| Mass marketing, for the purposes of this article, is where an organisation
develops a brand image for its product that it promotes globally, and
where a large sales force is employed to promote the product across a
broad range of customers.
This established approach to selling pharmaceutical products has worked
successfully for the past 30 years. However, there is a growing force
for change. The fact that there is a need for change can be drawn into
sharp relief when companies review where they are deriving their major
sales growth. The United States market accounts for approximately 45
per cent of revenue for global pharmaceutical companies, and is where
greater than double digit sales and profit growth is predominantly derived.
However, in Europe the market is not so buoyant; many ethical companies
are struggling to drive sales growth organically and tend to be consolidating
through acquisitions.
There are two basic factors that are driving this change. These factors
seem to be noticed and reported by industry observers and investors,
but unnoticed within the industry itself.
The economic logic of “big pharma” is a well-run path. The
premise has been to
drive economies of scale in large research and development departments,
to generate new medicines that can then be passed on to the large scale
sales and marketing teams. Size means greater resource, which of course
means greater penetration in the markets through higher share of voice,
ie, the more noise you make in the market the more likely you are to
be heard.
However a few realities are beginning to come to light.
Research and development
The first is that the economies of scale are not materialising in research
and development. More money is being spent with little evidence of
an increase in tangible saleable products. All that is happening is
that there is a higher attrition rate from the large number of potential
targets. Many potential therapeutic targets are being developed in
an ever more crowded research field, but the number of truly innovative
new medicines appearing on the market is few.
The promised panacea that was the growth in intellectual capital in genetics
and genomics has not yet delivered products of mass market appeal. Valuable
research is being undertaken that frequently hits the news headlines,
but this is not generating new “blockbusters”. More complex
selective targets are generating more complex selective products, and
these are being developed faster and more efficiently through technological
advances and improvements. However these products do not lend themselves
to a traditional mass marketing approach, but to focused, specialist
fields. It is therefore not surprising that investors are becoming more
sceptical of the constant promise of jam tomorrow. It looks like the
more specialist niche players are a more attractive proposition currently,
and they have drawn an upgraded attention from investors and acquisitive
larger players.
A hostile environment
The second reality is more worrying still. Europe is becoming an ever
more hostile environment in which to sell pharmaceutical medicines.
Regulators are becoming increasingly sophisticated and stringent, and
customers are becoming increasingly reluctant to open their doors to
fleets of medical representatives. The return on investment in sales
forces is ever diminishing as companies have to provide more technical
and economic data to support their propositions, and fewer representatives
are being seen by customers.
The traditional “share of voice” approach to bill-boarding
marketing messages to customers, where the one that can shout the loudest
is most likely to be heard, is beginning to fall on deaf, or rather closed,
ears. The number of medical representatives has increased significantly
over the years but the number of doctors has stayed the same, if not
declined. This is coupled with clinicians having less and less time to
see representatives with the development and introduction of more numerous
means of sourcing “impartial” information on products. The
ability of the large promotional power houses to be effective is hampered
further by the market access regulators, who are making it harder not
only for companies to get their products into the European markets, but
also approved on to tiers of drug formularies.
The US market still dominates world pharmaceutical sales, and therefore
drives the style and approach of the global players. There is also another
important factor that differentiates the US from European markets, which
is that it is possible to link a representative’s performance directly
to specific sales from a specific customer. Therefore the belief that
activity drives sales can be readily correlated. Share of voice, market
noise, and therefore the number of customers your sales force make contact
with, are key drivers of performance. Europe, though, is more reliant
on the third party anonymous sales data provided by IMS, where the tangible
correlation between activity and sales is more opaque. It is therefore
easier to fool oneself that increased activity drives sales at a micro
level, where plainly this is not happening at a macro level in some European
markets.
It is not surprising that US-centred thinking dominates the management
cultures within “big pharma”. A sales force management structure
and culture in Florida will be the same as that in France and that in
the United Kingdom, and even in an area within one of the countries.
Experimentation is not encouraged because it hinders the traditional
need to compare input performance measures. Instead of driving sales
and acting as a motive for change, this drives conformity and unscrupulous
activity recording.
The force for change is therefore still not strong from within. The significant
gross margin, ie, gross profit, on new products, acts as a further disincentive.
Why
drive sales growth when profits are still high? However, as investors
see profit eroded through diminishing operating margins, due to erosion
on return of investment in the sales force coupled with sales growth
targets not being hit, some of the larger investors may start to ask
more prying questions.
The challenge
Is the challenge to innovate, and become more creative, with sales force
excellence programmes? Maybe not. An alternative may be to put greater
emphasis behind the cornerstone of the business, ie, the ability to
sell. Many representatives are now more motivated and measured on how
many calls they make, rather than how much they have sold.
What drives most sales forces nowadays are ever more sophisticated activity
monitoring systems and balanced scorecards. The representatives who can
do seven to eight calls a day are highly valued, and this activity performance
is regularly touted by the sales force contract houses. The challenge
is to prove that these levels of activity drive sales performance. One
simple test that can quickly uncover whether detailing messages seven
times a day drives sales, or whether the activity card is just driving
an activity recording exercise, is to ask the representatives how many
prescriptions they think they have generated on each specific call.
Of course this is subjective, but my experience has demonstrated to me
that it encourages the representatives to think about whether they have
made a sale, rather than whether they have delivered their pre-prepared
story to an unhearing customer.
In an environment of slowly diminishing returns, the established representative
that has rapport-developing skills, as well as the dying ability to sell
products rather than recite a story, becomes an ever more valuable commodity.
The real test is whether this becomes a widely more valued commodity
in an industry that has become obsessed with chasing activity reports.
Sales managers need to know whether their representatives are selling
rather than reciting a story. Even more fundamentally, R&D and marketing
departments need to give their representatives something to sell. |
