Business-to-Business Marketing Key Account Management Haas School of Business UC Berkeley Fall 2008 Week 10 Zsolt Katona 1

Managing Business Customers Differences from B2C Fewer customers Focus on relationship and process benefits Can charge different prices Big differences in sales volume Cost to serve may differ across customers 2

Basic Steps Segmentation of customers -Size -Industry -Other (CEO role, competition, etc.) Distribution of customers (e.g. size) -Only one customer -One large customer + smaller ones -A couple of large ones + smaller ones -Many similar customers Evaluate each segment’s profitability

Response curve (one account) margin Budget 4

Serving two Accounts Account 1 Account 2 Budget 5

Smaller Total Budget Account 1 Account 2 Budget 6

Budget Constrained Allocation Marginal profit should be the same for all accounts Smaller accounts are more costly to serve More focus on large accounts But, if there is competition Each supplier focuses on large buyers It might be more profitable serving small accounts 7

Wesco takeaway Segmentation of customers Profitability in different stages of implementation Importance of previous relationship Allocation of sales force (key account managers) Applicable to different types of firms (not only distributors) 8

Industrat 9

Prediction Market 10