Even though turnover rates are coming down, the length of time it takes to fill vacant territories has increased, which means
that many companies still struggle to stay fully staffed. One quarter of participating survey respondents report an average
vacancy rate of more than two months. Filling open sales positions is particularly problematic for biotech companies, where
a whopping 60 percent report an average vacancy rate of more than two months. This difficulty is likely due to the greater
selectivity many biotech companies use to recruit specialty sales talent.
There's no doubt that companies are learning to do more with less. Key to that is trimming the fat while retaining top talent.
The numbers back this trend: More organizations are implementing formal processes for retaining high-performing and high-potential
salespeople. This year, 41 percent indicated that they have a formal process in place, compared with 30 percent in 2006 and
22 percent in 2005. This process may be as simple as identifying high-performers and communicating to those reps that the
company views them in this way. In any case, companies are rapidly realizing the importance of this process to keeping their
strongest field reps.
The use of contract sales organizations has not abated, as organizations are taking advantage of the greater flexibility offered
by outsourcing. One-fifth of the responding companies use contract sales organizations, consistent with 2006. However, the
industry is less likely than in the past to recruit these workers into full-time staff positions. In 2006, all companies said
that they occasionally recruited contract staff, whereas this year, only 75 percent did (likely a result of downsizing and
the redeployment of internal sales staff). That being said, many companies are, in fact, increasingly open to hiring sales
people with no industry experience; this year, 69 percent of participants said they did so, compared with 56 percent in 2006.
Base Salary: Aiming for Average
The shift to an employers' market was evidenced by the stagnation of primary care reps' salaries. In 2007, the median base
pay for all reps was $63,100, up from $61,900 in 2006 (a 1.9 percent increase). The median total compensation for a Level
II primary care sales rep—that is, a fully trained sales representative—was $96,500, up from $94,500 in 2006 (a 2 percent
Pharmaceutical sales reps continue to be paid more handsomely than their counterparts in general industry, where median base
salaries for sales reps are $62,000 vs. the $72,100 average for all types of pharmaceutical reps.
However, the average merit increase did not change between 2005 and 2006, and at 4 percent was slightly above that of general
industry's 3.5 percent. Given the freer labor market, it is very likely that merit increases will begin to level off, if not
decrease, as companies will not need to pay a premium to attract and retain the talent they need.
This trend is not yet true of total cash compensation for specialty reps, as they continue to experience pay increases.
Putting aside specialty sales, there are apparent changes in the way that companies are targeting their pay scales in relation
to the market. Most companies set out to pay reps at or above the market median. Therefore, since no company targets below
the median, the median is a constantly moving target, and has had the effect of ratcheting up pay levels and inflating reps'
salaries. (See "Pay Positioning: Total Cash Compensation," ) But this year, companies have begun to target lower overall,
with no pay packages targeted above the 90th percentile. This is a continuation of a trend, where the number of companies
targeting cash compensation in the 75th to 89th percentile has shrunk 50 percent in the last four years.
Pay Positioning: Total Cash Compensation
Incentive Compensation: Too Much at Risk?
In 2001, incentive compensation accounted for 20 percent of a salesperson's total compensation. Over the next several years,
that percentage rose gradually as companies sought to accommodate escalating pay scales by shifting more of the risk to employees.
By 2005, incentive compensation accounted for 27 percent of the sales force's total compensation.