Handbook of Strategic Account Management: A Comprehensive Resource

Switching costs in key account relationships

by Sanjit Sengupta, Robert E. Krapfel and Michael A. Pusateri

Abstract

Companies are increasingly implementing key account management for their most important business customers. Relationships between key account managers and their customers are intended to be long-term strategic partnerships resulting in competitive advantage for both. Switching costs include the psychological, physical and economic costs a customer faces in changing a supplier. The main question we seek to investigate in this paper is whether customer switching costs are good or bad for both the customer account and the selling firm. Further, we examine the factors leading to switching costs so that key account managers may influence the outcomes in these relationships.

Companies are increasingly implementing key or major account management for their most important business customers (Sengupta et al. 1997a). In some companies, these are also called national or global accounts. Key account managers (KAMs) should develop and build long-term relationships with each of their customer accounts. The account manager helps the customer solve operational and strategic problems by providing research and analysis. As part of the deal, the customer commits to large volume purchases of products and services over a long period of time. This is a challenging boundary role suited only for the best sales professionals.

Selected sales management literature has examined the role of ...