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Synchronising KAM

Taking the new key account management process through to the final step
Synchro

Once the principles of key account management (KAM) are established, the new methods must be aligned through the company so that structural KAM can work effectively. This second in a series of two articles (following 'New Pattern') on incorporating KAM practices investigates the fresh set of problems to be aware of in bringing the organisation through to value-based selling.

Only after an organisation implants the core skills of account management can it empower one role to manage relationships with a single account across a set of products and customer-facing roles. Creating a KAM position to manage and promote everything that a pharmaceutical company offers can add tremendous value to the customer, but it also brings a host of new challenges.

Beyond the product
A pharmaceutical company is organised around its products, but if the key account manager is to span an entire portfolio, to whom does he or she report? How is the position reconciled with the rest of the business management structure? If KAMs determine strategy for key accounts, which can represent a majority of the company's revenue, what is the role of the marketing team and brand plan?

Resolving these questions means that brand planning and account planning must be aligned. National marketing plans must reflect the needs of key accounts explicitly; account plans have to be aligned with national strategy on positioning, pricing and other key strategic decisions.

In addition, most pharmaceutical companies employ sales managers aligned with products or therapeutic areas. The objectives of a cross-portfolio key account manager must be reconciled with those of a therapeutically aligned sales manager.

Coping with empowerment
Most pharmaceutical organisations have a top-down operating model: the marketing department develops strategy and the sales department implements it. However, the KAM model upsets these traditional practices.

The conventional relationship between brand managers and sales force area managers is divided between plan and execution, which minimises overlap and conflict. But under a KAM structure, a portfolio KAM's decisions will ultimately encroach upon the brand and sales area managers' responsibilities. Synchronising the plans, budgets and objectives of these three different stakeholders is a challenge.



Box 1: Synchronising KAM, Sales and Marketing

When a major pharmaceutical company introduced key account management spanning its oncology franchise, it quickly discovered two major budgeting issues. First, when it consolidated its key account plans (covering 80 per cent of its business), sales executives found that the KAMs' planned budget bore no resemblance to the brand teams' budgets. The marketing plans had budgeted for one health economist; the KAMs wanted four. The marketing team wanted to spend a certain amount of money on symposia; the KAMs' symposia budget was half as much.

Second, the KAMs' portfolio decisions resulted in account objectives that differed from the objectives of the brand-focused sales managers. This caused friction between the KAMs and the sales managers, who perceived that KAM decisions were undermining them.

Both of these problems required a dedicated effort to synchronise stakeholders. Through this, the company established an efficient top-down/bottom-up planning process that provided a common budgeting basis for all participants.



Bottom line
The increased empowerment of key account managers also requires some responsibility for the bottom line; the profit and loss implications of KAMs' decisions at the account level need to be transparent, but producing this kind of information can be extremely challenging as many of the required metrics are only produced nationally.

Finding the right people
Portfolio KAMs must cope with both workload and bandwidth (the number of different projects or how much information the KAM has to understand), which, if managed incorrectly, can result in a role of Herculean proportions. The KAM's workload increases with additional accounts, customers, reports and projects; bandwidth depends on the number of products for which the KAM must command expertise, how many accounts he or she needs to understand, the number of internal and external relationships the KAM must manage and how many projects they have.

In addition, some of these workload and bandwidth issues may be in conflict intrinsically. For example, a KAM may not be able to be an expert on six products, so requires the support of product specialists (ie. representatives). This in turn may require the KAM to manage an additional three to six employees, increasing workload. A product-focused sales manager may be slotted in above the product specialists to reduce the workload, but this introduces an additional relationship for the KAM to manage. Indeed, one of the most important objectives in designing a KAM sales strategy should be to minimise the number of internal relationships a KAM must handle.

In examining the balance between workload and bandwidth, it is obvious that the KAM position demands an individual with strong management skills. One large UK pharmaceutical company recently made a transition to a portfolio KAM strategy, creating 25 new account manager positions in the process. However, after a rigorous search, only eight people in its entire organisation were found to have the new competency profile for a KAM.

Once a KAM position is filled, the employee may wonder where it will lead and unless the job can be integrated into an attractive career progression path, retention will be difficult. On the other hand, KAM provides an attractive opportunity for reinvigorating careers in the pharmaceutical industry, as the position straddles marketing and sales.

In order to extract the maximum value out of the shift to KAM, it is important to develop a value proposition beyond the benefits of individual products; after all, this is what the structure is designed to achieve. This requires companies to develop a deeper understanding of their customers' businesses and, beyond that, of their customers' customers.

It also requires customers to be willing to engage with the pharmaceutical industry on such a basis, which requires significant trust. Further, the KAM structure entails navigating considerable ethical and regulatory issues that vary by country and company, but exist in all.


Box 2: Pushing the value-based frontier

A major pharmaceutical company with a focus on primary care business had seen its market share eroded by managed care reimbursement decisions. It believed that this resulted from a narrow focus on the price of its products and decided to try to sell on the basis of the total value that it as a company could bring to managed care customers instead. A small pilot team was given the task of exploring this possibility. The team had to work hard on two fronts: developing a compelling value proposition and changing the nature of its interaction with customers.

One key to generating mutual value was to identify ways in which the pharmaceutical company could add value to patients of the managed care organisation. By demonstrating that certain patient programmes could generate clear health benefits it was able to make a compelling case for overall healthcare savings for the managed care company. Mutual value was created by lowering managed care costs while increasing drug usage. One managed care executive even offered to share the costs of the programme.

The radically different customers, interactions and sales process required massive shifts in the salespeoples' capabilities. The initiative was supported by intensive coaching and support, with as many people in the support team as in the field.


Value-based selling
For companies able to complete the Portfolio-KAM stage, the next step is to move to full, value-based selling. A number of pharmaceutical companies have started piloting initiatives in this area and the results are promising, but hard to achieve.

The experience of such pilot cases and from efforts in other industries make two things abundantly clear:

1.Value capture is harder than value creation
Developing a new value proposition and an associated suite of market offerings is relatively straightforward. Customers are normally happy to tell a pharmaceutical company how it can do more for them. The real challenge is generating mutual value for both customer and company. Often the key to creating mutual value comes from focusing on the patients and their outcomes as both the customer and product of the healthcare provider.

2.Good value propositions need to be implemented
In addition, good sales organisations are required to implement good value propositions. Generally, companies should devote only a third of their time and energy to developing a new strategy; the rest should be spent implementing it. All the conditions described in each stage are necessary preconditions before reaching full KAM status. If value-based selling is the final destination, companies have a substantial job of capability building first.

As it is an enormous organisational change, moving from a conventional pharmaceutical sales model to KAM cannot be undertaken lightly. Simply creating a new role and providing training will not work and companies that take this shortcut rapidly find themselves dealing with one crisis after another.

But make no mistake; despite all the obstacles along the way, the journey to KAM is worth taking. By anticipating the challenges, pharmaceutical companies can ensure that the road will be a smooth one.

This article is a follow up to 'New Pattern'

The Author
Chris Morgan is a principal at ZS Associates

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

13th April 2011

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