In a nutshell: Returns on key accounts – do the results justify the expenditures?

Scientific articles contain valuable management implications, but are usually not very easy to digest. We summarize the core results so that you can use the latest research findings for your company.

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Original

The use of key accounts has become a mature trend and most industrial firms use this concept in some form. Selling firms establish key account teams to attend to important customers and consolidate their selling activities. Yet, despite such increased efforts on behalf of key accounts, sufficient research has not quantified the returns on key account strategy nor has it firmly established performance differences between key and non-key accounts within a firm. In response to this shortcoming, this study aims to examine returns on key accounts. Data were collected from a global consulting firm. The data collection started two years after the implementation of the key account program. Data were collected on recently acquired customers (within the previous year) at two time periods: year 1 and year 3 (based on company access of data). Initially, key accounts perform as well or better than other types of accounts. However, in the long term, key accounts are less satisfied, less profitable and less beneficial for a firm’s growth than other types of accounts. Because the returns to key account expenditures, thus, appear mixed, firms should be cautious in expanding their key account strategies. The study contributes to research in three areas. First, most research on the effectiveness of key accounts refers to the between-firm level, whereas this study examines the effect within a single firm. Second, this study examines the temporal aspects of key accounts, namely, what happens to key accounts over time, in comparison with other accounts in a fairly large sample. Third, it considers the survival rates of key accounts versus other types of accounts. The authors suggest that firms also need to track their key accounts better because the results show that key accounts are less satisfied, less profitable and less beneficial for a firm’s growth than other types of accounts. Extant research has not examined these issues.

Key statements

Most B2B companies now use key account management (KAM). Key accounts are a company’s most important customers from a strategic point of view. Due to their status, these customers are often managed using a more resource-intensive approach. This study aims to examine the extent to which the introduction of KAM benefits companies, if at all. The authors analyzed an internationally active company that had recently introduced KAM and investigated whether it generated more turnover with its key accounts than with the rest of its customers. Data for around 300 new customers, of which 112 were key accounts, were analyzed. The authors found that KAM is beneficial in the short term, as key accounts generate more income than other customer groups in the period directly after their acquisition. After two years, the average turnover generated by each key account had dropped so significantly that the study was not able to confirm the long-term effectiveness of KAM. However, the authors do not attribute this finding to KAM itself, but rather to the fact that the company was not able to effectively track and manage its key accounts in a targeted way. Based on these findings, B2B companies would be advised to implement the following measures:

  • Monitor costs: Many companies do not actually know how much profit their customers generate for them. You should therefore ensure that all customer management costs can be attributed to the right customer.
  • Use several channels: Sales often focuses primarily on face-to-face selling. Make sure to take advantage of the potential available by adopting a multichannel approach and, for example, introducing a dedicated online shop for selected key accounts.
  • Do not neglect smaller customers: Sales can have a tendency to neglect smaller customers and focus too much energy on key account customers, often based on the assumption that they generate higher revenues. Ensure that smaller customers with big growth potential are also managed effectively.

Source:
Sharma, A. & Evanschitzky, H. (2016). Returns on key accounts: Do the results justify the expenditures? The Journal of Business & Industrial Marketing, 31 (2), 174–182.