Key Account Management - Shortcomings and limitations

Key Account Management is an effective relationship management mechanism provided that the firms build the appropriate database of key accounts with respect to their adequacy on the customer contribution margin.

Key Account Management is one of the four components of customer relationship management along with customer lifetime value, customer portfolio analysis and the relationship lifecycle. Key Account Management is defined as an appropriate relationship management mechanism that utilizes the value of trust in business relationships to achieve functioning relationships with the customers.

The internationalization of markets and customers require from firms an increasing customer orientation. In addition, the intensity of competition forces firms to implement Key Account Management aiming to improve organizational internal efficiency, while decreasing competitive pressures. The main concept of Key Account Management is to enhance the efficiency and effectiveness of relationship development and management. In mature markets customers are more sophisticated and demanding, and firms need to develop customer oriented strategies to meet customer satisfaction. To achieve that, Key Account Management focuses primarily on establishing trust with customers.

Key Account Management unlocks the customer potential by emphasizing on mutuality in business relationships. Progressively used as a value-adding marketing approach in customer-centric organizations, Key Account Management facilitates relationship management by recognizing the appropriate key accounts to manage, involving them in the process and including key scenarios in this approach. Applying detailed customer segmentation, Key Account Management allows for product/service differentiation according to expected customer requirements, while minimizing the market risk.

Firms that develop key account management skills follow strategic marketing management decision reflected on the emphasis given on the right marketing mix. Demographical data including industry structure, number of employees, sales volume, the firm’s international operations and the product characteristics, are taken into consideration in the implementation of Key Account Management. In addition, firms that engage in Key Account Management should craft suitable two-way plans and structure the appropriate team approach to ensure that they can offer different value proposition than competition.

Despite numerous advantages, Key Account Management has shortcomings and limitations. Primarily, it faces a difficulty in determining the key accounts. Criteria such as sales volume have been questioned a lot. Although various B2B companies consider sales volume and market share as appropriate criteria to determine a key account, customer contribution margin is applied only by 33% of the companies pursuing Key Account Management. Moreover, many firms still use traditional cost-accounting systems, although the new approach necessitates reconsideration of obsolete valuation approaches.

In conclusion, Key Account Management is an effective relationship management mechanism provided that the firms build the appropriate database of key accounts with respect to their adequacy on the customer contribution margin. Finally, firms should frequently measure and monitor the results of Key Account Management implementation in order to take corrective action if necessary and to reclassify where appropriate.