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Hive mentality

Co-promotion agreements require hard work and realistic expectations to succeed

Hive mentalityAs the dust settles on Westminster, the age of government majorities is being replaced by a new era of collaboration. Yet, whether the fledgling coalition will survive and thrive still remains to be seen.

Perhaps, as our politicians seek to come to terms with the new order, they should turn to the pharmaceutical industry for instruction. In pharma, the era of the blockbuster — our equivalent of a thumping Commons majority — has been on the wane for some time and those who are bringing new brands to market are resorting increasingly to co-promotion arrangements.

Licensing deals are expected to account for more than a third of revenue for the top 20 pharma companies by 2012, up from just 17.5 per cent in 2002. The motives for co-promotion agreements vary, but for most a key driver would be the opportunity to share commercial risk.

Getting it right
When a co-promotion works, it brings all sorts of benefits: maximised share of voice through the promotional impact of a larger salesforce, with that increased salesforce capacity ensuring a more successful launch; reduced initial promotional costs through sharing marketing responsibility; boosted salesforce expertise in a new market through working alongside a more experienced marketer, and shared promotional investment risk when entering a new market.

Yet, despite all the potential benefits, it is estimated that 60 per cent of co-promotion alliances fail within five years because of failure to achieve the revenues expected by the partners at the start of the collaboration. This leads to each partner company viewing the agreement as ineffective.

Clearly there are some specific challenges to making a co-promotion work. Firstly, the prospective partner has to be attracted to the deal, which could mean a relatively low profit share being offered to the molecule owner. Obviously, there will be an element of reliance on the more experienced partner in the market, and the expectation will be there that this partner will drive the promotional strategy. Finally, there is the significant challenge of integrating and managing two essentially separate sales teams.

Given that many more co-promotion and licensing deals are anticipated in the industry, it is vital that we learn how to manage them effectively. Core skills and competencies need to be developed to make a co-promotion work. These encompass branding (to develop a shared vision), people management (to enable conflict resolution) and negotiating skills (to ensure a fair deal for each partner).

A shared vision
Participants in accomplished partnerships agree that developing a shared team vision at the outset as a key driver for success. This can provide a clear understanding of what success will look like for each participant, and also for the partnership as a whole.

It is generally differences in company culture that lead to tension. One culture may be slow-moving and the other rapid, for example, or one might take a more scientific approach and the other a more commercial approach. Unless these differences are addressed early, the partnership could be headed for failure.

To avoid this happening, common goals and objectives for the co-promotion brand team working in the local market must be set. In addition, as far as is achievable within the constraints imposed by the rest of each partner's business, ways of working on topics where there is interaction must be aligned before the co-promotion is implemented.

The co-promotion will likely support a global brand with a global brand vision. To complement this brand vision, the local co-promotion team could well develop a team vision that sets out the goals of the local team. This vision would be based on insights about the individuals within the team and the organisations that employ them.

There are two key words to bare in mind here, and they are 'goals' and 'insight'. If these can be brought together to create something sustainable, credible, differentiating, motivating and meaningful, then a powerful team vision will emerge.

To do this, the scope of each partner's quantitative and qualitative aspirations for the alliance must be established early on. This entails asking "how big?" (quantitative) and "how will the aspirations and hoped-for success of the brand alter the organisation for which individual team members work?" (qualitative). There needs to be agreement, not only on what the partnership could be, but also on what the partners want it to be to meet each individual company's goals.

Insight is important because it allows each partner to understand his own and his partner's thinking; how each will look at the market opportunity and what their strategy really is.

Out of this should come a set of core values, ie the active words that reflect the shared team vision and which both partners wish to associate with the team over time. Crucially, these core values need to be demonstrated, not just in the brand vision, but also in the tone of voice and style of all communications associated with it.

Getting the structure right
Guaranteeing a harmonious co-promotion team at the start of the agreement may be impossible. However, taking the time at the outset to design a processes that will facilitate collaborative working and help efficient decision making is likely to pay dividends for the team in the long term.

Putting conflict resolution procedures in place can serve to head disagreement off at the pass. The development of a team charter, which sets out how individuals should work within the team, acts to limit the frustrations that could poison its effective working.

To determine how the team structure might look, it is necessary to think about a number of factors, including the key activities and outputs that the joint team will be expected to deliver. Decide which of these will be delivered collaboratively and which will be delivered exclusively by one of the partners. Ask what overall behaviours will assist in that delivery.

A good starting point is to allocate the key tasks and outputs that were identified in the co-promotion's marketing plan by discipline. For example: the strategic plan and the marketing communications plan will need to be undertaken by the marketing function; phase IV and key opinion leader (KOL) management by the medical function; customer management and targeting by the sales function; tracking and monitoring, along with ad hoc research, by the business intelligence function; adverse event (AE) reporting and licence renewals by the regulatory function, and so on.

Once you have identified these functional responsibilities, you can start to create a structure where it is explicit which activity will be the responsibility of which partner, and which responsibilities will be shared. This way there is no room left for doubt about who is responsible for what and, therefore, there will be far fewer opportunities for conflict further down the line.

In addition to the formal structure, it is important to consider the informal structure. Often, informal contact plays a big part in oiling the wheels of success for partnerships. If you don't think about how that informal contact will work in advance, you risk losing control of the situation, with the possibility of conflict, misunderstanding or worse.

So, a structure and protocols need to be put in place that cover communication, approval and sign-off procedures, conflict resolution and reward and recognition.

Negotiating a solution
"In business you don't get what you deserve, you get what you negotiate." These wise, if somewhat clichéd, words from the negotiating guru, Chester L Karrass have some resonance when it comes to co-promotion; the initial negotiations to set up the joint venture are vital to a long-lived partnership. A partnership will only flourish if both partners feel they are getting value out of it.

Experience suggests that these first negotiations can be tricky, as each side comes to the table with a relatively fixed idea of what the co-promotion will look like. But it's worth remembering that however committed the other party appears to be to his position, he would not be involved in negotiating if he were not willing to consider moving towards an agreement.

Preparation is key. Each party should enter the negotiations having identified and prioritised areas that need to be agreed upon under a local contract. It is important to have examined the likely position of the potential partner, as well as have identified his underlying interests. Such negotiations often break down because either a lack of confidence leads to concessions being given away too quickly and/or easily, or because an inflexible position is adopted, which focuses on the party's own wants rather than on achieving a genuine win-win outcome.

Twelve steps to clarity
If open communication is vital to a successful partnership, clarity is the foundation. To make a co-promotion work, you must develop an action plan that sets out clearly the responsibilities within the partnership (who does what), the key deliverables and the timing.

There are 12 questions you should be confident you can answer to manage a co-promotion successfully:

1.  Do you have a shared vision, values and strategy for the brand?
2.  Have you aligned your financial and market share goals and milestones?
3.  Have you identified the investment requirements and budgets by year and agreed the percentage splits between partner companies?
4.  Have you undertaken joint strategic and operational planning, including approval processes and an implementation plan?
5.  Have you aligned the operating teams across the various functional disciplines?
6.  Have you agreed on whether individual companies will have any independent operating freedom within the joint venture and, if so, are you clear in which areas, under what circumstances, and to what budget level?
7.  Have you aligned the sales teams and territories, established reporting systems, clarified how ETMS and CRM information will be exchanged, and agreed sales KPIs?
8.  Have the sales teams been trained, and their language aligned?
9.  Are contract terms watertight? Are roles and responsibilities clear? Is authority – by discipline and overall — sufficiently clear?
10.  Have inter-company communications channels been set up, including establishing a co-promotion 'dictionary'?
11.  Are financial and reporting procedures aligned?
12.  Have processes for arbitration and conflict resolution been put in place?

Only once you have determined answers to each of these questions should you proceed with your co-promotion.

 

Managing a co-promotion: some dos and don'ts

Do:
•  Agree in advance:

-  The contribution of each party to promotional and market access programmes
-  The competencies and skills each partner will provide
-  Individual measures of success and contribution to the overall programme

•  Define and agree clearly the parameters for negotiation
•  Define at the outset timelines and deadlines for process, and identify inter-dependencies
•  Identify and outline scenarios, contingencies and triggers
•  Define what is outside the scope of the agreement.

Don't:
•  Allow ambiguity in the ownership of the agreement
•  Indulge in opportunistic conversations, instead, keep communications within the scope of the agreement
•  Allow egos to get in the way, especially if this leads to ignoring customer needs
•  Hoard information.

 

The Author
Gerard Doherty is managing consultant at The MSI Consultancy

To comment on this article, email pm@pmlive.com

24th June 2010

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