquisitions, Centralized purchasing which is key to cost maintenance in the buyers cost centre, "Active strategies of supplier base reduction by larger buyers to reduce purchasing costs and exploitation by KA of their strong position to gain lower prices and better terms of trade". Gosselin and Bauwen (2006) concur with these factors; however they also identify some more. One of the key factors influencing the current research is impact of information communication technologies and this will a key variable in the current research.

The other notable change that has occurred is the increasing emphasis on key account management and the establishment of customer segment managers as stated by Homburg et al (2000). The key implication for this change is that the key account managers are now handling more and complex tasks in managing the full expectations of the customers. This is well supported by Achrol,(1991) who had observed that functional boundaries in firms must be minimized totally and the various tasks to be undertaken by cross functional teams. He noted that firms of the future must be very permeable across their departments with minimal or no bureaucracy and the employees will have to be more independent.

Homburg, (2000), summarizes these changes by noting that the firm structures, management mechanisms, and its culture must be developed with the aim to encourage agility and cross functional sharing of information. The possible implication of the sharing of information function is that firms must improve their communication systems and possibly one must way is to adopt ecommerce in their business.


Key Concerns of KAM

KAM focuses mainly on value creation and is used as a tool to implement a firm's marketing strategy to achieve its set goals. Gosselin and Heene (2003) observed that KAM is both "inside-out" and "outside-in" implying that it implements strategies and identifies business opportunities by deeply understanding the customer's value creating process. If one of the concerns of KAM is strategy implementation, then it follows that the implementation function must be executed right in order to achieve this objective. This is necessary since practicing managers as well as academicians seem to reach an agreement that strategy implementation poses a greater challenge than its formulation. (Alexander, 1985; Gluck et al, 1980; Mintzberg,1995).

There are several key benefits identified by (Barret 1986, and Boles et al., 1994). They include; Better business terms between buyers and selling firms, better quality sales call, improved and interactive communication hence increased sales. Even though it is quite obvious to assume that the perceived and actual benefits associated with KAM are the only reasons for practicing KAM, there are other driving forces as stated by Per-Olof and J. Rehme,(2008). The other driving forces can be categorized into internal and external factors; the external factors being those beyond the control of the selling organization and include the purchaser's situation and general environmental conditions and factors, (Jones et al., 2005). Namely they are clients, competitors, technology, Ethical and regulatory environment. The internal factors influencing include; internal organization issues, for example, marketing, operations and strategy.

From the above one of the main factors that is hypothesized to have a great influence in the operations of the KAM is technology, an aspect that will be investigated through the ecommerce route. As argued by Jukka (2001), it is expected that ecommerce has had an impact on how key accounts are managed and implemented since information and communication are key elements of relationships.

There are two other primary factors driving the increased importance of KAM as identified by (Homburg et al 2000); First companies want to develop a closer relationship with their key business partners and they view KAM as one possible route. The second reason identified is the increased centralization of purchasing decisions; customers are increasingly coordinating purchasing activities across locations and involve more senior people, from more functional areas in procurement decisions. In conclusion (Homburg et al, 2000), state that many firms establish KAM programs with the goal of coordinating sales resources across regions, calling on customers at higher levels and using people from multiple functional areas.

The research will analyze different industries/sectors, and different types of firms (indigenous versus multinational) to establish whether these factors have any significant influence on the key account performance. As noted by Homburg et al (2000), analyzing different industries and different countries is useful since they are subject to diverse environmental issues that will definitely affect the way a firm plans and executes its marketing strategies. Hence the researcher will use the same logic, however substitute country analysis with the categorization of firms as either indigenous or multinational. Different multinationals are expected to have originated from different countries and therefore bringing with them differences especially in corporate culture. Under the indigenous and multinational category it will also be interesting to observe how the different organizational culture influences the key account performance. The researcher will hypothesize that the international firm's culture is significantly different from the indigenous firms.


References

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Alexander Larry D, (1985) "Successfully Implementing Strategic Decsions" Long Range Planning Vol 18/3

Barret John (1986), "Why Major Account Sales Works", Industrial Marketing Management, Vol 1/1 pp 63-73

Boles James S, Wesley Johnston, and Alston Gardner (1999), "The Selection and Organization of National Accounts: A North American Perspective", Journal of Business and Industrial Marketing, Vol 14/4 pp 264-275

Christian,H., Workman, P.J, & Jensen,O., (2000), "A Configurational Perspective on KAM", Journal of Marketing Vol 66 (April 2002), pp 38-60

Dirk Zupancic (2008); "Towards an Integrated Framework of Key Account Management", Journal of Business and Industrial Marketing 23/5 (2008) pp 323-331

Dean Elmuti and Yunus Kathawala (2001); "An overview of strategic alliances", Journal of Management Decision 39/3 pp 205-217

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