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The customer is king

Business models must transform to ensure payers and patients top the bill

elvis Rule number one in the classic marketers' handbook is that the customer is king. In a modern environment driven by production overcapacity, it is customers, not products, that are in short supply. The warning is stark: from the boardroom to the factory floor, if you're not thinking about the customer, you're not thinking. Customers are companies' most important assets and customer creation is an organisation's highest priority. The key to success in the marketplace, therefore, is customer intimacy.

'Customer-centricity' is among the latest buzz phrases shaping business strategy, but what does it mean and is it actually happening?

Being customer-centric means aligning the resources of your organisation to respond to the ever-changing needs of customers and, in the process, building mutually profitable relationships. It is a mindset, and it encompasses every aspect of an organisation, starting at the top.

In his recent textbook, Marketing Insights from A-Z, marketing guru, Philip Kotler, says that companies need to learn how to move from a product-making focus to a customer-owning focus. "Products come and go," he says. "A company's challenge is to hold on to its customers longer than it holds onto its products. It needs to watch the market lifecycle and the customer lifecycle far more than the product lifecycle."

So how does this approach play out in pharma? Historically, not all that well. But perhaps it hasn't needed to, until now. In November 2007,  Eli Lilly's then president in Europe, Abbas Hussain hosted a multi-sector discussion group that looked at transforming into a customer-centric organisation. He noted that pharma's traditional focus had been on innovation and products. But, he said, as industry growth slowed, R&D costs increased and output dropped, a critical change in pharma's customer-base had begun to take shape. The industry had previously focused its activities on the prescribers, but now payers and patients were beginning to enjoy greater influence in the decision-making process. The result? A need to transform the pharmaceutical business model and put the customer, rather than the product, first.

Ability to innovate
Companies that focus on customers effectively acquire a powerful ability to innovate. By understanding the needs, challenges and objectives of all of its customer groups, a company becomes better placed to segment them and create products and services tailored to each segment. Becoming truly customer-centric creates a platform for significant brand differentiation and drives competitive advantage. Success comes from demonstrating to your customers that they are important to your business and that your goal is to exceed their expectations sustainably and for the long term.

The International Organisation for Standardisation (ISO) identifies customer focus as the first of eight quality management principles. Organisations, it says, depend on their customers and should understand their current and future needs, meet customer requirements and strive to exceed customer expectations.

Why? Well, the potential is obvious. ISO outlines the following as the key benefits of focusing on the customer:
• Increased revenue and market share obtained through flexible and fast responses to market opportunities
• Increased effectiveness in the use of the organisation's resources to enhance customer satisfaction
• Improved customer loyalty, leading to repeat business.

With such attractive benefits, the move towards a customer-centred approach appears to be a no-brainer, but converting the theory into reality is challenging. Fundamental to its success is the need for the philosophy to be embraced throughout an organisation – from the top down. This also links to the need for more integrated thinking across companies, and greater inter-departmental communication. For pharma, this means a departure from silo working and a move towards increased traction between medical, marketing and sales departments – the core of a robust market access strategy.

But what is driving this change? Appropriately, a rapid explosion in the industry's customer-base has provided the catalyst. If other business sectors are plagued by a dearth of customers, the evolution of health systems across the globe has given pharma the opposite problem: it has too many! The major challenge has become how to define the customer. The scientific side of the industry has traditionally defined customers as clinicians, but as the need to present a health economic argument has grown, the customer-base has broadened to include payers, health insurers and governments. And this, of course, is without considering the ultimate customer: the patient. A one-size-fits-all approach will no longer work for pharma. Being customer-centric requires a full and integrated understanding of all the key stakeholders, both clinical and non-clinical, and a unifying marketing strategy that is able to respond to their needs.

So does the industry walk the talk? It is certainly moving in the right direction. Back in 2007, Abbas Hussain said that one of the main problems in forcing change was that the old 'push model' was still working. "We know it is going to break, but the question is when," he said. "How do we move to the new 'pull model', a fundamental shift in which customers identify the solutions they need and we help provide them?" If the wholesale restructuring taking place across the industry is anything to go by, the move away from the old push model has developed from theory to reality.

A DIY guide to customer intimacy

1. Map your customers. Who are they? Where are they? What is their sphere of influence? Who are the decision makers? Who are the influencers?

2.Talk to them. Understand their challenges, priorities and needs. What are they looking for from a relationship with your company?

3. Listen.

4. Tailor your messages and value proposition to suit the needs of different customer groups – each set of customers requires a different approach.

5. Maintain customer focus;  monitor and respond to the changing needs of all your customers to ensure that the relationship value remains explicit in reinforcing development of strong, long lasting and mutually beneficial customer/pharma partnerships.

Abbas Hussain is now president, Emerging Markets, at GlaxoSmithKline(GSK), a company which appears to be fully embracing the philosophies of customer-centric thinking. Since the appointment of Andrew Witty as chief executive, GSK has restructured its organisation around the needs of its customers. Describing itself as a 'flexible company capable of responding quickly to a rapidly changing marketplace', GSK has developed 'smaller, customer-focused units'. In the process, Andrew Witty has raised eyebrows by sitting down with his customers and asking them what future products they would be willing to pay for, in an attempt to move away from the model where big pharma simply innovated as it saw fit. In a previous role as head of GSK's European arm, Andrew Witty struck a deal to delay reimbursement for certain treatments until, and only if, they generated their promised health benefits – linking research efforts to genuine value in the marketplace. As an example of customer-centricity 'from the top down', Witty's GSK strikes an impressive blow.

But it is not alone in embracing the philosophy. All of the global industry's major players now claim 'a customer-centred approach' to business, but delivering on the promise is the biggest challenge of all.

So, in a philosophy that requires company-wide buy-in to deliver demonstrable success, how can marketers play their part? Fundamentally, you need to fully understand your environment. Identifying precisely who your customers are is only one piece of the jigsaw; understanding their needs is even more important and will help build the bigger picture. Alongside this, in the UK, you need to understand the changing NHS environment and its impact on your customer-base. And you need to know this sufficiently well to be able to adapt your strategy in response to it. Put simply, marketers need to keep on top of change, to identify their key influencers, understand their needs and respond accordingly. Establishing the spheres of influence around all of your customers is vital to success.

The process requires collaborative and integrated working across the commercial organisation. As such, a move away from traditional silo working is critical. Marketers need to engage with internal colleagues in both medical and sales departments, to build marketing strategies that deliver services tailored to customer need. Underpinning this integrated internal communication is a need for marketers themselves to achieve increased customer contact, allowing them to develop a greater understanding of customers' mindsets and the challenges they face in the marketplace. Historically, the salesforce has enjoyed the lion's share of customer interaction and while this is unlikely to change, the need for marketers to develop messages based on true customer insights may require that the marketing fraternity takes a more active role in customer engagement.

Sales teams will, of course, remain the lynch pin in ensuring the success of a customer-focused approach. As such, a variety of processes must be in place for optimal results.

First, sales teams must be aware of the need to question and understand their customers in more detail. Second, clear and robust systems that enable this information to be fed back to marketing and other office-based teams must be established so that messages and tactics are developed to reflect and respond to the needs of customers. And finally, sales teams must be able to adapt and tailor these new messages in response to different customer needs. Developing customer insights from sales team information is a true reflection of the move away from silo working and will be the core element in any unified customer-focused approach.

According to Kotler, the sign of marketing maturity is when a company stops focusing on its products and starts focusing on its customers. On its own, customer focus will only take you so far; without strong products and operational excellence, organisations will fail. Undoubtedly, however, customer intimacy is the most effective approach to drive product development and organisational structure. And everyone has a part to play. If you're not thinking about the customer, you're not thinking. The question is: are you thinking hard enough?

The Author
Simon Dawson is a senior management consultant at WG Consulting.
To comment on this article, email

Case study: Novartis Oncology

Earlier this year, Novartis Oncology held an internal convention on customer-centricity for its senior management in Europe from the medical, marketing, sales excellence, legal and finance sectors. It featured the findings of a qualitative research programme conducted across the major European markets, designed to establish the status of industry relationships with key customer groups and find out how the company was performing compared to its competitors. Novartis wanted to understand the standard industry/stakeholder relationship better and identify how to improve it. Equally, it wanted to know more about the customers, their perceptions and needs.

Four sets of key stakeholders were included; oncologists, haematologists, patient association groups and payers. An independent third party carried out live one-to-one interviews with individuals in these groups from the top six European markets and smaller markets such as Poland, Estonia and the nordic countries. There were 36 in-depth one-hour interviews. The questionnaire set out to discover what 'poor', 'average' and 'good' relationships were. The interviews were video recorded and then collated, assessed and divided into these categories. The video packages then formed the centrepiece of workshops at the 400-strong convention. Twelve workshops were divided into different stakeholder groups. Attendees watched the videos together to gather insights from the customers. The aim was to identify the elements that customers liked. For example, for a payer, what should the company be doing? What were the competitors doing? Where could they improve?

Participants in the workshop rated the findings to determine what they felt were the 'winning factors'. The overriding objective was to establish what else the company should be doing with each specific customer type, and moreover, to determine what this might mean in terms of cross-functional actions; how to go about implementing them and measuring them.

The collaborative exercise was a great success, with the research itself unearthing some surprising insights from customers. The winning factors identified will be used to drive strategy across brand portfolios. The customer base has exploded. The clinician, irrespective of therapy area or country, is no longer the only customer that counts. But how well does pharma know these new stakeholders? Establishing what customers want should be top priority. The mechanism of control and access to products is tightening across Europe. In response, companies are putting more market access people into positions where they can influence payers. In addition, the industry is building more health economic data into its clinical studies. We must learn how to present our products. We must promote the life-enhancing and life-saving values of those products in a manner that suits customers. To do that, we must take steps to fully understand those customers and what they actually want.

The Author
Emma Wrigley is a Femara regional brand leader at Novartis Oncology

29th June 2009


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