Sales and Marketing: New Balances
Since performance is measured against a target, the creation of that target is key to the integrity of the entire compensation
system. Yet setting sales quotas is an inexact science at best—particularly in the primary care arena. Companies rise to this
challenge typically by using a combination of factors, including actual territory results (89 percent), overall company goal/objective
(86 percent), and territory potential (61 percent). The emphasis, however, is shifting away from territory potential, as it
is down from 86 percent in 2005. Undoubtedly, this trend reflects the fact that companies are uncomfortable attempting to
predict a territory's "true" potential, given the influence of external factors such as managed care. As a result, more transparent
elements, such as actual sales targets, get more weight in the goal-setting process.
Other changes also are underway. For several years, the marketing function within pharma companies has been gaining in size,
stature, and influence. This is noteworthy in an industry so traditionally focused on sales. While the scales have not tipped
toward marketing—and aren't likely to any time soon—companies continue to recognize the value of marketing and reward their
marketers richly. Product managers earned on average $129,300 in total compensation in 2006, while senior product managers
raked in $157,800—both up seven percent or more from 2005. These increases stand in sharp contrast to the 0.5 percent increase
granted to the industry's sales reps. Even senior specialty sales reps did not fare well in comparison, with only a 0.6-percent
increase in total compensation.
As more and more pharma and biotech companies grapple with the burden of administering highly sophisticated incentive-compensation
plans for their sales organizations, it is only natural that they begin to question the value of the effort. Until such a
time as PCP reps can interact with physicians as consultants in the sales process, they are increasingly functioning as highly
educated, very sophisticated, superbly trained—and generously paid—merchandising reps. In essence, PCP reps deliver product
information and distribute samples. In the harsh light of economic reality, does the current pay structure for these positions
still make sense?
One answer is to raise the percent of total comp represented by base pay for the PCP sales force, recognizing that these reps
simply don't have a lot of direct impact on the actual sale. At the same time, companies can simplify the structure of their
incentive plans, as many are starting to do. This would end some of the administrative misery—and free up companies to measure
and reward positions, like specialty sales and corporate account roles, that have a more direct impact on sales volume. Time
will tell, of course, if companies follow through with these changes, but the motivation is mounting—and the once-distant
rumblings, as seen with Pfizer, are upon us.
Bob Davenport is vice president and managing director for Hay Group. He can be reached at firstname.lastname@example.org
. Carrie Fisher email@example.com
and Erin Rosner firstname.lastname@example.org
are consultants for Hay Group Insight.