Putting the customer first
New models for pharmaceutical sales

Changes in the pharmaceutical market require companies to change their approach and business model. In the past, medical sales forces have mostly called on doctors and other prescribers to promote their products. This approach was focused on transactions and on increasing share of voice. Turnover among sales representatives was often high, making it difficult to build relationships with the customers. Several representatives from the same company might be calling on the same customer to promote different or the same products, presenting further challenges of coordination.

In recent years, the market for pharma companies in the developed world has become more complex. Companies need to adapt for several reasons:

the increasing numbers of influencers and stakeholders involved in prescribing/purchasing decisions (e.g. PCTs in the UK)

challenges to achieving quality interactions with customers (clinical and non-clinical)

new channels for marketing messages

increasing resistance among physicians and other stakeholders to high call frequency by medical reps

generally heightened scrutiny of the industrys promotional practices

impact of pharmacoeconomics on buyers (e.g. the influence of NICE on purchasing decisions).

Necessary changes in sales strategy include:

Widening the term customer to include people who are not direct prescribers.

Tailoring messages to address customer needs.

Using new sales channels and/or different people to meet the needs of the new customer base cost-effectively.

Incorporating market access considerations (e.g. regarding pricing and reimbursement) into the product R&D process.

At the same time, the increased focus on profitability at the customer level, the lack of new blockbuster drugs and a tighter squeeze by pricing and reimbursement authorities seems to have put an end to the arms race of the past, leading to a freeze or even a reduction in sales force sizes.

The vital questions

These changes are driving alternatives to the traditional sales and marketing routes. The focus is now on smarter use of resources and better meeting of customer needs. To be successful, companies need to move away from a transactional focus on share of voice and calls per day to managing all interactions with customers to create best value for them and the company.

This requires an improved understanding of customers and their needs. A successful strategy will answer these questions:

What information do we have about the market? How can we fill any gaps?

Who are the customers and influencers?

What are the relationships between the customers? How strong are the influences?

Who are our key customers?

What are the best and most cost-effective channels to engage with the customer (events, direct sales force, call centres)?

Who in the company is best placed to engage with the customers?

How can we best co-ordinate our activities with key customers across the business?

How will we incentivise, manage and organise those parts of the organisation interacting with customers? How will we measure success?

What information do we have about the customers, and where is it held?

What other information is available but has not been systematically captured (e.g. sales representatives knowledge)?

What can we do with this information?

The bigger picture

What is needed is an integrated plan for each key customer in the context of the companys portfolio, rather than the traditional plan for each sales force team. This integrated plan should identify the companys objectives for the customer, their needs, how to address them and who will be responsible for doing so.

This will lead the company to identify what type of sales people or teams it needs, what skills they should have, what roles they should play, what tools they require, and what system will hold it all together and provide support. Implementing this strategy requires new processes and technologies for information sharing, which in turn requires a change in organisational structure and the breaking down of information silos within the organisation (see Figure 1).

Changes in business processes, organisation and IT are necessary to meet customer needs. When focusing on the customer and the intended interactions with them, many companies will find that their existing processes and internal structures are ill-equipped to put the new strategy into practice. Organisational silos may prevent the transfer of information, create bureaucracy and lead to internal conflicts (over responsibility or authority) that get in the way of engaging with the customer. Internal business processes need to be developed that successfully implement the selected strategy, and an organisational structure needs to be created in which these can be implemented efficiently. Information needs to be gathered in a comprehensive and systematic way, capturing what the company needs to know about its customers and its interactions with them.

The organisation has to have the needs of customers, as well as the product portfolio, at heart. This could include a profit and loss approach to individual customers and customer groups to ensure that their needs are met in a profitable way. Accountability, or at least responsibility, for a particular customer should be assigned to someone in the organisation. Several people in the organisation may still interact with the same customer but there will be a clear focus, better co-ordination and consistent relationship management. The organisation should be aligned around the customers, with all other functions and processes supporting this structure.

Changing the structure

Many companies have focused on adapting their sales force, but wider organisational changes are needed to fit the pieces together. Re-sizing an organisation and allocating resources can be complex, however, especially where customers are involved who do not have a direct prescribing impact. For these customers, typical ROI measures often do not work or lead to under-resourcing. Many of the traditional metrics are not appropriate or need to be refined.

Some pharma companies have already changed their business processes and organisational structure. For example:

New sales forces have been created to engage with new customer groups, e.g. by targeting PCTs.

Traditional GP sales forces have been reduced to reflect the increasing influence of other parties on prescribing. In 2004, Takeda UK replaced its entire sales force with a team of PCT account managers, with budget responsibility and decision-making powers.

Other companies have changed their first line managers to area account managers with matrix responsibility for secondary care and account management teams, to ensure a consistent and co-ordinated account approach.

Allergan in the US formerly used separate agencies to develop messages for the companys sales force and the managed markets account. This remit has now been given to one agency, which ensures that the marketing messages and the sales pitch support each other.

In January, Pfizer announced its plan to build a leaner and more flexible organisation that places customer focus alongside brand focus. Pfizer is piloting new selling models, moving from a transactional to a relational approach.

According to Pfizer, the pilot models highlighted key benefits including better access to physicians, positioning as a partner, enhanced customer knowledge and use of fewer resources. Reducing the number of management layers will bring leaders closer to the customer. In the US, one of Pfizers five business units will focus on managed care and market access. Pfizers European organisations have already been reorganised to increase customer focus and accountability.

Now's the time

The whole organisation must have the needs of customers, as well as the product portfolio, at heart. The transformation to a customercentric structure is not an easy undertaking, but will deliver competitive advantage. Companies need to:

ensure that customer interactions are managed across all relevant functions

target and segment key customer groups and align to them as the market changes

measure in real time the effectiveness of interactions with customers

model influences between customer groups and plan sales and marketing interventions to maximise impact

ensure that sales representatives, marketers and other commercial staff who interact with customers are focused on providing the best service and building relationships.

Comprehensive, robust and complete information on the customers is key. This involves collecting all available customer information and making it accessible to everyone who needs it. This approach requires a fundamental shift in mindset and activity, a long-term commitment to building customer relationships, a change in the way that people are assessed and incentivised, and a robust infrastructure that allows customer information and analysis to be shared across the company.

To better meet customer needs and engage new decision-makers, pharmaceutical companies will have to change. Companies who are committed to delivering customer value, have confidence in their ability and are brave enough to make radical changes sooner, rather than later, will race ahead of the pack.

SUMMARY

In response to the changing market, the pharma industry is adapting its sales models to increase focus on the customer.

Identifying and building relationships with key customers is the foremost challenge facing medical sales teams.

These new sales models require the whole company to change its business processes, organisation and IT applications.

Pharma companies including Takeda and Pfizer have already moved towards a customer-centric organisational structure.

Alexandra Schwarz is a Concultant in Life Sciences and Healthcare at PA Consulting Group. To contact her, phone 01763 267492 or e-mail healthcare@paconsulting.com.