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New pattern

True key account management requires changes to the very fabric of a company

FabricHaving a successful key account management (KAM) programme has become an important, if not imperative, goal for pharmaceutical companies. However, though executives are eager to embrace KAM initiatives, there are many challenges to overcome during implementation. Understanding and anticipating these challenges is important for success. This first in a series of two articles examines the journey to be taken, the problems that firms have encountered in the early stages and how they can be solved.

Consider the example of Paul, the primary care business unit director of a UK pharmaceutical company. Paul was delighted by his team's creative ideas to redesign his company's sales model. The company would reorganise itself in a KAM structure, with locally empowered teams managing their local markets.

A year later, Paul declared himself pleased with the sales outcomes with KAM, but he admitted that he had been unprepared for some of the pitfalls. "The idea [is] so elegant and simple, but it has taken a lot of work to get it functioning," he said. "We had no idea when we started how much this would require change throughout the fabric of the organisation. I wish that I could rewind the clock and start again."

Paul's experience is not unique to business; Thomas Edison expressed similar thoughts when he said that genius was 1 per cent inspiration and 99 per cent perspiration.

Manage expectations
Instituting KAM in the salesforce is not easy, so it is important to manage expectations before the start. It is good to be ambitious, but it is dangerous to stretch beyond the company's organisation, people, skills, culture and tools. Most pharmaceutical companies are in the embryonic stages of KAM and basic disciplines need to be second nature before progressing. Having said this, at any one time different parts of the organisation, or even different account relationships, could be at different stages of this journey.

Understand the steps
Key to the KAM journey is an understanding of the route (see Figure 1). Each of the five steps must be considered:

1. Pre-KAM - (a) 1-to-1 or (b) Low-traction

KAM selling model 1 

1.  Pre-KAM: At this stage there is contact between multiple roles within the pharmaceutical company and the account. However, the pharmaceutical company has been unsuccessful in connecting effectively with the group ultimately responsible for making account decisions, known as the Decision Making Unit (DMU). The promotional emphasis is on product features and benefits, although price may ultimately govern the customer's decision. This stage has two potential sub-stages: one-on-one selling, in which the salesforce is only intended to detail products to individual customers; and 'low-traction' account management, in which only a handful of sales representatives grasp and effectively employ KAM concepts.


2. Early KAM - Doing the basics well; building capabilities

KAM selling model 2 

2.  Early KAM: Actions and outcomes with individual customers are aligned with the needs and outcomes of the DMU. Visiting individual customers has become a means to an end rather than an end in itself. The different roles in the salesforce are now informally directed towards a common purpose.


3. Structural KAM - Full account ownership

KAM selling model 3 

3.  Structural KAM: The pharmaceutical company brings the value of a group of products, comprising a business unit, a therapy area or a broad portfolio, to the account. The KAM becomes the account 'business manager', coordinating the pharmaceutical company's different roles, for example, representatives, health economists and medical science liaisons. Product or therapy area specialists may operate as part of the KAM team to bring detailed product knowledge to individual customers.


4. Value-based KAM - Bringing a value proposition to the account

KAM selling model 4 

4.  Value-based KAM: The pharmaceutical company sells on the basis of the full value it brings to the account. The product becomes more than a box of pills. Instead, it is the pharmaceutical company's complete range of services, programmes, physical products and financial measures.


5. Synergistic KAM - Co-developing solutions in partnership

KAM selling model 5

 

5.  Synergistic KAM: The pharmaceutical company and the account work in partnership to deliver value to an account's customers. Solutions are developed in tandem, giving mutual benefits.


The aspirations and objectives of each step are clear, but the practical issues that organisations typically encounter must also be considered.

Get the basics right
In the earliest stages, companies must overcome preconceived corporate notions about KAM. Language plays an important role. For instance, one company which agreed wholeheartedly that it should pursue account management took over a month to decide what 'account management' actually meant.

Another common hurdle is that many pharmaceutical employees already hold the title of Key Account Manager. These positions typically fall into two groups: those who negotiate tenders and rebates with hospitals or hospital representatives who have been given a more impressive-sounding title without a commensurate change in responsibilities or expectations. Companies may believe wrongly that they have KAM because they have Key Account Managers.

Sometimes, stakeholders have different ideas about what constitutes KAM. Some say KAM needs to be cross-portfolio, KAMs must have profit and loss responsibility and that KAM means sharing a business plan with key customers. Each of these features may be a valuable part of a KAM strategy, but none is a prerequisite.

Pharmaceutical executives tend to think within fairly rigid structures. Their immediate instinct is to create an account manager who will 'do account management'. There is nothing inherently wrong in creating a new position, but KAM is a discipline, not a role. By way of comparison, every customer-facing employee in Procter & Gamble's consumer products operations is trained in account management, regardless of title.

In addition, organisations are bound by history. It is inevitable that some words come with connotations as a result of previous initiatives. 'Account management' and 'KAM' may bear a heavy load of representative scepticism.

'Typical' Pharma Selling Process

Selling process 1



KAM Selling Process

Selling process 2


Process

Frequency

Attendees

Content

Goal

Preparation

Typical

Frequent

Individual

Often repetitive

Closing each call

Minimal (30 mins)

KAM

Less frequent meetings

Wider audience of stakeholders

Varies from meeting to meeting

'Advance' for stakeholders

Significant (4-9 hours for 1 hour meeting)



Deep-rooted change
Many companies underestimate the challenge of changing employee capabilities. KAM is a difficult skill to develop and, for most individuals, the journey will be long and hard. It is not sufficient to conduct training, issue a template and leave the salesforce to do the rest.

For KAM to be successful, the company must engage in an ongoing process of reinforcement, training and support over several years. Like many of the steps along the KAM journey, this is not necessarily easy. Sales managers are usually as new to the KAM concept as their staff and need to be trained in how to coach the salesforce. KAM is an apprenticed skill, not a taught one, and salespeople cannot negotiate a multi-customer, multi-issue, multi-channel world on their own.

For the particular challenge of creating account plans, off-the-shelf account planning software seems like a viable tool, but often employs language unfamiliar to pharmaceutical sales representatives, who may not do the extra work to 'translate' the template. Plus, of course, creating an account plan is not, in itself, account management.

An insightful sales process, rather than having salespeople improvise, can also greatly benefit the salesforce. A KAM sales process is extremely different from a primary care sales process. A process generates its greatest value when it is tailored to fit specific customers. Such a process is indispensable to align marketing, KAM and sales.

The legacy of previous sales models can also be an obstacle. Companies that have hired and promoted people to execute the established and, until recently, successful, sales model, are left with discrepancies in talent for implementing KAM.

The lack of KAM salesforce expertise in the pharmaceutical industry has several possible consequences: competition for talent will drive costs up; or companies will have to invest heavily in developing competencies internally, or sales executives will need to look outside the industry for talent. While the last option may appear to be the most attractive, it causes tension with the traditional pharmaceutical touchstone of technical expertise, which will be exacerbated in the second stage of KAM.

Conclusion
There are important steps for a pharmaceutical company to take to lay the foundations for a successful KAM programme. A concrete vision for KAM must be established and capabilities must be developed, supported by a qualitative shift in sales process. A different breed of sales person must be identified and located. As KAM ambitions build, increasingly subtle organisational capabilities must be developed, based on these strong foundations.

For the second part in this series of articles, see 'Syncronising KAM'.

The Author
Chris Morgan
is a principal at ZS Associates

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

23rd March 2011

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