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Why major account selling works
Why Major Account Selling Works John Barrett This article builds upon established theories of lndustrial Buying Behavior and National Account Marketing to establish some rationale for firms to determine whether targeting their major customers with a separate sales force is a strategy that can work for them. It attempts to describe why major account selling works, where it has been successful, and provides some ideas for firms to consider when determining the organization of their sales force.
INTRODUCTION National or major account selling is an accepted and widely used strategy among industrial marketers today. Its concept is a direct link to the accepted axiom in business and marketing that 80% of a company's revenues are derived from 20% of their customers and that it is prudent and wise for companies to maximize that revenue and, more importantly, protect that revenue base by meeting the special needs and requirements in marketing services those companies demand and expect. Many major industrial corporations such as IBM, AT-F, Union Oil, Xerox, and others have adopted the concept of National Account Marketing in organizing their marketing efforts, particularly their sales force, Address correspondence to John Barrett, Major Account Sales Manager, Xerox Corporation, Suite 400, 180 E. Ocean Blvd., Long Beach, CA 90802.
Industrial Marketing Management 15, 63-73 (1986) © Elsevier Science Publishing Co., Inc., 1986 52 Vanderbilt Ave., New York, New York 10017
and the trend towards this form of "Customer Segmentation" seems to be increasing as evidenced by the growth of the National Account Marketing Association and the increased focus in the literature and marketing books of Key Account Marketing [10]. As Moriarty put it, "National Account Marketing is the phenominal topic of the '80s." (1) Much has been written in the literature on the value, benefits, and use of Major Account Selling. Most of these articles focus on the actual use of the programs by companies and the subsequent findings of payoffs to the vendors and customers, how companies determine a National Account, various National Account structures, what kinds of companies utilize National Account Marketing, etc. In reading these articles and through my own experience at a company that uses National Account Marketing, it becomes obvious that it works for some companies in certain situations. The question that keeps coming up, however, is "Why does it work in industrial marketing?" and "Why does it work only in certain Seller/Buyer relationships? By examining the relationship between industrial buying behavior theories and the various hypothesis that have been proposed and accepted on National Account Marketing, this article attempts to describe a theory of why National Account Marketing works. By determining why it works and looking at proven concepts of National Account Marketing in practice,
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it is hoped that management, especially marketing management, of a seller in an industrial market, will be better able to determine if it is right for their company and to develop customized criteria for establishing a National Account Organization.
METHODOLOGY In trying to determine why National Account Marketing works in given situations, it is important to examine those situations where it has been shown that firms have been successful in focusing special attention on their most important accounts. Thus, the first part of this article will briefly examine existing concepts and hypothesis of National Account Marketing that have been shown to be true in empirical studies and through observation of success in various companies in order for the reader to have an under-
NATIONAL ACCOUNT MARKETING National Account Marketing simply means targeting the largest and most important customers by providing them with special treatment in the areas of marketing, administration, and service. It has been described as a holistic approach to marketing, focusing not on the product being offered but on finding solutions to complex problems by providing expertise, resources, and post-sale follow-up that create a completely different "product offering" for the seller, designed to meet the customers needs [2]. Normatively speaking, the creation of special attention to a group of customers through one key person (National Account Manager) or team, headed by the NAM, would create a close working relationship with the customer, improve communication and coordination within the seller's company and between
Targeting the Most Important Customers standing of when and where National Account Marketing works. The major focus of the article is industrial buying behavior, with a short summary of the theories developed by Sheth, Wind and Webster, and Hakansson and Wootz. National Account Marketing is then related to several key elements of industrial buying behavior to explain why National Account Marketing works and to develop further hypothesis for study. Finally, the article takes a look at what implications this theory of National Account Marketing has for industrial marketers and the impact of the other 80% of the customers.
JOHN BARRETT is currently a Sales Manager for National Accounts for Xerox Corporation. His career has included highly successful performances in selling, sales management for Commercial Accounts, as well as management of National Account Managers.
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buyer and seller, provide better follow-up on sales and service to the account, allow for more productive sales calls, and maintain and grow relationships as the account grows. In fact, with the few empirical studies that have been done so far and the observations noted in the literature, reality is very much correlated with this normative scenario. Studies by Stevenson, Moriarty, Shapiro, and others have shown that National Account Marketing tends to provide marketers with the benefits of improving relationships between buyer and seller, shares of sales increasing, improving communication between buyer and seller, and customers having multiple locations.
Improving Relationships between Buyer and Seller The relationship and interaction between buyer and seller becomes stronger as the National Account organization is maintained and, in fact, becomes a much more intimate relationship that is difficult for
either party advantage.
to
break,
creating
a competitive
Shares of Sales Increasing [10] Companies indicated that after installing a National Account Marketing program, their sales increased with the buyer. Not only was it determined that share of sales increased in 74% of the companies surveyed but that absolute sales increased in over 90% of the companies. This indicates that the mere establishment of a National Account program helped these companies maintain their share of sales and participate in normal sales growth of the company, a corollary benefit. A key reason cited for the increase in sales is the effect that the relationship developed with the account, the full attention to the penetration of an account that occurs, and the focus on solving complex customer problems has in giving credibility to recommendations made by a National Account team or individual, as compared to recommendations made under traditional sales organizations divided by geography or product.
Improving Communication Between Buyer and Seller (1) With one individual or National Account team coordinating the marketing efforts of the seller, there is better communication of both partners' needs, organizational differences/similarities, objectives, specific problems with respect to the physical exchange of goods and services between the partners, competition, etc. Communication on market information and trends to the seller is also improved through a focused marketing effort on the major companies with power and resources in a particular industry. Other benefits noted in the studies were that National Account Marketing provided an opportunity for advancement into a prestigeous position for those successful sales representatives who did not want to go into management and coverage of a major customer with an experienced, successful sales representative, ensuring that an important customer received the best sales support. Although these advantages seem to be desirable for most firms in business, the studies found that they existed and worked in situations where a National
Account Marketing program was established on certain criteria. Since most of the empirical studies were conducted only in large firms, it is difficult to establish a theory describing when any firm, large or small, should consider National Account Marketing. In any event, there were four situations where National Account programs were successful.
Customers had an Existing or Potential Dollar Volume [9] Most companies established National Account organizations based on existing or potential dollar volume. This is the primary criteria established by companies and although the dollar amounts varied, the average amount in Stevenson's study of 23 firms using National Account Marketing systems in 1980 was $1,021, 438. The hypothesis concluded that companies that exceeded a threshold amount, depending on the particular industry, should be given National Account status.
Customers Have Centralized Purchasing [9] Data support the notion that firms that have centralized purchasing or where headquarters has control over decentralized purchasing are good candidates for National Account status. Purchasing Agents in these situations indicated, in a survey conducted by the National Account Marketing Association, that they prefer having one person call on them. Stevenson noted that many large customers have centralized purchasing which are not National Accounts, indicating that National Accounts have centralized purchasing but that centralized purchasing alone is not a sufficient criteria for establishing a National Account.
Sellers Exceeded Dollar Volume and Sales Force Size [8] Because of the high cost of allocating an experienced, tenured portion of the sales force, most companies using National Account Marketing had sales forces of significant size, a mean of 532 vs. 109 for Non-National Account programs, and these companies were generally large scale operations, although dollar figures were not given. In addition, it was suggested that industry concentration was also a factor in trying to determine National Accounts. The studies tended to show that bilateral concentration of the seller industry and buyer market had a positive 65
Another criteria on which customers were classified as National Accounts was that there were multiple establishments, generally more than ten. Also, these customer establishments were generally in more than one geographic location which use the same product or service being offered by the supplier. Although the findings described above on National Accounts are very good for a "first cut" at determining an account classification and what can be expected of the National Account program, these findings were the result of looking at what is in existence in major companies and making inferences from that data. Yet, what about the companies that don't fit any of those classifications? Can they use National Account Marketing? If a company falls into one of these classifications, do they automatically use this program? What about the other 80% of the customers? If we take the approach of examining why National Account Marketing works, creating, in essence, a theory of National Account Marketing, perhaps we can come up with criteria for any industrial company to use, in conjunction with the empirical evidence, to determine if it is right for them. To do that, we need to take a brief look at Industrial Buying Behavior Theory.
structure. These individuals are faced with making buying decisions directly related to the buying problem (task), social needs, values, personal goals, etc. The entire structure is influenced by the environment, consisting of suppliers, industry structure, legal factors, government, economic factors, etc. The Sheth model is an extension of the HowardSheth model on Consumer Buying Behavior. The model describes the organization buying process as taking place among three groups, purchasing agents, users, and engineers, with others involved at various times. Each of these groups has their own expectations and perceptions of suppliers' products based on that individuals background, information sources, perceptual distortions of the information, their ability to search for the information, and satisfaction with past purchases. A key element of the Sheth model is that decisions are either made jointly or autonomously depending on various product or company criteria. If the decision making is joint, then conflict is bound to occur and conflict resolution becomes an important factor in the buying process [7]. For the purposes of this article, we will examine how National Account Marketing impacts the concept of conflict in industrial buying as compared to traditional sales organizations and the effect it has on interactions and relationships between buyer and seller to explain why it works. We will also examine more closely Sheth's differentiation between joint and autonomous decision making to establish further criteria for using National Account Marketing.
INDUSTRIAL BUYING BEHAVIOR
CONFLICT/CONFLICT RESOLUTION
Organizational buying has been defined as "a decision making process carried out by individuals, in interaction with other people, in the context of a formal organization" [11]. There are several models of the process, with the Wind and Webster and Sheth being the most widely recognized. The Webster and Wind model describes the buying process as being undertaken by individuals within a "buying center," each with their own role set, defined as buyers, decision makers, users, influencers, and gatekeepers. The individuals within the buying center are influenced by many factors within the organization including the organizational goals, personal goals, reward system, communication system, and organization
In companies where purchasing decisions are made jointly among a number of individuals within a buying center, National Account Marketing is able to better overcome some of the inherent obstacles that occur, namely conflict over role sets, personal goals, organizational goals, and expectations than normal sales organizations typically divided by geography or product. The benefit we see is the increase in sales and share of sales that occurs as well as a better line of communication between buyer and seller. In the typical buying center scenario, individuals fill the roles of buyer, user, influencer, decision maker, and gatekeeper [11]. It is important to note that some of these roles may be, and usually are, filled by thc
correlation to the use of National Account Marketing. It also showed, however, that large sellers in an unconcentrated industry also used it if their buyers were very large.
Customers Have Multiple Locations
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same person or more than one person. For example, in many instances the gatekeeper and buyer are the same individual, usually the Purchasing Agent. That person may also be the Decision Maker or the Decision Maker may be the User. In any event, in the industrial buying process of identifying a need, establishing criteria, identifying alternatives, evaluating alternatives, and choosing a supplier, a different m e m b e r may be involved at different times. Thus, it appears evident that a seller must have interaction with each of these roles or at least be able to know who is in which role and which role is in the power position, where marketing efforts should be directed at, if they want to maximize their chance of success. The hypothesis is that National Account Marketing is better able to achieve the interaction necessary with each of these roles and, as a result, create the communication and environmental stimulus necessary to help avoid or minimize conflict. Through these interactions, marketers are able to understand the differing motives and expectations of each of the individuals involved in the buying decisions which opens up communication channels between the seller and each member, allowing for marketing efforts to be directed at each individual based on their particular role set. For example, in a traditional selling organization set up by geography or product, without National Account Marketing, generally a sales representative will call on a buying contact, usually the Purchasing Agent. Figure 1 shows the relationships going on during the buying/selling process. In this relationship, the Purchasing Agent is the buyer and gatekeeper, a very regular occurrence. The diagram describes the interacting relationships of the buyer/gatekeeper with the user, influencer and, in some cases, a higher Decision Maker. Each of these roles have their own idea or expectation of the seller based on their educational background, values, personal goals, the system of rewards they operate under, and the quantity and quality of information they receive. These contrasting expectations and perceptions create conflict which, as March and Simon note, is present whenever a group of people must decide jointly [7]. Compounding this problem is the fact that there may be many users and influencers, for example, or the users may be in different locations in contact with local influencers while the buyer is in a central location with different users and influencers.
It appears logical that as the companies grow in size and expand to multiple locations, that the buying process becomes more complex, more people become involved, and the conflict becomes more critical. An important topic regarding conflict, which has not been raised yet but is critical to the marketer, is how firms resolve conflict. Sheth describes four conflict resolution patterns which take place in organizations:
1. Problem Solving. If the conflict results from differing expectations about the supplier or brand, problem solving techniques are used. This involves gathering more information about the supplier, their brands, and alternative suppliers. 2. Persuasion. If the conflict is on specific criteria used to evaluate the supplier or brand, then the individuals will attempt to persuade other members on the value of their criteria and how it accomplishes overall objectives. 3. and 4. Bargaining and Pofiticking. These are two other methods described by Sheth, which he states are counterproductive to the objectives of the organization. These occur where differences exist on the buying goals that cannot be resolved, resulting in trade-offs or favors by individuals in exchange for future favors or bad mouthing other members of the buying center. The environment or culture of an organization usually creates an atmosphere where a particular form of conflict resolution takes place most of the time. Marketers must understand how firms, specifically the buying center within the firm, resolve conflict if they are to have an impact on the buying process. For example, if problem-solving techniques are used primarily, the seller can direct more information to the buying center or where persuasion is used, arguments can be developed to convince the members of the organization on criteria to use which helps the seller. In the Seller/Buyer interaction shown in Figure 1, the seller has a difficult job. Industrial sellers are taught that to be successful, they must sell "high and broad [6]. Yet, in this scenario, they are dealing with only one m e m b e r of the process, the buyer/ gatekeeper, who controls the information and access to the other members. The representative has little understanding of who the individuals are that make up the buying center, what their expectations are, 67
,@ FIGURE1. Typical relationship between seller and buyer when the selling organization is set up by geography or product, The interaction occurs primarily between the sales representative and the "gatekeeper" and does not occur with others in the organization who influence the "gatekeeper,"
A Better Line of Communication Between Buyer and Seller their personal wants and needs, and how those individuals resolve conflict in buying decisions. Thus, they are not able to minimize the differences among the individuals and, consequently, the conflict remains. They can try! Most successful sales representatives will attempt to expand their contacts and reach all of the individuals involved. However, there are usually several constraints, especially in larger, multiple location buying organizations. 1. The Gatekeeper/Buyer may not allow them to meet the engineers, users, etc. who are part of the Buying Center. 2. Very often in geographic, product, or customer sales organizations, the representative has many customers and noncustomers to call on, making it difficult to allocate the time needed to penetrate the account. 3. The representative must be able to "style-flex" to adapt to the background, values, and expec-
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tations of each member. This requires extensive knowledge, training, and time. 4. The Users/Influencers may be in other locations outside of the representatives territory, making it physically impossible to create the interaction. 5. Where the selling company has a varied product line, the representative must be skilled in all areas to be able to satisfy the total needs of the account. The danger here is becoming a "jack of all trades, master of none" and losing credibility. 6. The background, perceptions, and personality of the representative may not blend well with all members of the buying center at all times of the buying process, creating unnecessary conflict between buyer and seller. National Account Marketing overcomes many of the obstacles noted and, more importantly, is able to minimize the conflict within the buying center as a result. Although there are several variations of Na-
tional Account Organizations, which are beyond the scope of this paper, the underlying principle is the coverage of a major account by a team of people led by one person, usually designated the National Account Manager. The essence of National Account Marketing is described in Figure 2. The Sales Representative (NAM or someone else on the team) is supported by a team of specialists who interact with and "sell" their counterparts in the buying organization. The National Account team, working in a well-coordinated fashion is able to "pull" the buying decision through the organization from the Users and Influencers to the buyer rather than the more difficult task of "pushing" it through the buyer into the organization as is done in more traditional sales environments. The NAM and seller benefit from the influence that the Customer Engineers, Production Managers, etc. exert on the buyer as a result of the interaction with their corresponding specialist on the selling team [2]. Figure 2 shoves the relationships that are going on. There is still the contact between the sales representative and the buyer/gatekeeper. However, since this customer may be the only one for the National Account team, or at least one of a few, and there is the increased focus by a team of people, many more relationships develop. The NAM, as sales representative, may develop a
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secondary relationship with an overriding Decision Maker (e.g., President, Vice President of Operations, etc.) who may or may not be in the buying process but is an important factor in the buying center. The NAM, in this case, has got more time to develop these kind of relationships and, since the objective of that contact is to simply create an interaction and relationship between the two companies, the NAM may not disrupt the role relationships within the buying center which would inhibit the relationship built up with the buyer. In addition, this relationship does not require the extensive knowledge or training needed to establish contact with others in the buying center. The specialists create the relationship with their counterparts in the buying organizatiorL the Users, Influencers, and perhaps, Decision Makers. The specialists are well trained in the same field as their counterparts which, presumably, allows them to communicate in the same language, empathize with their needs, understand their values, and generally open up a line of communication between seller and buyer which did not exist before. The gatekeeper role is extremely important in both scenarios. As the primary contact with the seller, the gatekeeper controls the information entering the buying process within the organization, creating a powerful situation that is the target of all the influenc-
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~~~l Ilu..i.l-lm:m'" FIGURE 2. The interaction going on between seller and buyer in an organization set up with National Account Marketing. The team of sales people focus on the team of buyers and are able to reach the decision making entity as well as the influencers.
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ers. The role the gatekeeper is expected to play and the actual behavior that is displayed may be quite different. The information being distributed may be distorted and biased on the individual needs and perceptions of the gatekeeper. This is a reason why the gatekeeper may not allow the sales representative in a traditional selling situation to go to others in the buying organization. They fear that the existing relationships and interactions will be disrupted and, in turn, will disrupt the role set of the gatekeeper [11]. In Figure 1, the seller has little control over this. In Figure 2, the seller has a greater degree of control. Specialists, who are not sales representatives or are not perceived to be, but are counterparts to the Users and Influencers, may have a better opportunity to be allowed in the buying process as a gatherer of information to help the buyer and seller, or on some other premise, to establish contact without upsetting the gatekeeper role. In any event, if we accept the hypothesis that conflict in the buying process is a result of differing expectations, perceptions, and values among the individuals involved, then it would seem that being able to interact with each of the individuals would allow the seller to minimize these differences through information exchange, persuasion, and strengthening of personal relationships. For example, for the user looking for ease of operation and efficient service, the specialist can exchange information on the benefits of their product or service in this regard and, in so doing, persuade them toward the direction of the seller. At the same time, for the Purchasing Agent concerned with getting the best price advantage, the sales representative is able to provide information and persuasion in that regard. In both instances, they may be able to get the perception and expectation of each individual to the same relative position based on their individual values. Because National Account Marketing is able to create these interactions more effectively, it also seems true that it is able to minimize the differences in perception, values, and expectations of the individuals within the buying organization, which creates less conflict. The benefit of this concept is that the buying process proceeds more efficiently and effectively toward a favorable decision for the seller, increasing sales. In addition, it forms a base for establishing further relationships which we discuss below.
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RELATIONSHIPS Two of the major benefits found to be true when National Account Marketing is used are the strengthening of relationships and better communication between the buyer and seller. How relationships are built and maintained between organizations is a complex subject with many social psychology, as well as marketing principles, involved. A basic premise that will be used in the context of this article is that relationships between two organizations cannot be built and maintained or strengthened solely on the physical exchange of goods and services between the companies [3]. This, again, is supported by Industrial Buyer Behavior Theory where buying decisions are made by individuals within the context of a formal organization and who face conflicting goals. The personal goals of the individuals are based on individual values and needs, including social needs, the desire and need to interact with people, and any buying decision will have these "non-task" elements involved. The physical exchange of business may satisfy some of the individual/organizational needs, certainly the "task" needs are met, but it cannot meet all of the social and other personal needs requiring more intimate interaction [11]. Because industrial buyers can account for a very large portion of a sellers output (80/20), both buyer and seller are more dependent on each other than is seen in Consumer Buying. As a result, sellers and buyers in the industrial market are individually identified, forming the initial base for establishing a relationship. This creates a natural need to interact that becomes stronger as the perceived ability of the other party increases or the number of alternatives available decreases. Thus, in an oligopolistic industry, the need for interaction among Decision Makers is very strong [7]. Marketers should attempt to influence that interaction process. Initially, this simply starts by establishing contacts. The more contacts that are made, the more interaction occurs, and a larger base for building upon results. Here, National Account Marketing 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.
In the interaction process, these contacts initially create an environment where Decision Makers at least have a positive attitude about each other and perhaps small physical exchanges take place. For example, the buyer may test one of the smaller products or purchase their product for a small application to see how things work. If we accept the hypothesis by H o m e r (1954) that "it is not people we like whom we interact with, rather we like the people we interact with," then these interactions develop into friendships, creating a much stronger, emotional commitment between the two partners [3]. This can take place between one person on each side or many. Again, National Account marketing creates many interactions, leading to the development of friendships. All of these emotional commitments together create a bond that is difficult to break. That is why we see that supplier/buyer relations are long term in empirical studies and it is difficult for new vendors to enter. Thus, National Account Marketing has the benefit of the competitive advantage and, at a minimum, growing in sales with the buyer's normal growth. If we contrast this with traditional sales approaches, we can see how a single relationship between buyer/sales representative, which cannot be as strong, can be broken more easily and competition enters. As the process continues, the Decision Makers adapt to each other and develop a trust in one another. For example, when the seller experiences a let down in the service the buyer is used to receiving, the decision maker may adapt by loosening demand during that period or having in-house people handle it for awhile. This is in contrast to breaking off the relationship and finding new suppliers in situations where strong bonds do not exist. Trust among partners in buying/selling interaction does not occur automatically [3]. Decision Makers on both sides must be convinced that the other has the ability and intention of satisfying their whole needs. This is accomplished through contacts with representatives from both sides and observing how the other party deals with other similar firms. If they cannot maintain relationships or satisfy the needs of other similar firms, it is difficult to believe it can be done with them. When interactions between partners are good, then they tend to get better. However, if relationships with other partners is better then the
need to interact with that one partner is decreased and the interaction may get worse. This is important from the sellers standpoint. Perhaps, if National Account Marketing is not used for a buyer in an oligopolistic situation, then the buyer may have a better interaction with another seller and the need to interact with the first seller decreases. Thus, National Account Marketing may be as useful defensively as well as offensively. A potential problem arises at this point. In a relationship where Decision Makers on both sides have strong, emotional commitments to each other and the buying process is affected by that relationship, there is the danger that one of the partners leaves or loses their power position. Although it is difficult to prevent this, it is more of a problem in situations where there are only a couple of key people on each side. National Account Marketing helps to minimize the effects of that because of the team approach making it a necessity that many contacts take place and many relationships develop. Thus, the loss of one of the partners is less significant. National Account Marketing creates interactions that develop into strong, emotional relationships that are difficult to break. These relationships help to meet the social and personal needs of the individual within the organizational buying structure. The result is a bond between buyer and seller that grows stronger and maintains the benefits of better communication and revenue growth that has been seen in National Account Marketing. At this point we have seen that National Account Marketing works in given situations and we have taken a look at why it works by examining its effect on minimizing conflict and creating interactions leading to strong relationships. We now turn to what all of this means to the business manager.
IMPLICATIONS As the trend in business is toward more concentrated industries, larger customers, more centralized purchasing, and fewer new markets to enter with existing products, coverage of the largest and most important customers is becoming a critical marketing issue for more and more companies in an effort to maximize and protect their revenue [5]. Understanding why National Account Marketing works can help
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provide m o r e concrete, customized methods and criteria for businesses to determine if it is an alternative they should consider. This article states that the success of National Account Marketing has at its roots, Industrial Buying Behavior. This means that business should look at their own situation and thoroughly understand their company, industry and, most important, their customers. By understanding how their customers buy, who individuals involved in the purchasing process are, the needs of their customers, and correlating that with the kind of products they offer, the type of industry they are in and the way competition is marketing, they can quantify the benefits and costs of National A c c o u n t Marketing to see if it is justified. In addition to the general means of classifying a National Account presented earlier, this article raises some further hypotheses on how organizations can determine w h e t h e r to use National Account Marketing:
they have few alternatives to choose from. In a situation like this, the seller must be able to create and maintain a relationship with one of the buyers if that buyer is a large portion of their sales or, in the absence of any one of the buyers in the oligopoly being the main revenue producer, creates and maintains a relationship with all of them. Perhaps the seller may consider a National A c c o u n t T e a m for each of the accounts or one team covering all of them.
Type of Product or Service Being Offered
Competitive Activities
Sheth states that joint decisions are m o r e likely if the product or service being offered is perceived as more risky by the buyer, is a first time or very large purchases, and does not require an immediate or e m e r g e n c y decision. The more complex a product is, w h e t h e r it is technologically complex or just part of a systems selling approach, it would seem that the risk perception and cost would be greater. This would indicate a decision requiring many people, creating the conflict situations described earlier. National Account Marketing should be considered, therefore, if the product is costly, complex, or requires a major c o m m i t m e n t in time or resources.
If competitors within the seller industry and similar to the seller in product offering, size, structure, etc. are providing their similar customers with National Account Coverage, the seller should consider it as well for defensive purposes. There are probably m o r e hypotheses that can be developed regarding the use of National A c c o u n t Marketing which, along with these, are good areas for further empirical research to take place. A n o t h e r implication that arises is that National Account Marketing requires a certain a m o u n t of skill and c o m m i t m e n t from the seller. C o m m i t m e n t is fairly obvious. National A c c o u n t Marketing is expensive and, after quantifying the costs and benefits and deciding to go with it, the effects may not be seen for 1 - 3 years. Skill is a little more subtle. National Account marketing can be considered as a perfect example of micromarketing. The National Account T e a m must look at their customer as a small business and consider themselves entrepreneurs in running that business. The skills n e e d e d are leadership, an understanding of marketing principles, strategic analysis, and motivation. The N A M is a critical role in this business. The N A M must create a positive group self-concept within the team and display the leadership characteristics n e e d e d to run a business. To
Concentration of Seller Industry and Buyer Market Stevenson, in his study, concluded that bilateral concentration between seller industry and buyer market was a factor in establishing National Accounts. The theory presented here supports that finding but it also puts forth the hypothesis that buyer m a r k e t concentration is a m o r e important factor and sellers should look at that regardless of their own concentration or size situation in considering National Accounts. The need for interaction and power dependence is greater for the seller since in this situation
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Specific Buyer or Small Group of Buyers Purchases a Threshold Percent of Sales W h e t h e r a seller or buyer are large, in a concentrated industry or in multiple locations, if a buyer purchases a large percentage of a sellers output, e.g., > 70%, that buyer should be considered for focused support. National Account Marketing protects the revenue base, as put forth in this article, from this key customer by finding new needs to satisfy or more ways to satisfy existing needs.
facilitate this, the NAM position must have esteem and power within the selling company if there is to be any impact on the needs of the customer [2]. Finally, the NAM should be skilled at being able to understand and probe for the environment and culture of the company to take advantage of the contacts that are made as a result of the focused coverage.
WHAT ABOUT THE OTHER 80% There is a natural conflict that occurs when a firm attempts to balance the sales coverage of their largest 20% and the other 80% of the total customer base. Personal Selling can be considered a distribution method, as well as a promotional tool for marketing, which exists among a number of alternative distribution channels. The goal in distribution is the maximization of efficiency and effectiveness and alternatives are evaluated on those two criteria. Personal Selling should be no different. If companies truly believe that 20% of their customers are key, producing 80% of their revenues, and make the commitment to provide focused coverage on those customers or potential customers, then they really should be allocating most of their resources (80%?) to those accounts to increase the revenue, even at the expense of putting all of their personal selling effort on those accounts [4]. The argument to this is that doing this is very cost-inefficient since there is no guarantee that revenues can be increased and that it is purely development. But isn't that what allocating the resources on the other 80% is, developmental? These companies must decide where the expense of development should go: to the 20% making up 80% of the revenues or the 80% making up 20% of the revenues. I would argue that the former is better spent. However, won't that mean that competitors will get the customers left behind? Maybe, except that coverage of these customers does not stop; it is only handled in a different manner such as telemarketing, direct mail, retail operations, etc. Also, it is likely that within the same industry, these customers are also the 80% of small producers for the competitor. In addition, if these accounts are covered by a sales force already and they only produce 20% of the revenues, chances are that competitors won't do much more with them.
There is an exception, however. Marketers must watch for those companies among the 80% that have the potential to be large revenue producers for them and make a calculated gamble on them by providing more coverage. With the 80/20 rule so prevalent in marketing today, it is likely that only 20% of those companies gambled on will actually become large revenue producers. The implication here is that companies should put their resources where their revenue is.
CONCLUSION It is hoped that this article provided a basis for understanding how National Account Marketing works by understanding how industry purchases. As companies grow and industries tighten, National Account Marketing will become more popular and used more by both large and small firms in an effort to protect their most important customers and potential customers.
REFERENCES 1. Bragg, A. J., NAM's to the Rescue, Sales & Marketing Management (Aug 16, 1982). 2. Coppett, J. I., and Staples, W. A., Managing a National Account Sales Team, Business (1983). 3. Hakansson, H., and Wootz, B., Framework of Industrial Buying & Selling, Industrial Marketing Management (Jan 1979). 4. Hanneh, M., More Than One Way To Use the 80-20 Rule in Setting Up a Key Account System, Sales & Marketing Management (Feb 4, 1980). 5. Shapiro, Ben P., and Bonoma, T. U., How to Segment Industrial Markets, Harvard Business Review (May-June 1984). 6, Shapiro, Ben P., and Posner, Ron, Making the Major Sale, Harvard Business Review (April-May 1976). 7. Sheth, Jagdisb, A Model of Industrial Buying Behavior, Journal of Marketing (Oct 1973). 8. Stevenson, Thomas, and Page, A. L., Adoption of National Account Marketing by Industrial Firms, Industrial Marketing Management (Jan 1979). 9. Stevenson, Thomas, Classifying a Customer as a National Account, Industrial Marketing Management (April, 1980). 10. Stevenson, Thomas, Payoffs from National Account Marketing, Industrial Marketing Management (April, 1981). 11. Webster, Frederick E., and Wind, Yoram, A General Model for Understanding Organizational Buying Behavior, Journal of Marketing (April, 1972).
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INTRODUCTION National or major account selling is an accepted and widely used strategy among industrial marketers today. Its concept is a direct link to the accepted axiom in business and marketing that 80% of a company's revenues are derived from 20% of their customers and that it is prudent and wise for companies to maximize that revenue and, more importantly, protect that revenue base by meeting the special needs and requirements in marketing services those companies demand and expect. Many major industrial corporations such as IBM, AT-F, Union Oil, Xerox, and others have adopted the concept of National Account Marketing in organizing their marketing efforts, particularly their sales force, Address correspondence to John Barrett, Major Account Sales Manager, Xerox Corporation, Suite 400, 180 E. Ocean Blvd., Long Beach, CA 90802.
Industrial Marketing Management 15, 63-73 (1986) © Elsevier Science Publishing Co., Inc., 1986 52 Vanderbilt Ave., New York, New York 10017
and the trend towards this form of "Customer Segmentation" seems to be increasing as evidenced by the growth of the National Account Marketing Association and the increased focus in the literature and marketing books of Key Account Marketing [10]. As Moriarty put it, "National Account Marketing is the phenominal topic of the '80s." (1) Much has been written in the literature on the value, benefits, and use of Major Account Selling. Most of these articles focus on the actual use of the programs by companies and the subsequent findings of payoffs to the vendors and customers, how companies determine a National Account, various National Account structures, what kinds of companies utilize National Account Marketing, etc. In reading these articles and through my own experience at a company that uses National Account Marketing, it becomes obvious that it works for some companies in certain situations. The question that keeps coming up, however, is "Why does it work in industrial marketing?" and "Why does it work only in certain Seller/Buyer relationships? By examining the relationship between industrial buying behavior theories and the various hypothesis that have been proposed and accepted on National Account Marketing, this article attempts to describe a theory of why National Account Marketing works. By determining why it works and looking at proven concepts of National Account Marketing in practice,
63 I~(J19-8501/86/$3.50
it is hoped that management, especially marketing management, of a seller in an industrial market, will be better able to determine if it is right for their company and to develop customized criteria for establishing a National Account Organization.
METHODOLOGY In trying to determine why National Account Marketing works in given situations, it is important to examine those situations where it has been shown that firms have been successful in focusing special attention on their most important accounts. Thus, the first part of this article will briefly examine existing concepts and hypothesis of National Account Marketing that have been shown to be true in empirical studies and through observation of success in various companies in order for the reader to have an under-
NATIONAL ACCOUNT MARKETING National Account Marketing simply means targeting the largest and most important customers by providing them with special treatment in the areas of marketing, administration, and service. It has been described as a holistic approach to marketing, focusing not on the product being offered but on finding solutions to complex problems by providing expertise, resources, and post-sale follow-up that create a completely different "product offering" for the seller, designed to meet the customers needs [2]. Normatively speaking, the creation of special attention to a group of customers through one key person (National Account Manager) or team, headed by the NAM, would create a close working relationship with the customer, improve communication and coordination within the seller's company and between
Targeting the Most Important Customers standing of when and where National Account Marketing works. The major focus of the article is industrial buying behavior, with a short summary of the theories developed by Sheth, Wind and Webster, and Hakansson and Wootz. National Account Marketing is then related to several key elements of industrial buying behavior to explain why National Account Marketing works and to develop further hypothesis for study. Finally, the article takes a look at what implications this theory of National Account Marketing has for industrial marketers and the impact of the other 80% of the customers.
JOHN BARRETT is currently a Sales Manager for National Accounts for Xerox Corporation. His career has included highly successful performances in selling, sales management for Commercial Accounts, as well as management of National Account Managers.
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buyer and seller, provide better follow-up on sales and service to the account, allow for more productive sales calls, and maintain and grow relationships as the account grows. In fact, with the few empirical studies that have been done so far and the observations noted in the literature, reality is very much correlated with this normative scenario. Studies by Stevenson, Moriarty, Shapiro, and others have shown that National Account Marketing tends to provide marketers with the benefits of improving relationships between buyer and seller, shares of sales increasing, improving communication between buyer and seller, and customers having multiple locations.
Improving Relationships between Buyer and Seller The relationship and interaction between buyer and seller becomes stronger as the National Account organization is maintained and, in fact, becomes a much more intimate relationship that is difficult for
either party advantage.
to
break,
creating
a competitive
Shares of Sales Increasing [10] Companies indicated that after installing a National Account Marketing program, their sales increased with the buyer. Not only was it determined that share of sales increased in 74% of the companies surveyed but that absolute sales increased in over 90% of the companies. This indicates that the mere establishment of a National Account program helped these companies maintain their share of sales and participate in normal sales growth of the company, a corollary benefit. A key reason cited for the increase in sales is the effect that the relationship developed with the account, the full attention to the penetration of an account that occurs, and the focus on solving complex customer problems has in giving credibility to recommendations made by a National Account team or individual, as compared to recommendations made under traditional sales organizations divided by geography or product.
Improving Communication Between Buyer and Seller (1) With one individual or National Account team coordinating the marketing efforts of the seller, there is better communication of both partners' needs, organizational differences/similarities, objectives, specific problems with respect to the physical exchange of goods and services between the partners, competition, etc. Communication on market information and trends to the seller is also improved through a focused marketing effort on the major companies with power and resources in a particular industry. Other benefits noted in the studies were that National Account Marketing provided an opportunity for advancement into a prestigeous position for those successful sales representatives who did not want to go into management and coverage of a major customer with an experienced, successful sales representative, ensuring that an important customer received the best sales support. Although these advantages seem to be desirable for most firms in business, the studies found that they existed and worked in situations where a National
Account Marketing program was established on certain criteria. Since most of the empirical studies were conducted only in large firms, it is difficult to establish a theory describing when any firm, large or small, should consider National Account Marketing. In any event, there were four situations where National Account programs were successful.
Customers had an Existing or Potential Dollar Volume [9] Most companies established National Account organizations based on existing or potential dollar volume. This is the primary criteria established by companies and although the dollar amounts varied, the average amount in Stevenson's study of 23 firms using National Account Marketing systems in 1980 was $1,021, 438. The hypothesis concluded that companies that exceeded a threshold amount, depending on the particular industry, should be given National Account status.
Customers Have Centralized Purchasing [9] Data support the notion that firms that have centralized purchasing or where headquarters has control over decentralized purchasing are good candidates for National Account status. Purchasing Agents in these situations indicated, in a survey conducted by the National Account Marketing Association, that they prefer having one person call on them. Stevenson noted that many large customers have centralized purchasing which are not National Accounts, indicating that National Accounts have centralized purchasing but that centralized purchasing alone is not a sufficient criteria for establishing a National Account.
Sellers Exceeded Dollar Volume and Sales Force Size [8] Because of the high cost of allocating an experienced, tenured portion of the sales force, most companies using National Account Marketing had sales forces of significant size, a mean of 532 vs. 109 for Non-National Account programs, and these companies were generally large scale operations, although dollar figures were not given. In addition, it was suggested that industry concentration was also a factor in trying to determine National Accounts. The studies tended to show that bilateral concentration of the seller industry and buyer market had a positive 65
Another criteria on which customers were classified as National Accounts was that there were multiple establishments, generally more than ten. Also, these customer establishments were generally in more than one geographic location which use the same product or service being offered by the supplier. Although the findings described above on National Accounts are very good for a "first cut" at determining an account classification and what can be expected of the National Account program, these findings were the result of looking at what is in existence in major companies and making inferences from that data. Yet, what about the companies that don't fit any of those classifications? Can they use National Account Marketing? If a company falls into one of these classifications, do they automatically use this program? What about the other 80% of the customers? If we take the approach of examining why National Account Marketing works, creating, in essence, a theory of National Account Marketing, perhaps we can come up with criteria for any industrial company to use, in conjunction with the empirical evidence, to determine if it is right for them. To do that, we need to take a brief look at Industrial Buying Behavior Theory.
structure. These individuals are faced with making buying decisions directly related to the buying problem (task), social needs, values, personal goals, etc. The entire structure is influenced by the environment, consisting of suppliers, industry structure, legal factors, government, economic factors, etc. The Sheth model is an extension of the HowardSheth model on Consumer Buying Behavior. The model describes the organization buying process as taking place among three groups, purchasing agents, users, and engineers, with others involved at various times. Each of these groups has their own expectations and perceptions of suppliers' products based on that individuals background, information sources, perceptual distortions of the information, their ability to search for the information, and satisfaction with past purchases. A key element of the Sheth model is that decisions are either made jointly or autonomously depending on various product or company criteria. If the decision making is joint, then conflict is bound to occur and conflict resolution becomes an important factor in the buying process [7]. For the purposes of this article, we will examine how National Account Marketing impacts the concept of conflict in industrial buying as compared to traditional sales organizations and the effect it has on interactions and relationships between buyer and seller to explain why it works. We will also examine more closely Sheth's differentiation between joint and autonomous decision making to establish further criteria for using National Account Marketing.
INDUSTRIAL BUYING BEHAVIOR
CONFLICT/CONFLICT RESOLUTION
Organizational buying has been defined as "a decision making process carried out by individuals, in interaction with other people, in the context of a formal organization" [11]. There are several models of the process, with the Wind and Webster and Sheth being the most widely recognized. The Webster and Wind model describes the buying process as being undertaken by individuals within a "buying center," each with their own role set, defined as buyers, decision makers, users, influencers, and gatekeepers. The individuals within the buying center are influenced by many factors within the organization including the organizational goals, personal goals, reward system, communication system, and organization
In companies where purchasing decisions are made jointly among a number of individuals within a buying center, National Account Marketing is able to better overcome some of the inherent obstacles that occur, namely conflict over role sets, personal goals, organizational goals, and expectations than normal sales organizations typically divided by geography or product. The benefit we see is the increase in sales and share of sales that occurs as well as a better line of communication between buyer and seller. In the typical buying center scenario, individuals fill the roles of buyer, user, influencer, decision maker, and gatekeeper [11]. It is important to note that some of these roles may be, and usually are, filled by thc
correlation to the use of National Account Marketing. It also showed, however, that large sellers in an unconcentrated industry also used it if their buyers were very large.
Customers Have Multiple Locations
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same person or more than one person. For example, in many instances the gatekeeper and buyer are the same individual, usually the Purchasing Agent. That person may also be the Decision Maker or the Decision Maker may be the User. In any event, in the industrial buying process of identifying a need, establishing criteria, identifying alternatives, evaluating alternatives, and choosing a supplier, a different m e m b e r may be involved at different times. Thus, it appears evident that a seller must have interaction with each of these roles or at least be able to know who is in which role and which role is in the power position, where marketing efforts should be directed at, if they want to maximize their chance of success. The hypothesis is that National Account Marketing is better able to achieve the interaction necessary with each of these roles and, as a result, create the communication and environmental stimulus necessary to help avoid or minimize conflict. Through these interactions, marketers are able to understand the differing motives and expectations of each of the individuals involved in the buying decisions which opens up communication channels between the seller and each member, allowing for marketing efforts to be directed at each individual based on their particular role set. For example, in a traditional selling organization set up by geography or product, without National Account Marketing, generally a sales representative will call on a buying contact, usually the Purchasing Agent. Figure 1 shows the relationships going on during the buying/selling process. In this relationship, the Purchasing Agent is the buyer and gatekeeper, a very regular occurrence. The diagram describes the interacting relationships of the buyer/gatekeeper with the user, influencer and, in some cases, a higher Decision Maker. Each of these roles have their own idea or expectation of the seller based on their educational background, values, personal goals, the system of rewards they operate under, and the quantity and quality of information they receive. These contrasting expectations and perceptions create conflict which, as March and Simon note, is present whenever a group of people must decide jointly [7]. Compounding this problem is the fact that there may be many users and influencers, for example, or the users may be in different locations in contact with local influencers while the buyer is in a central location with different users and influencers.
It appears logical that as the companies grow in size and expand to multiple locations, that the buying process becomes more complex, more people become involved, and the conflict becomes more critical. An important topic regarding conflict, which has not been raised yet but is critical to the marketer, is how firms resolve conflict. Sheth describes four conflict resolution patterns which take place in organizations:
1. Problem Solving. If the conflict results from differing expectations about the supplier or brand, problem solving techniques are used. This involves gathering more information about the supplier, their brands, and alternative suppliers. 2. Persuasion. If the conflict is on specific criteria used to evaluate the supplier or brand, then the individuals will attempt to persuade other members on the value of their criteria and how it accomplishes overall objectives. 3. and 4. Bargaining and Pofiticking. These are two other methods described by Sheth, which he states are counterproductive to the objectives of the organization. These occur where differences exist on the buying goals that cannot be resolved, resulting in trade-offs or favors by individuals in exchange for future favors or bad mouthing other members of the buying center. The environment or culture of an organization usually creates an atmosphere where a particular form of conflict resolution takes place most of the time. Marketers must understand how firms, specifically the buying center within the firm, resolve conflict if they are to have an impact on the buying process. For example, if problem-solving techniques are used primarily, the seller can direct more information to the buying center or where persuasion is used, arguments can be developed to convince the members of the organization on criteria to use which helps the seller. In the Seller/Buyer interaction shown in Figure 1, the seller has a difficult job. Industrial sellers are taught that to be successful, they must sell "high and broad [6]. Yet, in this scenario, they are dealing with only one m e m b e r of the process, the buyer/ gatekeeper, who controls the information and access to the other members. The representative has little understanding of who the individuals are that make up the buying center, what their expectations are, 67
,@ FIGURE1. Typical relationship between seller and buyer when the selling organization is set up by geography or product, The interaction occurs primarily between the sales representative and the "gatekeeper" and does not occur with others in the organization who influence the "gatekeeper,"
A Better Line of Communication Between Buyer and Seller their personal wants and needs, and how those individuals resolve conflict in buying decisions. Thus, they are not able to minimize the differences among the individuals and, consequently, the conflict remains. They can try! Most successful sales representatives will attempt to expand their contacts and reach all of the individuals involved. However, there are usually several constraints, especially in larger, multiple location buying organizations. 1. The Gatekeeper/Buyer may not allow them to meet the engineers, users, etc. who are part of the Buying Center. 2. Very often in geographic, product, or customer sales organizations, the representative has many customers and noncustomers to call on, making it difficult to allocate the time needed to penetrate the account. 3. The representative must be able to "style-flex" to adapt to the background, values, and expec-
68
tations of each member. This requires extensive knowledge, training, and time. 4. The Users/Influencers may be in other locations outside of the representatives territory, making it physically impossible to create the interaction. 5. Where the selling company has a varied product line, the representative must be skilled in all areas to be able to satisfy the total needs of the account. The danger here is becoming a "jack of all trades, master of none" and losing credibility. 6. The background, perceptions, and personality of the representative may not blend well with all members of the buying center at all times of the buying process, creating unnecessary conflict between buyer and seller. National Account Marketing overcomes many of the obstacles noted and, more importantly, is able to minimize the conflict within the buying center as a result. Although there are several variations of Na-
tional Account Organizations, which are beyond the scope of this paper, the underlying principle is the coverage of a major account by a team of people led by one person, usually designated the National Account Manager. The essence of National Account Marketing is described in Figure 2. The Sales Representative (NAM or someone else on the team) is supported by a team of specialists who interact with and "sell" their counterparts in the buying organization. The National Account team, working in a well-coordinated fashion is able to "pull" the buying decision through the organization from the Users and Influencers to the buyer rather than the more difficult task of "pushing" it through the buyer into the organization as is done in more traditional sales environments. The NAM and seller benefit from the influence that the Customer Engineers, Production Managers, etc. exert on the buyer as a result of the interaction with their corresponding specialist on the selling team [2]. Figure 2 shoves the relationships that are going on. There is still the contact between the sales representative and the buyer/gatekeeper. However, since this customer may be the only one for the National Account team, or at least one of a few, and there is the increased focus by a team of people, many more relationships develop. The NAM, as sales representative, may develop a
Q s'
secondary relationship with an overriding Decision Maker (e.g., President, Vice President of Operations, etc.) who may or may not be in the buying process but is an important factor in the buying center. The NAM, in this case, has got more time to develop these kind of relationships and, since the objective of that contact is to simply create an interaction and relationship between the two companies, the NAM may not disrupt the role relationships within the buying center which would inhibit the relationship built up with the buyer. In addition, this relationship does not require the extensive knowledge or training needed to establish contact with others in the buying center. The specialists create the relationship with their counterparts in the buying organizatiorL the Users, Influencers, and perhaps, Decision Makers. The specialists are well trained in the same field as their counterparts which, presumably, allows them to communicate in the same language, empathize with their needs, understand their values, and generally open up a line of communication between seller and buyer which did not exist before. The gatekeeper role is extremely important in both scenarios. As the primary contact with the seller, the gatekeeper controls the information entering the buying process within the organization, creating a powerful situation that is the target of all the influenc-
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~~~l Ilu..i.l-lm:m'" FIGURE 2. The interaction going on between seller and buyer in an organization set up with National Account Marketing. The team of sales people focus on the team of buyers and are able to reach the decision making entity as well as the influencers.
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ers. The role the gatekeeper is expected to play and the actual behavior that is displayed may be quite different. The information being distributed may be distorted and biased on the individual needs and perceptions of the gatekeeper. This is a reason why the gatekeeper may not allow the sales representative in a traditional selling situation to go to others in the buying organization. They fear that the existing relationships and interactions will be disrupted and, in turn, will disrupt the role set of the gatekeeper [11]. In Figure 1, the seller has little control over this. In Figure 2, the seller has a greater degree of control. Specialists, who are not sales representatives or are not perceived to be, but are counterparts to the Users and Influencers, may have a better opportunity to be allowed in the buying process as a gatherer of information to help the buyer and seller, or on some other premise, to establish contact without upsetting the gatekeeper role. In any event, if we accept the hypothesis that conflict in the buying process is a result of differing expectations, perceptions, and values among the individuals involved, then it would seem that being able to interact with each of the individuals would allow the seller to minimize these differences through information exchange, persuasion, and strengthening of personal relationships. For example, for the user looking for ease of operation and efficient service, the specialist can exchange information on the benefits of their product or service in this regard and, in so doing, persuade them toward the direction of the seller. At the same time, for the Purchasing Agent concerned with getting the best price advantage, the sales representative is able to provide information and persuasion in that regard. In both instances, they may be able to get the perception and expectation of each individual to the same relative position based on their individual values. Because National Account Marketing is able to create these interactions more effectively, it also seems true that it is able to minimize the differences in perception, values, and expectations of the individuals within the buying organization, which creates less conflict. The benefit of this concept is that the buying process proceeds more efficiently and effectively toward a favorable decision for the seller, increasing sales. In addition, it forms a base for establishing further relationships which we discuss below.
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RELATIONSHIPS Two of the major benefits found to be true when National Account Marketing is used are the strengthening of relationships and better communication between the buyer and seller. How relationships are built and maintained between organizations is a complex subject with many social psychology, as well as marketing principles, involved. A basic premise that will be used in the context of this article is that relationships between two organizations cannot be built and maintained or strengthened solely on the physical exchange of goods and services between the companies [3]. This, again, is supported by Industrial Buyer Behavior Theory where buying decisions are made by individuals within the context of a formal organization and who face conflicting goals. The personal goals of the individuals are based on individual values and needs, including social needs, the desire and need to interact with people, and any buying decision will have these "non-task" elements involved. The physical exchange of business may satisfy some of the individual/organizational needs, certainly the "task" needs are met, but it cannot meet all of the social and other personal needs requiring more intimate interaction [11]. Because industrial buyers can account for a very large portion of a sellers output (80/20), both buyer and seller are more dependent on each other than is seen in Consumer Buying. As a result, sellers and buyers in the industrial market are individually identified, forming the initial base for establishing a relationship. This creates a natural need to interact that becomes stronger as the perceived ability of the other party increases or the number of alternatives available decreases. Thus, in an oligopolistic industry, the need for interaction among Decision Makers is very strong [7]. Marketers should attempt to influence that interaction process. Initially, this simply starts by establishing contacts. The more contacts that are made, the more interaction occurs, and a larger base for building upon results. Here, National Account Marketing 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.
In the interaction process, these contacts initially create an environment where Decision Makers at least have a positive attitude about each other and perhaps small physical exchanges take place. For example, the buyer may test one of the smaller products or purchase their product for a small application to see how things work. If we accept the hypothesis by H o m e r (1954) that "it is not people we like whom we interact with, rather we like the people we interact with," then these interactions develop into friendships, creating a much stronger, emotional commitment between the two partners [3]. This can take place between one person on each side or many. Again, National Account marketing creates many interactions, leading to the development of friendships. All of these emotional commitments together create a bond that is difficult to break. That is why we see that supplier/buyer relations are long term in empirical studies and it is difficult for new vendors to enter. Thus, National Account Marketing has the benefit of the competitive advantage and, at a minimum, growing in sales with the buyer's normal growth. If we contrast this with traditional sales approaches, we can see how a single relationship between buyer/sales representative, which cannot be as strong, can be broken more easily and competition enters. As the process continues, the Decision Makers adapt to each other and develop a trust in one another. For example, when the seller experiences a let down in the service the buyer is used to receiving, the decision maker may adapt by loosening demand during that period or having in-house people handle it for awhile. This is in contrast to breaking off the relationship and finding new suppliers in situations where strong bonds do not exist. Trust among partners in buying/selling interaction does not occur automatically [3]. Decision Makers on both sides must be convinced that the other has the ability and intention of satisfying their whole needs. This is accomplished through contacts with representatives from both sides and observing how the other party deals with other similar firms. If they cannot maintain relationships or satisfy the needs of other similar firms, it is difficult to believe it can be done with them. When interactions between partners are good, then they tend to get better. However, if relationships with other partners is better then the
need to interact with that one partner is decreased and the interaction may get worse. This is important from the sellers standpoint. Perhaps, if National Account Marketing is not used for a buyer in an oligopolistic situation, then the buyer may have a better interaction with another seller and the need to interact with the first seller decreases. Thus, National Account Marketing may be as useful defensively as well as offensively. A potential problem arises at this point. In a relationship where Decision Makers on both sides have strong, emotional commitments to each other and the buying process is affected by that relationship, there is the danger that one of the partners leaves or loses their power position. Although it is difficult to prevent this, it is more of a problem in situations where there are only a couple of key people on each side. National Account Marketing helps to minimize the effects of that because of the team approach making it a necessity that many contacts take place and many relationships develop. Thus, the loss of one of the partners is less significant. National Account Marketing creates interactions that develop into strong, emotional relationships that are difficult to break. These relationships help to meet the social and personal needs of the individual within the organizational buying structure. The result is a bond between buyer and seller that grows stronger and maintains the benefits of better communication and revenue growth that has been seen in National Account Marketing. At this point we have seen that National Account Marketing works in given situations and we have taken a look at why it works by examining its effect on minimizing conflict and creating interactions leading to strong relationships. We now turn to what all of this means to the business manager.
IMPLICATIONS As the trend in business is toward more concentrated industries, larger customers, more centralized purchasing, and fewer new markets to enter with existing products, coverage of the largest and most important customers is becoming a critical marketing issue for more and more companies in an effort to maximize and protect their revenue [5]. Understanding why National Account Marketing works can help
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provide m o r e concrete, customized methods and criteria for businesses to determine if it is an alternative they should consider. This article states that the success of National Account Marketing has at its roots, Industrial Buying Behavior. This means that business should look at their own situation and thoroughly understand their company, industry and, most important, their customers. By understanding how their customers buy, who individuals involved in the purchasing process are, the needs of their customers, and correlating that with the kind of products they offer, the type of industry they are in and the way competition is marketing, they can quantify the benefits and costs of National A c c o u n t Marketing to see if it is justified. In addition to the general means of classifying a National Account presented earlier, this article raises some further hypotheses on how organizations can determine w h e t h e r to use National Account Marketing:
they have few alternatives to choose from. In a situation like this, the seller must be able to create and maintain a relationship with one of the buyers if that buyer is a large portion of their sales or, in the absence of any one of the buyers in the oligopoly being the main revenue producer, creates and maintains a relationship with all of them. Perhaps the seller may consider a National A c c o u n t T e a m for each of the accounts or one team covering all of them.
Type of Product or Service Being Offered
Competitive Activities
Sheth states that joint decisions are m o r e likely if the product or service being offered is perceived as more risky by the buyer, is a first time or very large purchases, and does not require an immediate or e m e r g e n c y decision. The more complex a product is, w h e t h e r it is technologically complex or just part of a systems selling approach, it would seem that the risk perception and cost would be greater. This would indicate a decision requiring many people, creating the conflict situations described earlier. National Account Marketing should be considered, therefore, if the product is costly, complex, or requires a major c o m m i t m e n t in time or resources.
If competitors within the seller industry and similar to the seller in product offering, size, structure, etc. are providing their similar customers with National Account Coverage, the seller should consider it as well for defensive purposes. There are probably m o r e hypotheses that can be developed regarding the use of National A c c o u n t Marketing which, along with these, are good areas for further empirical research to take place. A n o t h e r implication that arises is that National Account Marketing requires a certain a m o u n t of skill and c o m m i t m e n t from the seller. C o m m i t m e n t is fairly obvious. National A c c o u n t Marketing is expensive and, after quantifying the costs and benefits and deciding to go with it, the effects may not be seen for 1 - 3 years. Skill is a little more subtle. National Account marketing can be considered as a perfect example of micromarketing. The National Account T e a m must look at their customer as a small business and consider themselves entrepreneurs in running that business. The skills n e e d e d are leadership, an understanding of marketing principles, strategic analysis, and motivation. The N A M is a critical role in this business. The N A M must create a positive group self-concept within the team and display the leadership characteristics n e e d e d to run a business. To
Concentration of Seller Industry and Buyer Market Stevenson, in his study, concluded that bilateral concentration between seller industry and buyer market was a factor in establishing National Accounts. The theory presented here supports that finding but it also puts forth the hypothesis that buyer m a r k e t concentration is a m o r e important factor and sellers should look at that regardless of their own concentration or size situation in considering National Accounts. The need for interaction and power dependence is greater for the seller since in this situation
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Specific Buyer or Small Group of Buyers Purchases a Threshold Percent of Sales W h e t h e r a seller or buyer are large, in a concentrated industry or in multiple locations, if a buyer purchases a large percentage of a sellers output, e.g., > 70%, that buyer should be considered for focused support. National Account Marketing protects the revenue base, as put forth in this article, from this key customer by finding new needs to satisfy or more ways to satisfy existing needs.
facilitate this, the NAM position must have esteem and power within the selling company if there is to be any impact on the needs of the customer [2]. Finally, the NAM should be skilled at being able to understand and probe for the environment and culture of the company to take advantage of the contacts that are made as a result of the focused coverage.
WHAT ABOUT THE OTHER 80% There is a natural conflict that occurs when a firm attempts to balance the sales coverage of their largest 20% and the other 80% of the total customer base. Personal Selling can be considered a distribution method, as well as a promotional tool for marketing, which exists among a number of alternative distribution channels. The goal in distribution is the maximization of efficiency and effectiveness and alternatives are evaluated on those two criteria. Personal Selling should be no different. If companies truly believe that 20% of their customers are key, producing 80% of their revenues, and make the commitment to provide focused coverage on those customers or potential customers, then they really should be allocating most of their resources (80%?) to those accounts to increase the revenue, even at the expense of putting all of their personal selling effort on those accounts [4]. The argument to this is that doing this is very cost-inefficient since there is no guarantee that revenues can be increased and that it is purely development. But isn't that what allocating the resources on the other 80% is, developmental? These companies must decide where the expense of development should go: to the 20% making up 80% of the revenues or the 80% making up 20% of the revenues. I would argue that the former is better spent. However, won't that mean that competitors will get the customers left behind? Maybe, except that coverage of these customers does not stop; it is only handled in a different manner such as telemarketing, direct mail, retail operations, etc. Also, it is likely that within the same industry, these customers are also the 80% of small producers for the competitor. In addition, if these accounts are covered by a sales force already and they only produce 20% of the revenues, chances are that competitors won't do much more with them.
There is an exception, however. Marketers must watch for those companies among the 80% that have the potential to be large revenue producers for them and make a calculated gamble on them by providing more coverage. With the 80/20 rule so prevalent in marketing today, it is likely that only 20% of those companies gambled on will actually become large revenue producers. The implication here is that companies should put their resources where their revenue is.
CONCLUSION It is hoped that this article provided a basis for understanding how National Account Marketing works by understanding how industry purchases. As companies grow and industries tighten, National Account Marketing will become more popular and used more by both large and small firms in an effort to protect their most important customers and potential customers.
REFERENCES 1. Bragg, A. J., NAM's to the Rescue, Sales & Marketing Management (Aug 16, 1982). 2. Coppett, J. I., and Staples, W. A., Managing a National Account Sales Team, Business (1983). 3. Hakansson, H., and Wootz, B., Framework of Industrial Buying & Selling, Industrial Marketing Management (Jan 1979). 4. Hanneh, M., More Than One Way To Use the 80-20 Rule in Setting Up a Key Account System, Sales & Marketing Management (Feb 4, 1980). 5. Shapiro, Ben P., and Bonoma, T. U., How to Segment Industrial Markets, Harvard Business Review (May-June 1984). 6, Shapiro, Ben P., and Posner, Ron, Making the Major Sale, Harvard Business Review (April-May 1976). 7. Sheth, Jagdisb, A Model of Industrial Buying Behavior, Journal of Marketing (Oct 1973). 8. Stevenson, Thomas, and Page, A. L., Adoption of National Account Marketing by Industrial Firms, Industrial Marketing Management (Jan 1979). 9. Stevenson, Thomas, Classifying a Customer as a National Account, Industrial Marketing Management (April, 1980). 10. Stevenson, Thomas, Payoffs from National Account Marketing, Industrial Marketing Management (April, 1981). 11. Webster, Frederick E., and Wind, Yoram, A General Model for Understanding Organizational Buying Behavior, Journal of Marketing (April, 1972).
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