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Men from the boys

Research reveals that, despite its willingness, pharma is not meeting the criteria for strong KAM

kid_superherosNot long ago, it would have been silly to ask: "who makes the prescription decision?" There was one simple answer and it was much the same for every product; the doctor wrote the scrip. Nowadays, that question is fundamental rather than fatuous and the answer is not only complex, but varies by product, lifecycle stage and often by prescribing context. In many situations, decision making is a multi-stage process made by a group of stakeholders, of which the doctor is just one part. In this environment, many companies have moved away from the traditional sales model, towards a key account management (KAM) approach. But just what is key account management? How does it differ from traditional sales management and what, in our market, do companies actually do? These were the questions asked in a recent survey of 15 executives from leading pharmaceutical companies and the answers, described below, reveal a varied picture of often less-than-text-book practice.

The roots of KAM
Whereas segmentation, positioning, branding and most of the rest of the marketer's tool kit began life in the big consumer goods companies, KAM began in industrial markets. Academics noted that the complex decision-making units of business-to-business markets called for different approaches to those aimed at consumers who made decisions alone. From the 1960s to the 1990s, ideas developed under the label of major account selling. Then, in the sort of intellectual fusion that often lies beneath powerful ideas, account selling met the emergent field of relationship marketing. This discipline emphasised long-term relationships and mutual, multifaceted value.

The result was KAM, an approach to dealing with large customers that was about much more than just cutting a deal. A vast library of research now exists on the subject but, like many practical processes that have been dissected by management researchers, the reality of KAM is often hidden in learnèd journals. The first step in understanding KAM, therefore, is to understand that prior research and what it says about its practice.

The many faces of KAM
KAM almost always replaces traditional sales management and so it is important to recognise how the two models differ. Untangling complex literature on the subject reveals that KAM is distinguished by five characteristics, summarised in box 1. Taken together, these show KAM to be very different from traditional selling, a fact that is sometimes masked as companies adopt the terminology of KAM before, or instead of, the practice. Understanding of KAM is further confused by the simple fact that firms don't move from traditional selling to full-blown KAM in one leap. Instead, they evolve into it slowly, haltingly and sometimes stalling at the intermediate stages. The evolution of KAM, therefore, is the gradual progression from short-term, transactional, financially-focused selling towards the fully developed KAM described in box 1.

Box 1: How to recognise KAM

  • Key accounts generate not only profit but also knowledge, relationship assets and co-created value
  • Key account relationships are key to the buyer as well as the seller
  • Key account relationships involve multiple contacts across both organisations, not just through sales
  • Key account management is largely about facilitating the relationship rather than selling the product
  • Key account relationships are usually long-term rather than time-limited



The best of KAM

Whatever stage of KAM a firm has reached, the difference between good and weak practice is well understood. It is much more than a matter of just being diligent; five critical factors seem to distinguish strong KAM from weak. These are summarised in box 2. Overall, good practice is about more than putting lots of effort into the biggest accounts. The best KAM involves sophisticated targeting and leverages unique assets, be they distinctive products or exceptional knowledge of some kind. Moreover, delivering KAM effectively means restructuring, a sophisticated dashboard of metrics and constant testing and improvement of the key account plan.

KAM in pharmaceutical markets
Our research goal was to uncover the reality of pharmaceutical KAM practice and compare it to both the characteristics of fully developed KAM (box 1) and what we know to be good practice in other sectors in which KAM is more established (box 2). To achieve this, we conducted the afore-mentioned survey of 15 executives from leading companies who, between them, represented most of the major firms in our industry. Our findings revealed the nature of KAM in pharmaceutical markets and the extent to which our industry matches, or lags behind, best practice.

Box 2: KAM best practice

1. Key accounts are targeted on both attractiveness and compatibility

2. KAM creates value from a distinct asset, either product- or knowledge-based

3. KAM involves significant organisational change

4. KAM requires broader metrics than traditional selling

5. KAM is improved by deliberate organisational learning


In terms of the five factors that differentiate fully developed KAM from traditional sales management, our industry is well developed in some respects, but notably less so in others. For example, most companies do define value more broadly than just sales, especially with respect to using key accounts to develop their market knowledge and to create 'reference sites' for prospective customers or employees to get training. Similarly, pharmaceutical key accounts are usually managed in the long-term and, in the best cases, contact goes far beyond the sales team to include marketing, medical and clinical teams. By contrast, however, pharmaceutical key accounts are rather more one-sided than they should be, since they tend to be more important to the pharmaceutical company than they are to the primary or secondary care organisation that forms the account. Our industry falls short, too, in the way it uses its people. For most of our respondents, selling remains the key component of the key account manager's job and facilitation of the relationship necessarily takes a back seat. Overall, a picture emerges of a typical pharmaceutical KAM process that falls short by some distance of fully-developed KAM.

The next stage of the research looked at how our industry compares to pan-sector best practice in KAM. Again, the survey gave a mixed review of typical pharmaceutical industry performance. On the downside, key account targeting is relatively crude, being dominated by the business potential and taking little account of how receptive the account might be to a relationship. Equally weak is the failure of most companies to restructure effectively to deliver KAM. It appears, in these two respects, that traditional sales culture overrides new KAM habits. More positively, respondents all claimed to have significantly revised their metrics dashboard and used the results to reiterate and improve their KAM process. Less conclusively, most firms claimed that their KAM process was built on a unique asset, but on deeper probing, there was little tangible evidence of this. By and large, our industry is, as one might expect, some way behind the best practice seen in other markets. More importantly, it could be argued that, as shown by the failure to re-organise or target correctly, the strong hand of the traditional sales culture is preventing our industry from changing at the same speed as our market.

The research shows that the pharmaceutical industry has come late to KAM. We found no examples of fully-developed KAM and even the co-operative forms were some way behind best practice. But, in the detail of our findings, we found a strong recognition of the need for KAM, driven by market realities. The question we failed to answer, and only time will tell, is whether that appreciation of KAM will overcome the cultural barriers that are slowing its adoption.

The Author
Dr Brian D Smith is a visiting research fellow at the Open University Business School and runs Pragmedic.com, a specialist strategy consultancy. He gratefully acknowledges the support of Pharmaceutical Management Intelligence Ltd in supporting this research.
To comment on this article, email pm@pmlive.com

1st September 2009

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