Size isn’t everything

pharmafile | March 30, 2004 | Feature | |   

Pharmaceutical company sales teams have grown significantly in size over the last few years the – figures vary, but by something like a 40% increase in manpower. As costs spiral and salesforce budgets look set to rival R&D investment, the spotlight turns to sales effectiveness. These increases inevitably raise a number of interesting questions – is it sustainable; is it an 'ams race' and how much more can salesforces expand?

Overused and over here

The phrase 'arms race' was adopted a while ago from the US market, where the average industry field force budget is now $875 million, with the top spenders – the

superpowers – committing more than $1 billion in their sales budgets.

A number of market features have contributed to this so-called phenomena – a series of mega-mergers, a renewed focus on return on investment, driven by the rapid collapse of blockbuster brands facing generic competition. Is it really an arms race? The implication that it is merely to satisfy the corporate ego having to have the biggest sales team appears unfounded. It seems to be more a case of a race against time, rather than against each other.

The fact that the increase in salesforce size is not matched by productivity gains is interesting, and a little worrying for those concerned – estimates suggest that the 40% increase in 'heads' is only driving an average 8% increase in incremental sales growth.

The figures are notoriously difficult to reconcile because of issues of individual company sales performance and growth and return on investment are not for public consumption.

In an industry where the traditional focus on spending on investment has been R&D, the fact that salesforce budgets are now the second biggest investment made by a pharma company means that the spotlight will become increasingly focused upon them.

As thoroughness in analysis increases, there are increasing expectations over forecasting return on investment. Expectations vary, depending on product, promotional activity, coverage and detail position. However, a new molecule, offering significant prescriber benefits can recoup salesforce budgets in less than a year.

Optimal resourcing

Pfizer has one of the largest salesforces in the UK – Phillip Watts, sales operations director comments: "One of the key issues facing Pfizer, isn't 'do we have the biggest sales team' but more along the lines of 'do we have the optimal number of people promoting the various products in the portfolio.'"

Whilst there obviously is a link between the size of the Pfizer portfolio and the size of the field force, the resourcing is driven bottom-up, rather than top-down. There are many factors to consider: products need different types of manpower solutions at different times of their lifecycle. For example a mature product may need some account management focus, whilst a major launch requires a greater share of marketing voice, compared to the competition.

One of the constraints on further expansion comes from the customer perspective, and is in danger of being overlooked by the industry. The amount of time available for GPs/prescribers is finite – many observers suggest it is getting less, due to administrative pressures caused by a state of constant NHS reform.

Time is running out

This puts inevitable pressure on the system – in order to spend time face-to-face with reps, something must give: the product details get shorter, access gets limited or the activity is moved to meetings and other supported events.

According to IMS Health data, calls per GP have fallen by 25% and selling time to six to eight minutes, coinciding with unprecedented sales team activity.

Overcoming reduced GP access usually comes down to a few old-fashioned principles. In the US, where the same problem is faced, companies are

refocusing, for the first time in a while, on more careful recruitment, avoiding territory overlaps and minimising turnover.  

"Pfizer is very focused on this situation," says Mr Watts. "It is our responsibility to our customer to not only avoid wasting time, but to add real value to the interaction. Our field force size allows us to deploy teams to support some of the key products, and the representatives call sequentially on customers, developing a logical flow of conversation to build product awareness and use.

"The customers are increasingly used to communication with a product team like 'Team Lipitor' for example." At the heart of such field force activities lies successful CRM implementation. Optimisation, maximisation, return on investment modelling are at the crux of any CRM pitch. UK field force budgets are nowhere near US levels, but getting the best from the investment is the key to achieving sustainability and value for money. Issues of deployment and utilisation are the lifeblood of suppliers such as IMS Health.

Efficiency or effectiveness?

Traditionally, the approach to questions like return on investment has been to focus on efficiency producing more calls, meetings and associated activities. Increasing quantities, sheer call volumes, does not answer any metrics on salesforce effectiveness: simply put, if your sales team was performing average sales calls on the wrong customer type, increasing the numbers only compounds the problem.

As IMS Health group vice president, salesforce effectiveness, Nev Skelton, puts it: "It's only by combining the approaches of salesforce efficiency and effectiveness that we can provide return on investment and allow top-line growth to be maximised.

Mr Skelton continues:  "A key measure for the success of investment in a brand, and thus the sales team supporting it, is incremental sales growth. For many companies, it is difficult to tease out the impact of the sales rep from other aspects in the promotional mix; it has, however, become increasingly possible through precision measurement."

Looking at current pharma strategies, there are some common threads identifiable: they boil down to coverage activities – seeing as many people as possible, and frequency activities – repeat calling plans to reinforce product messages. According to Mr Skelton, there are flaws in these strategies, as they overlook sveral key issues.

A coverage activity does not take into account the spread of prescribing opportunity, which leads to time-wasting. Different customer groups or segments, adopt products at different speeds and from different parts of the marketing mix, again leading to time-wasting. Differential call frequency may be required by various customer segments.

Incentivising sales teams on productivity leads to high frequency calls on 'easy to see' customers, whilst ignoring the potential of tougher access prescribers. Not content with flagging areas of time-wasting, real improvements can be made. According to IMS, challenging these traditional approaches pays off – in more than 180 projects, this has delivered a 20 to 40% improvement in brand performances.

Such targeted and segmented approaches to the market yield far higher returns in incremental sales growth. In essence, this is simplicity itself – the right message to the right customer, delivered the right number of times.

One of the barriers to perfecting such precise call-planning is the guideline protecting prescriber confidentiality. Interestingly, survey after survey, show that the vast majority of prescribers appreciate the information communicated by pharma companies, often agreeing that the sales rep call is the most useful way of keeping up-to-date with product information.

The pressure to deliver personalised, value-added sales calls that are relevant to the individual prescriber will only intensify the drive for closer and closer data collection.

The industry is certainly taking all this seriously: a survey by Forrester Research showed that 60% of all pharma companies were currently rolling out CRM programmes, compared to total businesses, running at only 38%.

The challenges of such implementations are widely reported – getting systems up and running are difficult; spreading the use of such systems more widely (ie, not just the sales team) adds huge value. It is the breadth of implementation that really increases full use – the more useful targeting and planning data that the territory rep gets back reinforces its value and leads to more accurate and fuller recording.

Global giant or local hero?

IMS Health vice president of sales optimisation consulting, Nina Felton, says: "There are real advantages to being global, but it also has its drawbacks. In our opinion, there are distinct advantages to being global for things like pricing strategies and economies for instance in purchasing, market research and sharing best practices. But there also a price to pay. You end up having to put in place some form of tier management with teams based at your global headquarters. That's a significant investment in people and time and you're hindered in your ability to respond to local customers."

Every big pharma web site claims customer focus as a core value. Pfizer is no exception: "Customer focus is easy to say, but harder to achieve," says Mr Watts. "We are very pleased that many of our initiatives in this area appear to be paying off. For example, our investment in regionalisation – setting up HQs in each of the four sales regions has brought us closer to our customers and to our salesforce. The days of the 'once in a lifetime' visit to the head office for field personnel are now over, with regular meetings held at the regional centres."

Whilst consistency is important to Pfizer, the ability for local managers to input and change things locally help resolve this apparent dilemma. The importance of making decisions relating to local health boards or hospital scenarios cannot be overstated. Competitor products can vary regionally – for example, Lipitor is pitched head-to-head with pravastatin in Northern Ireland, whereas the rest of the UK is sold against simvastatin.

Are these activities sustainable? Clearly, the focus on salesforce budgeting and therefore size is increasingly going to come under the spotlight. Over the next few years, unless new product pipelines produce much faster than forecast, the gap in new molecules coming to market compared to older brands sliding off patent will widen.

Salesforce spend number one?

At that point, the spend on the field force may become the single largest investment made by a pharmaceutical company, with R&D falling into second place. To the rep on the ground, this means a number of changes: an increasing move to 'real time' activity recording and in return receiving a stream of useful marketing, clinical and planning data. A focus on the development of sequential call patterns, as described by Mr Watts, will lead to relationships built with the company, rather than with individuals; surely a preferred goal, given rep turnover.

Salesforce effectiveness will be the primary goal. Reconciling the corporate aim of customer focus with sales productivity will remain a core management activity. Competitive advantage will come to those players who focus on delivering what their customer wants and needs, rather than jostling with their competitors.

Explore e-detailing

As costs increase, the sustainability question becomes a challenge to move away from face-to-face calling, to explore the e-detailing route. The US model for this works best as a complementary activity working as part of the marketing mix. In the future, it may provide a 'way out' of spiralling salesforce spending.

It's difficult to see any pharma company sustaining the growth in manpower of the last five years: the numbers simply don't add up. By sharpening up salesforce effectiveness, better results can be achieved by fewer people.

Flexible resourcing

The need for flexible resourcing becomes even more obvious – if this has been an arms race, then few companies will pay to keep a 'standing army' when it not really needed – launching products, maximising revenue of key brands need multiple salesforces; more mature established products can be sold by smaller, more specialised sales teams.

Managing the portfolio effectively is the key – size matters, but not all of the time and not for all products.