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Unlocking key potential

The tried-and-tested is no longer the best option and new skills must be brought to bear

KeyThe unique nature of the pharma market has been well documented. Elements such as fixed-term patent protection, legal restrictions on promotion, price regulation, varied decision makers, and complex supply chains have been successfully accommodated into a profitable selling environment over the last 25 years. However, recently the landscape has changed. Overt government intervention to control spiralling healthcare costs, the reduced numbers of blockbuster drugs coming to market, and a focus on new products in niche markets and secondary care, have greatly decreased pharma company profitability. In this new situation, characterised by the removal of customer independence and a severe reduction in the number of purchasing customers (with those customers having increased purchasing power), a new sales approach is required.

Industries such as aerospace, IT, telecoms, and utilities have been operating successfully under very similar circumstances for years, using key account management (KAM) approaches appropriate for their environments. As a result, they have gained considerable experience in successful implementation that pharma can look to and learn from. 

The KAM environment
The main features of KAM are: it is highly structured and hierarchical; it involves decision-making units (not individual customers); accounts have multiple relationships; key accounts are disproportionately important (Pareto 20:80); and relationships benefit both the key account and the service provider.

With so many in pharma beginning to embrace KAM, it is interesting to note what their early experiences are showing.

To implement a KAM approach successfully in pharma, several points must be understood. It is a process consisting of logical, co-ordinated, sequential steps, requiring a management team that knows KAM is not just about selling. It is also a distillation of the traditional marketing approach, with a defined purpose and mission, and set objectives. These include:
• Defining, profiling and segmentation of accounts/customers
• Selecting key accounts (Pareto Law 20:80)
• Allocating individual account responsibility
• Recruiting, training and allocating suitable key account managers
• Defining and documenting the individual key account plan and process
• Defining the decision-making unit (DMU) and the interaction process
• Supporting the process with an appropriate KAM tool
• Defining the performance management process.

In practice, KAM is not a major departure from the comfort zone, as the following examples show.

Case study 1
Our first case study looks at a new product launched into an area of 'unmet clinical need', which was predominantly secondary care driven. Before recruiting a traditional number of geography-based hospital sales representatives, the company conducted research and market dynamics studies, which identified that a small number of treatment centres or accounts were responsible for the majority of the market potential, ie a significant Pareto effect. 50 per cent of business potential came from only 20 Trusts and 80 per cent of potential came from only 70 Trusts.

On the basis that some 70 accounts were responsible for the treatment of 80 per cent of appropriate patients, and with several hundred physicians and administrative personnel forming the 70 DMUs in these accounts, the company recruited significantly fewer key account managers than it would have done were it hiring traditional hospital sales reps.

Each key account manager was screened for, recruited, and trained in the softer, 'people skills' issues required to engage with, and develop 'win-win' propositions for the appropriate customers at each key account.

Managers were given responsibility for a realistic number of key accounts, taking into consideration the importance of these accounts, the number of people in their DMUs, and the accounts' political frameworks or receptiveness. A key account plan template was drawn up, populated and signed off by the key account managers and the senior management team. The plan identified specific opportunities at each account, and the processes by which these would be realised were documented and loaded into the KAM specific support tool, chosen by the company in preference to a traditional customer relationship management (CRM) tool.

The key criteria for determining success were identified, along with timed milestones, and incorporated into the KAM support tool, to provide regular management reports on implementation by account to the senior management team.

This focused KAM approach led to a highly successful product launch; uptake was in line with expectations in a 'niche' area, and the costs of recruiting fewer representatives to target accounts meant that traditional profitability figures were exceeded. The company's relationships with key account customers were mutually beneficial, and making use of an appropriate KAM support tool meant senior management was kept up to date with implementation successes. Detailed information on interactions with the DMU at each key account was captured for future use.

Case study 2
This example features a company that had a well-established product in a niche area, but which faced significant difficulties in defining an account and attributing a relative value. This was due to the interaction between secondary care physicians who initiated therapy and the repeat prescribing of the product in the community, which was 'idiosyncratic' or local policy dependent.

Using readily available data, the company combined the patient hospital episode data with its own product's sales direct to hospital, the product's community sales at lowest geography level, the trend of the product's sales, and PCT referral data to build a picture of the approximate value by account. On this basis, the company was able to determine more accurately the relative size and importance of accounts, as well as its relative penetration per account. This approach provided a sufficiently robust management tool on which to base decisions aimed at moving the business forward.

The Pareto analysis showed a concentration of market potential, with 80 per cent coming from 62 Trusts or accounts – a 34 per cent share.

Identifying key accounts
From an external analysis perspective, it was intriguing to see that the list of important or key accounts differed significantly in the two case studies.

In case study 1, the top key account, responsible for 50 per cent more potential than the second largest account, did not even feature in the key account list for case study 2. This contradicts the common perception that all accounts in a target list are the same and that they are always the big accounts.

The ranked list of accounts in the second case study was overlaid with the previous year's customer contact activity in a Pareto Plus Audit, to identify 'neglected' and 'saturated' accounts. This different perspective, and the additional information, challenged conventional wisdom. It was interesting to see how this was received by different groups in the company. Many senior staff reacted positively and began a lively debate on the merits of their historical prioritisation of accounts and corresponding focus of promotional activity, however, some of the hospital sales team were particularly defensive and perceived the results as critical of previous decisions. 'Neglected' accounts were rationalised by the hospital sales team to mean 'not considered important'. Because they had low sales of the company product, the potential was reasonably assumed to be correspondingly low, and so no corrective action for the future was planned.

Examples of 'saturated' or 'over resourced' accounts relative to their potential were rationalised to be important teaching hospitals with a network of influence extending outside the administrative and political boundaries. The fact that these accounts were often close to where the hospital sales rep lived was conveniently ignored.

Adopting a new sales model
Senior management decided it was time to adopt a key account approach and that the previous sales model was no longer appropriate. A new, smaller KAM team, with a different skills set, was recruited to implement the new approach in the 60 key accounts identified around the UK. Instead of the previous approach of working to coverage and frequency targets on customers, account plans were drawn up. A new performance management process was initiated. The senior management team piloted a dedicated KAM support tool after accepting that the inappropriate use of any CRM would not provide the KAM team with the tools for the job. Its success is still being assessed.

Co-ordinated approach
The transition to KAM is not quite as scary and difficult as some suggest. It does require a clear idea of what is needed and this understanding has to be accepted across the organisation. It is not just a different way of selling; it uses a different skills set and a more organised approach to ensure effective interaction with key account customers.

The essential elements of previous marketing approaches do not need to be thrown away; they just need to be applied appropriately in a structured and co-ordinated way. However, it is evident that making the move to KAM requires previous performance metrics and support tools to be replaced by ones more appropriate for the task in hand.

There are always those who will dismiss a new approach as inappropriate and too complex for this industry, wishing to stay with the tried-and-tested. In the current environment, the tried-and-tested cannot work. It remains to be seen, however, who is committed to implementing KAM and who is just going through the motions, waiting for an opportunity to revert to the old ways.

The Authors
Ken Boyce, Ralph Boyce and Tony O'Connor are directors of Pharma MI
To comment on this article, email

20th February 2009


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