Key Account Management: always read the label

Aug 17, 2009

"Always read the label" is embedded in the way we package and promote our products. I often think that management scientists should say the same about what they produce. Take, for example, Key Account Management (KAM). Much management theory, especially in marketing, has to be applied with care in the pharmaceutical business because it has early origins in the very different conditions of consumer markets. The notable exception is the theory that underpins KAM, a technique that is very fashionable in our sector.

The origins of KAM lie in the early 1970s when academics tried to model how organisations, rather than individuals bought things. There followed a stream of research into what was then called Major Account Selling. This sat in an academic silo for many years until, towards the end of the 1980s, Major Account Selling mated with ideas of Relationship Marketing to spawn what we now call Key Account Management.

However, it's only in the last 5 years or so that KAM has become of major interest to pharmaceutical companies. This is because it is a kind of transitional species of sales management that is a good ecological fit for a certain set of market conditions that many pharmaceutical brands find themselves in today. Traditional sales management works best when the product is highly differentiated and the prescribing decision is solely in the hands of the prescriber. At the other extreme, where the choice between various undifferentiated products is made solely by purchasing executives, commodity processes with tenders and contracts work well. But in the middle, where the choice is made by a decision-making group, KAM is the model of choice. This is the reality of the situation for many mid and late life-cycle chemical entities and KAM is the theoretically sound and practically sensible approach in this context.

So it's baffling, initially at least, when my research finds that many companies don't get good results from KAM. When I dig deeper, I usually find this is because what they call KAM is simply traditional sales management relabelled, which makes the newly-entitled Key Account Manager feel good but makes little practical difference. What research tells us is that KAM differs from traditional sales management in several key ways and that it is built on certain fundamental company habits.

KAM is characterised by the way it creates more than just financial value for both parties. KAM management is a long-term job that involves little selling and instead focuses on facilitating the multiple contacts between different specialists on each side of the relationship. Although firms evolve gradually towards KAM, its final form looks very different from short-term, sales-focused, traditional selling. And real KAM only works if the firm culturally embeds some new tricks. These include picking KAM-suitable accounts, leveraging distinctive knowledge assets, devising new ways of measuring success and, critically, double-loop learning.

In short, what research tells us about KAM is that it is not relabelled traditional sales management. It is much more difficult than that but, in the right circumstances, much more effective. That explains why re-labelling is always a dangerous thing and why, for pharmaceutical executives as much as patients, it's always important to read the label.

Further reading
1. McDonald M., Millman T., Rogers B., "Key Account Management: theory, practice and challenges," Journal of Marketing Management,13(8), 737–57, November 1997.
2. McDonald M., "Key Account Management — a domain review," Marketing Review, 1(1), 15, October 2008.
3. Smith B.D., "Myth, reality and requirements in pharmaceutical Key Account Management," Journal of Medical Marketing, 9(2), 89-95, 2009. (Available on request from [email protected])

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