Chapter 13:

Customer Relationship Management

in the Business-To-Business Context
Overview

Topics discussed:

 Characteristics of business-to-business (B2B) markets

 Premise of CRM in the B2B context

 Sales force management (SFM) and its subtopics as most important topics to realize

the CRM premise in the B2B context

 CRM and sales force automation (SFA)

 CRM and key account management (KAM)

 CRM and the goods to services shift

V. Kumar and W. Reinartz – Customer Relationship Management 2

Characteristics of Business-to-Business (B2B) Markets

 Organization (company or institution) as customer

 Large purchase amounts

 Complex organizational buying process with professional (group) buying and decision
making units

 Collaborative rather than transactional relationships between buyer and seller to build
strong ties over time

V. Kumar and W. Reinartz – Customer Relationship Management 3

Premise of CRM in the B2B Context

B2B CRM
“B2B CRM is the strategic process of strengthening relationships with business customers,
especially important clients, beyond transactional relationships to better manage the value of
these buyer-seller relationships.“

V. Kumar and W. Reinartz – Customer Relationship Management 4

SFM and its Subtopics as most Important Topics to Realize the
CRM Premise in the B2B Context

 Why is SFM one of the most important topic in the B2B CRM context?

 The sales force is entrusted with the seller‘s most important asset: the customers

 Due to the sales force long-lasting and strong relationships can be established

 What is the task of the sales force?

 Effectively and efficiently manage the relationships with the organization’s buyers to
fulfill the B2B CRM premise

 But how can that be realized?

V. Kumar and W. Reinartz – Customer Relationship Management 5

SFM and its Subtopics as most Important Topics to Realize the
CRM Premise in the B2B Context

There exist three subtopics of SFM to realize the B2B CRM premise
B2B CRM Premise:
· Build stronger buyer-seller relationships

· Better manage the value of buyer-seller

relationships

SFM

Goods to
SFA KAM
services shift

 Efficiently  Allocate right  Build long-

and activities to term buyer-
effectively right seller relation-
manage customers ships via
buyer-seller services
relationships propositions
Internal Perspective

External Perspective

Source: Kumar and Reinartz (2017)

V. Kumar and W. Reinartz – Customer Relationship Management 6

CRM and Sales Force Automation (SFA) – What Is SFA?

SFA describes any information technology applied to a sales situation that is intended to
facilitate a repetitive, administrative task and to make it more efficient, especially from the
internal perspective of the seller. By completing tasks more efficiently, salespeople can
reallocate their time to more personal contacts and more value-adding activities for customers
and thus build more effective, long-lasting buyer-seller relationships.

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CRM and Sales Force Automation (SFA) – SFA Benefits

There exist two main benefit dimensions leading to different benefits for salespeople, sales
managers, and senior management

Benefits for
senior Increased sales revenue
management

Improved customer
Benefits for relations
sales Better sales productivity
managers Better customer
satisfaction

Better process accuracy

&
Benefits for Better resource allocation Better customer
salespeople Facilitation and understanding
improvement of
information processing

Benefit
SFA efficiency SFA effectiveness
dimension

V. Kumar and W. Reinartz – Customer Relationship Management 8

CRM and Sales Force Automation (SFA) – Conditions for
Realizing Benefits

 Sales managers and senior management must ensure that the entire sales force adopts
and uses the SFA technology

 Drivers of SFA adoption

 Commitment of top management and immediate supervisors to the technology

 Personal innovativeness

 Positive attitude toward the new system

 Perceived usefulness of the new system

 Compatibility with the existing system

 Individual salespeople’s characteristics (e.g., age, gender, computer self-efficacy

and playfulness)

 Organizational characteristics (e.g., perceived voluntariness of use, early

involvement and participation of the user population)

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CRM and Sales Force Automation (SFA) – Conditions for
Realizing Benefits

 Drivers of SFA usage

 Personal innovativeness

 Positive attitude toward the new system

 Usage-facilitating conditions (e.g., provision of sufficient resources and external

support to use the system)

 Degree of market information processing

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CRM and Sales Force Automation (SFA) – Conditions for
Realizing Benefits

What should the seller’s organization apply to guarantee SFA technology adoption and
usage?

 Ensure and communicate the commitment and support of top management and
supervisors

 Hire salespeople who demonstrate personal innovativeness during the interview process

 Hire young salespeople with computer playfulness and computer self-efficacy

 Inform salespeople about the system’s features and benefits

 Provide continuous support and training

 Involve salespeople before purchasing and implementing SFA tools

 Provide the sales force with necessary market information

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InvisibleSolutions: Bridging the GAP between
Business Apps and Productivity Tools

 InvisibleSolutions is a technology provider of tools engineered to increase user adoption

and ROI of enterprise applications by seamlessly integrating them into the way business
people work every day.
 These tools enable users to work with their customer and corporate information, without
leaving their favorite communication applications – Office 365 and Gmail.

Source: [Link]
Businesswire, October 6, 2016.

V. Kumar and W. Reinartz – Customer Relationship Management 12

CRM and Key Account Management (KAM) – What Is KAM?

KAM can be defined “as the performance of additional activities and or/designation of special
personnel directed at an organization’s most important customers.”

Source: Workman, John P., Christian Homburg, and Ove Jensen (2003), “Intraorganizational Determinants of Key Account Management Effectiveness,”
Journal of the Academy of Marketing Science, 31 (1), 3-21.

V. Kumar and W. Reinartz – Customer Relationship Management 13

CRM and Key Account Management (KAM) – Implementation
of the KAM Program: A Stepwise Process

There exist three key steps for implementing a successful KAM program

Step 1: Step 2: Step 3:

Selection of key Design elements of Advancement of the
accounts the KAM program KAM program

• Activities
• Selection criteria • Actors • Optimizing
• Selection process • Resources • Improvement
• Formalization

V. Kumar and W. Reinartz – Customer Relationship Management 14

Implementation of the KAM Program: Step 1 –
Selection Criteria
Selection criteria serve to decide which customer is a key account
Quantitative criteria:

 Sales volume
 Market share
 Revenues/contribution/profit

Most commonly applied financial “rules”:

 Key accounts must generate 50-60% of the sales volume
 The Pareto rule identifies key accounts (20% of customers that account for 80% of sales)
 Key accounts are the top 10 customers

Qualitative criteria:
 Image of key account
 Reference potential of key account
 Technology potential and know-how of key account
 Interorganizational and cultural fit
V. Kumar and W. Reinartz – Customer Relationship Management 15
Implementation of the KAM Program: Step 1 –
Selection Criteria

Advantages and disadvantages of quantitative and qualitative selection criteria

Advantages Disadvantages
Quantitative + Relatively easy to - Monetary and short term
criteria measure focused
+ Coverage of fixed costs
Qualitative + Positive spillover effects - Not very easy to measure
criteria + -
Multiplier function of the No coverage of fixed
buyer costs
+ Additional knowledge
+ Long-term and
interorganizational
focused
+ Strategic focused

V. Kumar and W. Reinartz – Customer Relationship Management 16

Implementation of the KAM Program: Step 1 –
Selection Process

Example of a selection process

1. Criterion 2. Weighting (W) (%) 3. Evaluation (E) 4. Final Points (W x E)

Sales volume 40 5 2

Market share 5 1 0.05

Image 30 8 2.4

Interorganizational and cultural fit 25 9 2.25

5. Sum (Final Score) 100 6.7

The evaluation points range from 1 (low) to 10 (high)

The higher the final score of a buyer, the more

attractive that customer is in terms of key
account status

V. Kumar and W. Reinartz – Customer Relationship Management 17

FestoAG: Selecting Key Accounts

 Festo is a leading, world-wide supplier of automation technology and the performance

leader in industrial training and education programs. Its 18,700 employees globally maintain
its portfolio of approximately 33,000 catalogue products, with several hundred thousand
variants.
Festo’s key account selection process contains the following steps:
[Link] of the most interesting industries (potential).
[Link] for the world’s biggest companies within the different industries (sales volume).
[Link] of a list with the 200 biggest companies with the highest potential.
4. Analysis of attractiveness (sales volume, competitive situation, image, etc.), chances of
acquisition, and segmentation (products, industry, etc.) of these 200 companies.
[Link] and clustering of potential key accounts.
[Link] of most interesting key accounts.

Source: Klebert, Stefan (1999), “Key Accounts Portfolios – Die Selektion von Schlüsselkunden,“ Absatzwirtschaft, 4, 44-45.

V. Kumar and W. Reinartz – Customer Relationship Management 18

Implementation of the KAM Program: Step 2 –
Design Elements of the KAM Program

Customers Seller

Sales

Key Accounts Activities Actors Marketing

Information
Technology
Average
Accounts Manufacturing

Research &
Development

Finance

Key Question What is done? Who does it? With whom is it How formalized is
done? it?

Dimension Activities Actors Resources Formalization

Source: Homburg, Christian, John P. Workman, and Ove Jensen (2002), “A Configurational Perspective on Key Account Management,” Journal of
Marketing, 66 (2), 38-60.

V. Kumar and W. Reinartz – Customer Relationship Management 19

Implementation of the KAM Program: Step 2 –
Design Elements of the KAM Program

Activities – What is done?

 Suppliers can offer special activities for key accounts, for example,
special prizing, product customization, joint coordination of the workflow,
information sharing, and taking over outsourced business processes

 Intensity and proactiveness of these activities distinguish them from

those offered to an average account

 An intensive and proactive KAM shows the buyer that the supplier is
willing to invest in the relationship leading to deepening trust in the key
account and strengthening the buyer-seller relationship

Source: Homburg, Christian, John P. Workman, and Ove Jensen (2000), “Fundamental Changes in Marketing Organization: The Movement Toward a
Customer-Focused Organizational Structure,” Journal of the Academy of Marketing Science, 28 (4), 459-78; Homburg, Workman, and Jensen
(2002); Workman, Homburg, and Jensen (2003).

V. Kumar and W. Reinartz – Customer Relationship Management 20

3M: Activities for Key Accounts

 Especially for its key accounts, 3M offers a 2-day-event “Fascination Glue,” which features
lectures, discussions, shows, and evening events.
 Thus 3M not only provides its most important customers with up-to-date information about
special topics, trends, innovations, and solutions that 3M can provide but also offers them
the promise of building or strengthening networks with other companies, suppliers and
processing plants, as well as with researchers.
 But only for its important customers!

Source: [Link] 3M, October 6, 2016.

V. Kumar and W. Reinartz – Customer Relationship Management 21

Implementation of the KAM Program: Step 2 –
Design Elements of the KAM Program

Actors – Who does it?

 Special actors represent the personal coordination mode of KAM entailing top
management involvement, the use of teams, and key account managers

 With senior-level involvement in KAM, the firm can display its commitment to key accounts
leading to greater involvement and strengthening of the buyer-seller relationship

 The use of team can ensure a broader set of skills and resources and thus, dedicated
teams preferably should be composed of members from various functions and
backgrounds

 Key account managers are the main point of contact for the key account

 These managers need specific skills, including integrity, extensive product/service

knowledge, communication skills, selling and negotiating skills, and a deep understanding
of the buying company’s business and environment

 Exhaustive training of key account managers is necessary

Source: Homburg, Christian, John P. Workman, and Ove Jensen (2000), “Fundamental Changes in Marketing Organization: The Movement Toward a
Customer-Focused Organizational Structure,” Journal of the Academy of Marketing Science, 28 (4), 459-78; Homburg, Workman, and Jensen
(2002); Workman, Homburg, and Jensen (2003).

V. Kumar and W. Reinartz – Customer Relationship Management 22

Implementation of the KAM Program: Step 2 –
Design Elements of the KAM Program

Resources – With whom is it done?

 Successful KAM requires the coordination of activities

within the organization

 Important assets for building strong, collaborative buyer-

seller relationships: access to (non)marketing and
(non)sales resources and esprit de corps of the selling
center

 Esprit de corps of the selling center is the extent to which

members of the selling center feel linked to common goals
and to other members

Source: Homburg, Christian, John P. Workman, and Ove Jensen (2000), “Fundamental Changes in Marketing Organization: The Movement Toward a
Customer-Focused Organizational Structure,” Journal of the Academy of Marketing Science, 28 (4), 459-78; Homburg, Workman, and Jensen
(2002); Workman, Homburg, and Jensen (2003).

V. Kumar and W. Reinartz – Customer Relationship Management 23

Implementation of the KAM Program: Step 2 –
Design Elements of the KAM Program

Formalization – How formalized is it?

 Formalization refers to the extent to which key account handling has

been formalized through rules and standard procedures established in
the seller’s organization

 A high degree of formalization leads to bureaucracy and a lack of

flexibility in responding to the different needs of heterogeneous key
accounts

Source: Homburg, Christian, John P. Workman, and Ove Jensen (2000), “Fundamental Changes in Marketing Organization: The Movement Toward a
Customer-Focused Organizational Structure,” Journal of the Academy of Marketing Science, 28 (4), 459-78; Homburg, Workman, and Jensen
(2002); Workman, Homburg, and Jensen (2003).

V. Kumar and W. Reinartz – Customer Relationship Management 24

Implementation of the KAM Program: Step 3 –
Advancement of the KAM Program

Optimizing phase

 Financial investments necessary to integrate the KAM program

throughout the entire organization

 All members gain education in and become engaged with KAM

 The whole culture of the organization adopts a strong KAM orientation

 Internal performance measurements fade away, replaced by

benchmarking against competitors and reliance on customer feedback

 Necessity of adaption of internal processes, policies, and IT systems

Source: Davies, Iain A. and Lynette J. Ryals (2009), “A Stage Model for Transitioning to KAM,” Journal of Marketing Management, 25 (9-10), 1027-48.

V. Kumar and W. Reinartz – Customer Relationship Management 25

Implementation of the KAM Program: Step 3 –
Advancement of the KAM Program

Improvement phase

 The seller’s organization has to become increasingly focused and

targeted, with fewer and fewer key accounts

 To reduce the cost or waste of expensive resources, top management

becomes less involved

 The main element is the focus on cost management

Keep in mind:

KAM is never fully implemented but is always an ongoing,

continuous, very long-term commitment to improving among the best
practice KAM companies!

Source: Davies, Iain A. and Lynette J. Ryals (2009), “A Stage Model for Transitioning to KAM,” Journal of Marketing Management, 25 (9-10), 1027-48.

V. Kumar and W. Reinartz – Customer Relationship Management 26

Hilti: Best Practice in KAM

 Hilti is a global leader that provides value-added, top-quality products for professional
customers in the construction and building maintenance industries. Hilti‘s top management
is involved in the management of key accounts, and KAM is integrated throughout the
company‘s overall strategy. In terms of its activities for key accounts, Hilti offers “VIP”
solutions that solve specific customer problems in fleet management; the solutions support
and maintain a broad composition of electronic tools.
 Hilti expects much of its key account managers, including extensive experience in
international, multicultural environments; absolute fluency in English; demonstrated global,
corporate thinking and acting; leadership; motivational abilities; excellent communication;
superior negotiation skills; and analytical and interpersonal skills.
 To achieve its best results, Hilti provides special training to all key account executives, such
as presentation and negotiation techniques, teamwork, and the use of analytical and
strategic tools.

Source: Belz, Christian, Markus Müllner, and Dirk Zupancic (2004). Spitzenleistungen im Key Account Management – Das St. Galler KAM-Konzept.
Frankfurt: Moderne Industrie.

V. Kumar and W. Reinartz – Customer Relationship Management 27

CRM and the Goods to Services Shift – Why Hybrid Offerings?

 Necessity to develop innovative offerings to defend positions in

increasingly competitive product markets and increase revenue
and cash flows

 Attract new customer segments and increase demand among

existing customers by providing additional, superior value and
hence increase customer loyalty and retention

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CRM and the Goods to Services Shift – What Are Hybrid
Offerings?

Hybrid offerings can be defined as a combination of “one or more goods and one or more
services, creating more customer benefits than if the good and service were available
separately”.

Source: Shankar, Venkatesh, Leonard L. Berry, and Thomas Dotzel (2007), “Creating and Managing Hybrid Innovations,” AMA Winter Educators’
Conference, San Diego, CA, February.

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CRM and the Goods to Services Shift – What Are Hybrid
Offerings?

Two dimensions to classify industrial services for hybrid offerings:

1) Service recipient – service oriented toward the supplier‘s good or the customer‘s process

2) Nature of the value proposition – supplier’s promise to perform a deed (input-based) or to

achieve performance (output-based)

Service recipient

Service oriented toward the Service oriented toward the

supplier‘s good customer’s process

Product lifecycle services (PLS) Process support services (PSS)

Supplier’s promise
Nature of to perform a deed
Example: Installation of high- Example: Energy efficiency audit
the value (input-based)
voltage circuit breaker for a commercial building
proposition
Supplier’s promise Asset efficiency services (AES) Process delegation services (PDS)
to achieve
performance Example: Welding robot software Example: Tire fleet management
(output-based) customization on behalf of a trucking company

Source: Ulaga, Wolfgang and Werner Reinartz (2011), “Hybrid Offerings: How Manufacturing Firms Combine Goods and Services Successfully,” Journal
of Marketing, 75 (6), 5-23.

V. Kumar and W. Reinartz – Customer Relationship Management 30

CRM and the Goods to Services Shift – Advantages and
Disadvantages

There exist several benefits but also several risks in the shift from goods to services

Advantages
Disadvantages
I. Increased
buyer loyalty and I. Capability risk
lifetime value
II. Financial risk
II. Leverage of
resources and III. Market risk
knowledge

V. Kumar and W. Reinartz – Customer Relationship Management 31

CRM and the Goods to Services Shift – Rules for Successful
Shifts

Three essential rules for successful shifts exist that should be followed by managers

Reduce or Reduce or Reduce or

eliminate the eliminate the eliminate the Successful shift
capability risk financial risk market risk

V. Kumar and W. Reinartz – Customer Relationship Management 32

CRM and the Goods to Services Shift – Rules for Successful
Shifts

Rules to reduce or eliminate the capability risk:

 Mandate a centralized administration of services

 putting different services in one location or separate organization

 Design services that build on existing product platforms

 To build required capabilities ensure access to resources, such as

data about
 Installed base product usage and process
 Product development and manufacturing assets
 Sales force and distribution networks
 Field service organization

 Partner with a service-cultured company that has key resources,

capabilities, and competencies

Source: Sawhney, Mohanbir, Sridhar Balasubramanian, and Vish V. Krishnan (2004), “Creating Growth with Services,” MIT Sloan Management
Review, 45 (2), 34-43; Ulaga and Reinartz (2011).

V. Kumar and W. Reinartz – Customer Relationship Management 33

CRM and the Goods to Services Shift – Rules for Successful
Shifts

Rules to reduce or eliminate the financial risk:

 Identify the most profitable product/service and combine it with the

most commonly bought product/service

 Use the Internet to link goods and services and thereby lower the total
unit costs of the offering

 Find opportunities to balance the timing and magnitude of cash flows

from products and services

 Perform robust, early, and frequent economic value analyses

Source: Sawhney, Balasubramanian, and Krishnan (2004); Shankar, Venkatesh, Leonard L. Berry, and Thomas Dotzel (2009), “A Practical Guide
to Combining Products + Services,” Harvard Business Review, 87 (11), 94-99.

V. Kumar and W. Reinartz – Customer Relationship Management 34

CRM and the Goods to Services Shift – Rules for Successful
Shifts

Rules to reduce or eliminate the market risk:

 Create a service-savvy sales force

 Offer trial periods, prototypes, and iterations

 Blueprint according to customer specifications

 Focus on existing customers and processes and meet their needs

and requirements through effective hybrid offerings

Source: Sawhney, Balasubramanian, and Krishnan (2004)

V. Kumar and W. Reinartz – Customer Relationship Management 35

Oracle: Best Practice

 Oracle offers an integrated array of applications, databases, servers, storage, and cloud technologies to
empower modern business, with more than 420,000 customers and deployments in more than 145
countries. Companies of all sizes rely on Oracle’s complete, modern, and secure portfolio of enterprise
and industry applications to connect the entire organization and provide data-driven intelligence. Oracle
offers maximum personalization and choice, including applications for customer experience, enterprise
performance management, enterprise resource planning, human capital management, supply chain
management, and more.

 At the beginning of 2016, Oracle launched Oracle PartnerNetwork (OPN) Cloud program to support their
partners accelerate innovation, lead business transformation and fully realize the competitive
advantages gained through Oracle Cloud. The new Cloud program, with tiered designations, recognizes
those partners that engage with Oracle and invest in Oracle Cloud, by offering them incremental and
progressive benefits to complement and build on the existing OPN program levels. Oracle shares assets
with its partners who can use them to educate themselves, increase awareness, drive demand, and
impact sales via Oracle Sales Central.

 In March 2016, Oracle introduced Oracle Dynamic Hybrid Bundles, to offer Value Added Resellers
(VARs) the opportunity to drive growth on their existing engineered systems hardware business and
cloud. VARs can foster additional revenue and profitability with a solution selling approach that combines
the best of Oracle Engineered Systems on-premise solutions with Oracle Cloud metered platform and
infrastructure services. Oracle’s unique competitive differentiator is being the exclusive public Cloud
service provider that employs the same technology for Cloud and on-premise solutions enables VARs to
strategically position themselves as hybrid solution providers.
Source: [Link] “Announcing Oracle Dynamic Hybrid Bundles
Initiative”; [Link] “Oracle Fact Sheet”, Oracle, October 12, 2016.

V. Kumar and W. Reinartz – Customer Relationship Management 36

Summary

 The CRM premise in the B2B context is to build stronger buyer-seller relationships and to
better manage the value of these relationships

 Important CRM-related issues in the B2B context to realize this premise are SFA, KAM, and
the shift from goods to services

 SFA is a tool to efficiently and effectively manage buyer-seller relationships by realizing

benefits for salespeople, sales manager, and senior management

 KAM is a tool to allocate the right activities to the rights customers by following a three step
approach including the selection of key accounts, design elements of the KAM program,
and advancement of the KAM program

 By selling hybrid offerings the right activities can be offered through selling combinations of
goods and services that offer increasing value for the customer

V. Kumar and W. Reinartz – Customer Relationship Management 37