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Breathe life into your marketing

Overlapping leaves with water droplets Strategy may be defined as the pattern of activities that leads to achievement of your goal. In pharma companies our goals are normally ascribed to sales targets, with turnover being seen as a proxy for profit. Managers that fail to achieve their sales targets, however, often fail to follow a rational process to investigate possible causes. This is a necessary step to remedy the situation and if they were to do this, they would save time, money and effort.

In effect, most pharmaceutical strategies consist of a series of investments (activities) that we make in order to achieve our sales. The starting point is our marketing plan, which often fails to be redrawn afresh each year and normally consists of an update of last year's plan. This is a mistake, because just as you cannot step into the same river twice, markets move over time, and the pace of change in pharmaceuticals is quickening.

Critical error
Use of an updated marketing plan generally means that last year's budget is used as a template, with the percentage budgeted for each activity or category of activities remaining relatively unchanged from year to year. This is critical error, which accounts for a large proportion of the 30 to 50 per cent of promotional money that pharma companies invariably waste each year.

Avoiding this is simple – carry out a straightforward return on investment (ROI) analysis on each of these budgeted categories. This analysis will reveal those activities that work well together, allow you to build competitive advantage and  achieve a good return – at least €3 in for every €1 out. It will also enable you to identify those activities that act as costs sinks, where you pour money down the drain every year, without getting anything in return.

One simple ROI analysis conducted each year will save you wasting 20 to 30 per cent of your budget at a stroke. So the first golden rule is, always evaluate your promotional investments at the end of each planning campaign cycle before committing to the next.

Driving sales
One way to help this work is to use your ROI analysis to build a simple promotional model. This will allow you to interrogate your strategic options and discuss how to exploit synergies to your advantage. This approach puts money behind those activities actually driving your sales and cuts wastage, freeing up money to allow you to back promising new projects or to put more emphasis behind those activities proven to work.

This will breathe life into your marketing activities allowing you to refresh your ideas in order to keep pace with your market as it changes. Your competitors will no longer be able to read your promotional strategy, previously so transparent. The net result of these actions will be increased sales and improved marketing productivity.

Marketing is only one part of the equation. The principal cause of wastage and budget deficit becomes apparent when we examine salesforce implementation. For most pharma companies the cost of running their salesforce accounts for well over a fifth of turnover, often more than a quarter. Getting your strategy right here will yield major dividends.

Command and control
There are two main approaches to field strategy. In the 'command and control' model, regional managers are used to drive implementation and the field forces are each given a strategy to follow for the product, a target list and a clear incentive. This model relies on precise targeting and understanding the relationship between coverage and frequency for your particular segment; and therein lays the problem.

How your target list is generated will greatly influence your salesforce's effectiveness. Most pharmaceutical companies buy in their target lists, which in effect gives each GP a rank for a given therapeutic area. One issue with these 'off-the-shelf' lists is that they generally cover less than 80 per cent of the customer group. A more serious problem is that if everyone uses the same list as the basis for their targeting you and all your competitors will highlight the same customers as 'high priority.' The competitive intensity to see these customers may be much higher than average and doctors given such intense scrutiny are likely to switch allegiance more often and be less 'stable' prescriber. High priority targets cost more to acquire, and offer lower returns.

Analyses of ROI conducted at Aston University in the UK, indicate that target doctor lists wear out rapidly and that calls on these customers often do not significantly contribute to sales. In effect, non-target calls may offer the best return on sales for effort expended. Competition for high priority target doctors may be 'white hot' but all doctors within the given practice will sign repeats, contribute to formulary decisions and prescribe. Misuse or overuse of target lists is a major cause of promotional wastage.

Time or money
The second strategic approach positions the regional manager as business manager for a given area, where calls are very often largely determined by reps. This can result in both reps and their manager lacking the necessary ROI information to make informed choices between investments in time or money within their territory. In my experience, this can be very wasteful use of calls with some reps choosing to operate a high-frequency strategy on a rather limited cohort of doctors where diminishing returns can rapidly kick in. In one case, I observed a rep making more than 140 calls on one doctor in a year and then clocking up a similar figure in the next year. This scenario may shock but it is far more common than most managers would envisage.

It appears to be a common belief that the 80–20 rule works well in all pharma settings. In fact, many targeting strategies work on the implementation that 64 per cent of sales come from four per cent of your customers (the result of doing Pareto twice). Our research does not support this. Detailed frequency analysis reveals the presence of two peaks of effectiveness separated by a distinct 'cash-trap,' supporting the need for better information to underpin and evaluate these strategies.

Optimal frequency
Regardless of which strategy you implement, it is important to check whether you actually carried out the activities that you planned to do within the timeframe. Often this step is not fully investigated. It is important to be aware of whether the chosen customers were contacted at the right frequency. Here a useful analysis is to look at the number of customers seen at each frequency during the last year, and then overlay these results with this year's frequency analysis. Very often, common patterns emerge revealing that a large proportion of customers actually remain unseen and more importantly, a large proportion of calls were actually directed to customers already seen at a greater than optimal frequency. It is worth noting here that if you calculate the cost of the call at €300, probably a conservative estimate, then for a customer seen 15 times for example you will have wasted at least €1,800 in direct costs – not to mention the opportunity cost of having failed to use those calls upon customers with true growth potential.

Analysis of frequency reveals that this statistic may be context specific, but it is possible to generalise. From the analyses that I have conducted a common pattern is that salesforces will achieve an effective frequency of from one to four calls, which is the main driver of sales, and then a second smaller peak of eight to 10 calls, which I have interpreted as calls upon good friends and customers which the representative receives the bulk of their sales from. In between four to eight calls and beyond 10 calls, is in effect a cash trap, where each extra call returns little, if anything, in terms of extra sales.

Here the second golden rule is, don't look at coverage and frequency effects in isolation. Compare this year's calls against the same last year, and identify which doctors were not seen in either year. These doctors represent the hidden iceberg of your market potential. Finally identify which doctors were seen at a greater frequency than 10 during each year. Multiply this last figure by €300 and you'll be amazed at how much money you can save without affecting your sales.

Individual traits
Unfortunately, if you are adopting a common commercial strategy for each rep to follow then you are missing a major opportunity. Recent research here at Aston University reveals that most salesforces actually implement not one but often six to eight different strategies. This is because our reps each differ in their life experience and education; they will mimic successful strategies and discard activities that do not work for them. Yet despite these individual traits, analysis of the activities implemented in the field reveals a number of common strategies.

This presents an opportunity to ratchet up your sales and radically transform your salesforce productivity. If you take the most most common strategy as a benchmark, the difference between field strategies can be marked. Migrating most of your representatives from a low performing strategy to a more effective one can produce a major shift in sales.

Make sure that your CRM system captures the key dimensions of field salesforce strategy that delineate planning ability, persistence and opportunism.

When strategies fail to achieve budgeted sales and profit figures, rather than redoubling your efforts or changing strategy completely, it is important to approach the problem rationally in order to identify the true cause. This allows you to remedy the situation quickly without wasting unnecessary time and money and effort. All of the key areas to examine depend upon sound and effective use of information. Pharma is awash with data, but devoid of information. A fact not significantly improved by the emphasis put upon the CRM systems and various efficiency measures such as call rate, 360° feedback, and KPI's.

Effectiveness versus efficiency
In my opinion, what is required is not efficiency measures  – doing things right, but effectiveness measures – concentrating on doing the right things. The first is inward looking whereas my proposal is an outward emphasis based on creating a virtuous planning circle of plan–measure–adjust, supported by appropriate data collection and careful and accurate ROI analysis.

Using the  methods outlined above should enable most companies to improve their sales and marketing productivity by about 20 per cent.

The Author
Dr Graham Leask is a member of the Economics and Strategy Group at Aston University
To comment on this feature email pme@pmlive.com
 

17th December 2008

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