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KAM is a perfect example for micromarketing.
Key Account Management (popularly known as KAM) is an organizational form emphasizes partnerships and strategic alliances with customers and suppliers, and focus on relationship building through repetitive, rather than single, sales transactions. It involves the sales and marketing process like customer selection, customer satisfaction, channel management, relationship management, etc. in building long-term relationships creating competitive advantage for the organization. It improves performance, which leads to shareholder value creation (Gosseling & Bauwen, 2006). This reports ...view middle of the document...
These industries are dominated by a few (3-4) big companies which has various plants across the country. Each location has different plants which were operated separately, which means the sales engineers will interact with each plant and generate the requirements, maintains stock levels, looking for opportunity to maximise prices, etc., with the influence of the user and rapport developed over a period. This business model generates good overall sales from this segment as the volume is high, and with differential pricing, opportunity pricing, etc.
The increasing use of ERP has eventually leaded to centralised purchases for all the plants across various locations and maintenance of centralised warehouse or stores for spares. The requirements from each plant is fed to their centralised supply chain team which maintains the data of all the items in each plant and stores common spares required for all their plants across the country. This helps the customers to minimise the purchase cycle, maintain less spares, better cash flow and provides better negotiation power with their suppliers.
The dependence of the business to such KAs has always been there due to the huge volumes which keep the business going. Though the profitability is considerably less compared to the other customers, the sheer size of the customer and the negotiation power has kept the prices below the market average to retain the customer.
The following are the issues which the business is facing:
1. Over dependence on these Key Accounts. √
2. Lower negotiation power. √
3. Reduction in order flow in recession from Key Accounts.
4. Lower impact of rapport created at the end user level.
5. Difficulty in upgrading the products. √
This report would address the key issues which are marked with √.
Key Account Management as a concept:
According to Piercy and Lane (2006), the fundamental to the logic of KAM is the suggestion of an inevitable Pareto effect whereby a small number of customers provide a disproportionately large share of a seller’s sales and profits (the so-called “20:80 rule”). The suppliers frequently dedicate most of their resources to the core portfolio of buyers who represent the highest stakes and are identified as “Key Accounts”. The relationship and interaction between buyer and seller becomes stronger as the KA organization is maintained and becomes a much more intimate relationship that is difficult for either party to break, creating a competitive advantage and pays full attention on focus on solving complex problems has in giving credibility to recommendations made by KA Team. (Barrett, 1986)
KAM has a greater impact than traditional selling, with a team of people focusing on one account, living there constantly, and having the time and resources available, interaction will take place more often and with more people. KAM helps to minimise the effects of loss of a partner (user, infuencer, etc) because of the team approach making it a...