B2B selling is complex and time-consuming, in part because so many individuals are involved. While sellers’ marketers and sales teams used to target 5.4 buyers and buyer influencers at B2B companies, that number has soared to 6.8.
In addition, some accounts are strategic to sellers’ business success. Although these accounts represent 10% or less of a sellers’ accounts, they can account for more than half of its revenues. That’s why many sellers are taking a key account management (KAM) approach to managing priority customers, leveraging contributors from sales, financing, engineering, and executive functions to help make the sale. These KAM contributors interact with both internal (within-seller) and external (buyer-seller) networks to identify and meet buyer needs and develop appropriate offerings. When done well, KAM can drive firm revenues by 5% to 10%, increase margins by 3% to 4%, and lower costs by up to 20%. However, most KAM initiatives fail to achieve their objectives because of how they are structured.
In a new study in the Journal of Marketing, we investigate KAM team structure and how that impacts success (or the lack thereof). We also offer recommendations for how sellers can ensure KAM achieves its full potential.
We contend that the attributes of the two networks influence the seller’s key account profitability in a complex, interactive fashion. In accordance with social networking theory, in the buyer-seller network, we looked at network density, that is the ratio of the number of actual connections to the maximum number of connections possible in a network, and similar function ties, the similarity in functional backgrounds of network members. These two factors are key in buyer-seller networks for effective information exchange. In a parallel fashion, in the within-seller network, we looked at network density and cross-function ties, the diversity in the functional backgrounds (sales, engineering, etc.) of the selling team members. We also incorporate the role of network centralization—that is presence of central actors in the within-seller network who can coordinate information utilization efforts in the seller team.
To test our model, we use primary source data from 207 key account managers in a variety of B2B industries in the United States, applying a regression model to correct for unobserved heterogeneity and endogeneity.
Making KAM work isn’t easy. Within-seller teams must have industry and client-specific knowledge and also target the right buyers, who vary from company to company. In addition, within-seller networks necessarily vary from client to client. For example, a buyer with a wide-ranging product and service portfolio may require a larger, more diverse within-seller network to service it than one that focuses exclusively on selling a certain product. Similarly, buyer-seller networks and their internal counterparts vary: For example, a CTO at a seller might directly engage with VP of Technology at a buyer, or the key account manager from seller might have to engage with the VP of Technology at a buyer. Finally, in buyer-seller networks, stakeholder requirements often vary and may even conflict.
Our key findings include:
- A subtle pattern of alignment exists across the two networks. Specifically, increasingly dense ties in both networks undermine seller account profitability.
- In contrast, increasing centralization in within-seller network, when combined either with increasing density or with functional similarity in buyer-seller network, enhances account profitability. These findings challenge prior research, which has viewed centralization within teams in a predominantly negative fashion.
- Sellers can drive profitability by ensuring their cross-functional seller team has interactions between representatives from similar functional backgrounds from both firms. Thus, rather that considering cross-functional teams as a panacea, sellers’ managers should carefully align cross-functional teams with their functional counterparts at the buyer firm in order to improve profitability for the seller. This makes sense: Engineers would rather talk to engineers than accountants.
- We estimate that sellers can improve their profitability from key accounts by as much as 4% by aligning their key account selling teams and their ties to the buyer account.
Our study is the first to use a cross-level network perspective to study the relational ties structure between buyers and sellers and within selling teams selling team, assessing not just interplay across the networks but also several network attributes. This lens allowed our team to uncover nuanced findings that challenge the industry’s prior understanding of managing key account relationships. We also offer a new perspective of sales success, considering key account profitability as a critical outcome, rather than the common wisdom, which is to focus on individual salesperson performance.
Companies can use this research to assess how they structure and develop within-seller networks to address complexities in corresponding buyer-seller networks. This study can be used not only to drive profitability, but also create closer, more meaningful connections with customers and ensure offerings meet increasingly complex cross-functional needs.
From: Aditya Gupta, Alok Kumar, Rajdeep Grewal, and Gary Lilien, “Within-Seller and Buyer-Seller Network Structures and Key Account Profitability,” Journal of Marketing, 83 (January).