Company Y is a multinational manufacturer of machine tools and automated assembly equipment, traditionally supplying a wide range of customers in the engineering and manufacturing industries. It has built an international reputation for high-quality standard machines and customized flexible manufacturing/assembly systems. Though it has felt extreme competitive pressures on price/delivery of standard machines for over a decade, particularly from the Far East, it has only recently become worried about price sensitivity in customized systems. Since the onset of economic recession, the company's order mix has shifted dramatically towards supplying customized versions of standard machines and sophisticated high value flexible manufacturing/assembly systems to a smaller number of large multinational customers. During this period, the composition of the technical team has changed to reflect the emphasis on systems design and software, whereas the direct salesforce and service support activities continue to operate in roughly the same way as they did pre-recession.

The commercial director's anxiety about future orders is captured in the following comment in the context of a major customer: "Motor vehicle component manufacturer Z takes a long time to decide what they want and they buy sporadically. But when they do buy, the order is usually large and could represent up to 20 or 30 per cent of our sales for the year ... The trouble is, it's difficult to keep up with their investment programme and specifications, and I'm never certain precisely when an order will be placed". The commercial director, somewhat belatedly, is considering setting up a key account management system.

The commercial director is also troubled by the fact that at present the company practises a largely transactional approach to selling. This is due to the fact that when a customer it has previously sold to requires new tools, the original buyer has often left to go to another job, been promoted away from the buying function, retired, or in some circumstances may even have died. He is keen to adopt a relational selling approach, but are uncertain how this might be achieved and has explained the meaning of relationship marketing and stressed that a relationship is between people.

Question 1

From this case study, do you consider company Z to be a suitable organization to be a key account? Explain your answer.

Question 2

Assume that Z is willing to enter into a long-term partnership with Company Y. Advise the commercial director regarding the setting up the key account management system.

Question 3

Identify and explain two considerations that could make relationship selling inappropriate.