Key Account Management in Business-to-Business Markets: An Assessment of Its Economic Value

308 Pages·2006·4.186 MB·English

by  Stefan Wengler (auth.)

Stefan Wengler
Key Account Management in Business-to-Business Markets
GABLER EDITION WISSENSCHAFT
Business-to Business-Marketing
Herausgeber:
Professor Dr. Dr. h.c. Werner Hans Engelhardt,
Universitat Bochum,
Professor Dr. Michael Kleinaltenkamp;
Freie Universitat Berlin (schriftfiihrend)
Herausgeberbeirat:
Professor Dr. Dr. h.c. Klaus Backhaus, Universitat Munster,
Professor Dr. Joachim Biischken,
Katholische Universitat Eichstatt-lngolstadt,
Professorin Dr. Sabine FlieB, Fernuniversitat Hagen,
Professor Dr. Jorg Freiling, Universitat Bremen,
Professor Dr. Bernd Gunter, Universitat Dusseldorf,
Professor Dr. Frank Jacob,
ESCP-EAP Europaische Wirtschaftshochschule Berlin,
Professor Dr. Wulff Plinke, Humboldt-Universitat zu Berlin,
Professor Dr. Martin Reckenfelderbaumer,
Wissenschaftliche Hochschule Lahr/AKAD Hochschulefur
Berufstatige, Lahr/Schwarzwald,
Professor Dr. Mario Rese, Universitat Bochum,
Professor Dr. Albrecht Sollner, Europa-Universitat Viadrina
Frankfurt/Oder,
Professor Dr. Markus Voeth, Universitat Hohenheim,
Professor Dr. Rolf Weiber, Universitat Trier
Das Business-to-Business-Marketing ist ein noch relativ junger For-
schungszweig, der in Wissenschaft und Praxis standig an Bedeutung
gewinnt. Die Schriftenreihe mochte dieser Entwicklung Rechnung tra-
gen und ein Forum fur wissenschaftliche Beitrage aus dem Business-
to-Business-Bereich schaffen. In der Reihe sollen aktuelle For-
schungsergebnisse prasentiert und zur Diskussion gestelltwerden.
Stefan Wengler
Key Account Management
in Business-to-Business
Markets
An Assessment of Its Economic Value
With a foreword by Prof. Dr. Michael Kleinaltenkamp
Deutscher Universitats-Verlag
Bibliografische Information Der Deutschen Nationalbibliothek
Die Deutsche Nationalbibliothek verzeichnetdiese Publikation in der
Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet iiber
<http://dnb.d-nb.de> abrufbar.
Dissertation Freie Universitat Berlin, 2005
I.Auflage September 2006
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ISBN-10 3-8350-0517-0
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"The economic value of key account management"
Foreword
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.
As a result it is pointed out that some key account management alternatives, which
may enable companies realizing larger transaction cost economizing effects, often
require high implementation costs. In consequence, the set of organizational key
account management alternatives will be reduced to a set of five to six, which can be
considered as relevant alternatives in marketing practice. Furthermore, the author also
hints at the application of the proposed decision model in the evaluation of already
implemented key account management organizations, which may require a minimal
adjustment of the model.
VI Foreword
Companies considering whether to implement key account management or not and if
so, in which scale and scope, are therefore offered a theory-based model supporting
their decision-making process. Also companies with already existing key account
management organizations are assisted in evaluating the performance of their key
account management units.
As the following publication analyzes a practically, as well as scientifically, relevant
aspect in marketing management, it would be certainly desirable if it were to gain
attention not only in marketing science but also the attention of marketing & sales
practitioners.
Prof Dr. Michael Kleinaltenkamp
"The economic value of key account management" VII^
Preface
In times of fierce competition in business-to-business markets strong and economically
sound business relationships between a supplier and his customers become ever more
relevant. Companies, therefore, increasingly focus on business relationships with their
most important customers, their key accounts. In order to maximize the economic
value of their key account relationships, the majority of companies decide on
implementing key account management.
Interestingly, however, empirical research studies over the last couple of years have
been proving that relationship marketing and particularly key account management do
not achieve the economic value originally supposed. Although the research community
has identified various reasons for these performance deficits within companies'
marketing & sales organizations, it is neither able to offer any advice nor is it capable
of supporting the companies' management in their decision on the most appropriate
marketing & sales organization. Managers are thus still left on their own in their
determination of the economic value of the marketing management organization.
This publication, therefore, tries to provide a comprehensive answer to the question of
the economic value as well as the need for the implementation of key account
management. In addition to the overview on the recent status-quo of the key account
management literature it proposes the first uniform key account management
conception from the relationship marketing perspective, including its strategic,
fiinctional as well as organizational dimensions. Further, key account management
controlling literature is reviewed, the most relevant controlling tools are introduced
and evaluated with regard to their ability to support the implementation decision of
key account management. As the analysis shows, the existing controlling tools are not
capable of supporting a sound management decision.
In the approach to developing a comprehensive decision-making model concerning the
implementation of key account management, the focus is shifted to transaction cost
economics. The extension of transaction cost economics perspective with respect to
uncertainty/ complexity enables intraorganizational decisions, particularly with regard
to the company's marketing & sales organization. As the analysis will show, four
alternative key account management organizations seem to be economically sensible -
depending on the company's business relationship with its key account. Which
organizational alternative is deemed the most appropriate needs to be individually
assessed by the company's management.
VIII Preface
This publication is intended for academics as well as practitioners in their daily work:
whereas academics will gain a comprehensive overview on the discussion of key
account management as well as further ideas about its theoretical foundation;
practitioners will have the opportunity to extract the most important aspects of key
account management as well as the first uniform key account management conception
since the early 1980s. Furthermore, the application of the decision-making model
should not cause any difficulties: due to its rather simple structure, its qualitative
character as well as the comparative analysis, the model can be applied flexibly and
requires predominantly management estimates for its decision-making.
A publication of this kind does not come without any external support. I would
particularly like to thank my mentor and professor Prof Dr. Michael Kleinaltenkamp
for giving me the necessary liberty and intellectual stimuli for my own academic
development. My thanks also go to PD Dr. Michaela Haase for reviewing my
dissertation as well as for her collaboration within the project "Entrepreneurship in the
knowledge society". I owe four pleasant and extremely interesting years at the Free
University of Berlin, Germany, to my exceptional collegues of the Department of
Marketing. In particular I would like to thank Stefan Chatrath, Dr. Beate Dahlke, Dr.
Michael Ehret, Janine Frauendorf, Andrea Hellwig, Dr. Dorothea Kress, Astrid
Laseke, Sigrid Peuker, Ulli Reitz, Samy Saab as well as Petra Theuer for the various
articles, research and consulting projects we realized together.
Besides the members of the Department, I received positive support from my friends,
whom I have to thank in particular: Christof Dahl for supporting me in diffucult times
and sharing my passion of entrepreneurship, Gerd Finck for continuously pressing me
to finish my dissertation as well as Jan Miksch and Jom Herrmann who suffered the
same fate.
Most of all I am very grateful to my family for promoting and sponsoring me. Our
family values and virtues were both guidance and help at the same time: modesty and
hard work, humanistic education and fairness as well as curiosity and kindness have
been demonstrated by my dear grandparents, parents as well as my brother. Moreover,
my lovely wife Christina deserves particular thanks for showing me that life holds far
more than studying and working.
Stefan Wengler
"The economic value of key account management" IX
Contents
Introduction 1
1.1 Key account management - a seemingly evolutionary phenomenon 1
1.2 The efficiency of key account management 4
1.3 Objective and structure of the thesis 8
State-of-the-art of key account management in academia and science 12
2.1 Relationship marketing and the concept of key account management 12
2.1.1 From a transactional towards a relational understanding of
marketing 13
2.1.1.1 The transactional marketing perspective 14
2.1.1.2 The relational marketing perspective 16
2.1.1.3 Relationship marketing as relationship buying and
relationship selling 17
2.1.2 Key account management in the context of relationship marketing. 19
2.1.2.1 Key account management as a part of relationship
marketing 19
2.1.2.2 Key account management as a focused relationship-
marketing-program 21
2.1.2.3 Developments and evolution in the conception of key
account management 23
2.2 The conception of key account management 25
2.2.1 Definition of a key account management concept 25
2.2.2 Objectives of key account management 28
2.2.3 Dimensions of key account management 35
2.2.3.1 The strategic dimension of key account management 35
2.2.3.2 The functional dimension of key account management 38
2.2.3.3 The organizational dimension of key account
management 42
2.2.4 Integrating the customer by applying key account management 47
2.3 Research and empirical evidence on key account management 49
2.3.1 Conceptionalization of key account management 50
2.3.1.1 National account management and key account
management 51
2.3.1.2 Global and euro key account management 53
2.3.2 Key account managers and key account management teams 54
2.3.2.1 Individual key account manager 54
2.3.2.2 Key account management teams 56
2.3.3 Empirical research on key account management 59
2.3.4 The key account management conception and its performance
deficits 63
Contents
Key account management controlling 66
3.1 Defining the task and objectives of key account management controlling ..67
3.1.1 Tasks and objectives of marketing controlling 67
3.1.2 Key account management controlling 68
3.2 Tools in key account management controlling 71
3.2.1 Unidimensional criteria 71
3.2.2 Multidimensional criteria 81
3.3 Requirements of an implementation decision model 85
3.4 The theoretical foundation of the decision model 87
3.4.1 A systematization of organization theory approaches 87
3.4.2 A comparison of relevant modem organization theory approaches ..93
Analyzing key account management from the perspective of
transaction cost economics 98
4.1 The fundamentals of transaction cost economics 99
4.1.1 Transaction cost economics in economic theory 100
4.1.1.1 Differences between transaction cost economics and
orthodox microeconomic theory 100
4.1.1.2 Transaction cost economics and the new institutional
economics 102
4.1.2 Core assumptions in transaction cost economics 103
4.1.2.1 Methodological individualism 103
4.1.2.2 Human factors 104
4.1.2.3 Environmental factors 107
4.1.3 Characteristics of transactions 108
4.1.3.1 Asset specificity 108
4.1.3.2 Uncertainty 110
4.1.3.3 Frequency Ill
4.1.4 Transaction costs 112
4.2 Applying the framework of transaction cost economics 114
4.2.1 Organizational failure framework 114
4.2.2 The governance structure in transaction cost economics 118
4.3 Bilateral governance and the relevance of the marketing organization 122
4.3.1 The fundamental transformation 123
4.3.2 Institutions in relational exchange 125
4.3.2.1 Private ordering 125
4.3.2.2 Credible commitment and relational norms 126
4.3.3 Long-term business relationships in transaction cost economics.... 127
4.3.4 The neglect of the internal organization in bilateral governance.... 131
4.3.5 The marketing organization in transaction cost economics 133