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A new PwC survey reveals a strong need to fully embrace alternative commercial methods-not in a blind frenzy but through careful evaluation of which new sales strategies have true innovative potential.
Faced with a changing commercial marketplace, pharmaceutical leaders are investing heavily in new but largely unproven selling strategies-and they will continue doing so even though many of these new approaches are producing mixed results. That's the key finding from Strategy&'s (part of the PwC network) 2014 Global Pharma Marketing and Sales Survey, which surveyed more than 150 senior sales, marketing, and strategy executives to find how pharma companies are wrestling with a marketplace in flux.
Much of the uncertainty stems from the decline of the in-person sales rep model that has been the industry's standard approach for decades. And while there have been clear successes in making evolutionary improvements to that model-such as the increased use of key account managers (KAMs)-pharma executives intend to devote more resources to novel methods of reaching customers, despite the fact that success metrics for those methods remain largely undefined.
In placing their bets on new techniques with transformative potential, companies must recognize that the efforts to date have not adequately taken into account customer needs. At the same time, too little attention has been paid to establishing effective metrics to assess their validity and identify best practices. In short, before throwing good money after bad, the pharmaceutical industry needs a more basic understanding of its strategic objective and of how it can use new practices aligned to a measurable return on investment. Industry leaders must also become more outcomes oriented and overcome stubborn organizational and operational barriers that slow the pace of innovation in interacting effectively with a new breed of customer.
In previous years, our surveys focused on the future-for example, asking pharma executives where they planned to invest. While a number of predictions can be drawn from this year's survey, it primarily paints a picture of where the industry and its players stand at the moment. Where are they finding success and how are they building the right strategy or metric by which to accurately assess that strategy? Our goal was to scrutinize conventional wisdom, and to separate some of the industry's myths from its realities.
The results confirm that the industry is awash in new sales and marketing strategies and tactics, at various stages of implementation. This is no surprise-traditional tactics have often become cost prohibitive, the commercial marketplace has much greater complexity, and new regulations have restricted historical options, throwing the points of contact between pharmaceutical companies, their sales teams, and the providers themselves into a state of protracted turmoil. With the traditional landscape under pressure, many companies have shied away from unproven new commercial models (NCMs), relying instead on tweaking their old models to adapt to a changing market.
Nearly three-quarters of survey respondents agree that pharma companies have mainly repurposed the sales-rep model toward account management rather than creating any truly game-changing innovations. This reliance on tried and true models is understandable. These innovations, while incremental, clearly represent progress toward a better overall strategy moving forward.
But much work remains to be done. As one of our respondents pointed out, "sales reps will continue to be important but companies need to review capabilities to provide what is essential in adding value to customers."
A discussion of the new commercial model begins with a look at these new channels and content strategies.
The new channels being tested include:
» KAMs: Servicing key institutional providers through a single account manager.
» Clinical sales forces: Sales reps with substantial medical knowledge of specific disease areas and relevant therapies responsible for clearly communicating the benefits and uses of specific therapies to healthcare providers (HCPs) and other key stakeholders.
» Patient/physician portals: Web portals and other technologies that patients, physicians, and other stakeholders can access to obtain information about diseases, treatments, products, or services.
» Social media promotion: Using social-media sites (Facebook, Twitter, etc.) to engage consumers and provide medical information.
» Dynamic channel management: Integrating content and engagement history across HCP-directed channels to create a seamless experience.
» Digital tools: Digital applications used to engage HCPs, provide disease, product or service-specific medical education, or detail HCPs for product or service promotion.
New content being taken to customers includes:
» Product budget/outcomes models: Health economics and outcomes research that can be used to assess the impact of a therapy on relevant patient groups.
» TA or product-specific value-added services: Going "beyond-the-pill" to offer services targeting patients, HCPs, or other key stakeholders aimed at improving treatment outcomes or patient experiences.
» Above-the-brand services: Ancillary support services done "without-the-pill" (e.g., improved diagnostics, home monitoring) targeting HCPs and other care providers focused on improving the quality of care.
» Joint research/analytics with both payers and provider institutions: Collaborative research and analysis providing real-world evidence to help determine how products and services can either be used to improve the efficiency and efficacy of care or integrated into approaches to improve care outcomes.
» Disease management services: Services that improve management for chronic conditions by enabling coordination and communication between patients, care-givers, HCPs, and other key stakeholders.
» Innovative pricing and contract structures: Agreements that value therapies based on standards, established in collaboration with payers or providers, that go beyond those traditionally used to value therapies.
It's crucial to remember that, as the market becomes more contested, regulated and complex, with more stakeholders to serve, adaptation to this new environment is far from simple. Executives are tasked with reshaping their businesses while operating them in real time-the functional equivalent of repairing one's car while motoring down the expressway.
Today, the only NCMs in broad use are personal-selling approaches such as KAM; most others remain in pilot mode. But implementing even these incremental changes has proven challenging, especially in gaining the internal confidence to pursue a different set of tactics in satisfying the customer base.
"Adoption goes slowly with new tools because our own internal staff are not comfortable using the new tools," one survey respondent told us. "This must be resolved if we are going to have any hope of getting our customers to adopt."
On the content side, the most broadly applied variation has been the product budget/outcomes model. Nearly 85% of the executives we surveyed had at least piloted programs around this approach, and more than half had broadly applied the tactic as part of their overall strategies. Complementing that effort, about 70% had at least some experience with the innovative pricing/contracting model.
Generally speaking, however, broad adoption of new content approaches has lagged well behind those strategies focused on channels. Despite the fact that there has been fairly heavy piloting around the previously mentioned content strategies, the number of companies that applied these tactics only eclipsed a majority in the level of support in one instance-the product budget/outcomes model. Almost none of the other content-oriented commercial model levers have been applied in even a third of the cases, with collaborations falling at less than 25% for both payers and providers.
While our survey highlights the wide assortment of strategies, in various forms and combinations, at play in the marketplace, it also clearly shows that, in most cases, the results have been decidedly mixed. The KAM strategies aimed at institutional providers and more clinical-specialist-led sales forces ranked as the most successful strategies employed. It is worth noting that these personal-selling variations, leverage the strengths of the traditional commercial model. The lingering question remains, however, as to how long the industry can continue its heavy reliance on these tactics, which, besides being more costly, present challenges in providing broad reach.
This reliance comes as no surprise. While sales forces have shrunk and been outsourced, the industry remains dependent on direct sales forces. Almost all of our respondents have put in place some form of KAM strategy focused more on business–to-business interactions, where a team member represents the full portfolio and manages the relationship between large provider systems and the company.
The next iteration of this strategy will require companies to continue to bolster KAM approaches for institutional providers through better resource alignment, effective engagement from across the various pharma company functions, and development of more customer-centric offerings to gain access and influence.
But beyond the key account channel model and clinical sales rep approach, the results for the new offerings have varied. Respondents were far more comfortable identifying their successes based on channels of engagement rather than based on offerings.
One of the survey's greatest surprises may be the executives' ranking of new technological tools, which they deemed among the least successful NCM elements. Pharma companies have devoted notable amounts of resources to digital tools, patient-physician portals and social media promotion, where many see "revolutionary" potential. Yet these areas have proved the least successful of any of the applied strategies, according to our respondents.
Though some of those surveyed appreciated the ability of digital tools to "Increase the speed and reach of communication dramatically," as well as the ability to better track customer interactions, others noted that the strategy remains "untargeted." Interviewees noted that so much of the digital effort never really "changed the market equation." They were simple additions or pushed the traditional personal-selling message online with little consideration for gaining customer demand for the information.
Further confounding the situation is the lack of standards by which to measure efficacy. As one respondent put it, the digital tools' "fanciness and superficial evaluation influence investment decisions," but that there remains a troubling lack of both focus in their application as well as "meaningful benchmarks to assess success."
Where the results were less clear for content approaches, however, was in the middle. Strategies such as above-the-brand services, and joint research/analytics, to name two, were described as "highly appreciated by customers, but too expensive," and difficult to measure from an ROI standpoint. Both saw nearly equal levels of satisfaction and dissatisfaction. This contrast could indicate that success depends more on execution and is company- or brand-dependent. But, in any case, there is a fair amount of disagreement over what works.
Moreover, in the survey results and in our conversations with clients, we have found that quite often ROI is not consistently "measured." In those conversations, opinions have tended to be based less on actual data and verifiable ROI, and more on companies' impressions of how various commercial elements are performing. Given this dynamic, it is perhaps less surprising that the discussion of strategies and their efficacy breeds such disagreement.
The survey shows that executives will continue to invest in digital tools. The vast majority of survey respondents told us they were in the process of exploring alternative commercial elements, both broadly applied and piloted-a full 83% said they expect to further restructure their commercial model in the next two to three years. Clearly, they will continue to pilot new methods and spend more money as pharma executives continue to wrestle with NCM strategies-specifically digital strategies.
Though the industry has struggled to maximize the perceived potential of the various digital strategies it has attempted, and to measure their success, executives who responded to the survey indicated they would continue investing in digital tools. But even as they foresee proceeding further down this path, the executives continue to rate digital strategies as the least effective of those they have tried. Further, the respondents who had committed the most resources to those strategies reported the most uncertainty as to their effectiveness. This is partly due to digital's relatively low cost coupled with its high potential. Hence, 65% expect to increase digital interactions, with support centered on digital tools. With further investment will also come a greater need for more accurate and agreed-upon ROI metrics.
Progress will likely remain incremental on this front, at least for now. But if there will be success, companies will need to do more than "add digital" as part of their strategy. They will need to look at how digital can really change the market dynamics for customers and how it will be in demand from these key stakeholders.
As always, the investment and divestment strategies companies employ will by necessity remain opportunistic, with eyes keenly trained on methods for achieving cost-effective growth. But in those areas where success remains elusive or, at the very least, debatable, companies will be required to continue in their efforts at redesigning offerings to better suit the market.
There are considerable resources already deployed around these strategies and with that comes a certain amount of inertia. Changing course will certainly not be easy. But that inertia creates the need to anticipate the changing landscape even sooner, lest companies be forced to turn on a dime somewhere down the road.
Following on that notion, and perhaps more importantly, leadership teams will be required to address the operational and institutional barriers that continue to block innovation and in many cases exacerbate the inertia.
There is a common misconception in the industry that the regulatory environment-with its increasingly difficult-to-navigate rules and the resulting upheaval in the stakeholder landscape-is primarily to blame for these internal blockages. The results of our survey show that, in fact, equal culpability lies with the companies themselves, as they remain unsure of how to accurately determine the efficacy and ROI of the NCM strategies they attempt.
This year's survey results present a number of takeaways-but there is no one silver-bullet strategy to address them. Every potential solution that companies adopt moving forward must be tailored to suit the needs of their teams and, more importantly, the needs of their customers.
If there is one clarion call-one first step we would recommend-it is for companies to fully embrace the alternative personal selling or KAM methods, if they have not already or if they've done so in a way that's not delivering on the expected value. It will be critical to continue evolving the capabilities here-including targeting tailored value propositions, fostering organizational alignment, and ensuring a better fit with local selling strategies.
Next, companies still struggling with the many moving pieces of the NCM should be judicious with resource allocation. Before spending millions of dollars on strategies such as new content/offerings, which may or may not prove effective in the long run, it's vital to understand which of those strategies have true innovative potential rather than continuing blindly down myriad paths. To that end, adopting and ensuring best practice execution in strategic moves that show the most promise, while also continually redesigning offerings and tools -especially digital tools which may not yet be delivering on their potential value-should remain key components of any new model.
Third, companies must never lose focus on the needs of customers-what will deliver the highest satisfaction, outcomes, and efficiency from their perspective. We have seen, in some cases, a tendency in large organizations toward navel-gazing. Even for those who have made tremendous strides with their account management, a better understanding of customers' needs can only aid future endeavours.
Finally, as we have noted, the market will continue to shift. Difficult as it may be, companies must continue to identify and address the operational and organizational barriers which stand in the way of more fully adapting to those shifts. Given the amount of resources necessary to bring new products to market, and allowing for the fact that effecting dramatic change within the pharmaceutical industry can often feel like steering an oil tanker, there is little need to further impede that process with internal barriers.
To sum up, taking full advantage of the potential of NCM strategies, pharma companies must evolve to a more sophisticated selling approach. Continued reliance on personal selling models may serve as a useful point of leverage in the near term, but a deliberate effort to improve customer value with a precisely targeted combination of NCM techniques will be necessary if pharma wants to achieve the revolutionary advancement that changing market conditions require.
Rick Edmunds is a senior partner. He can be reached at firstname.lastname@example.org. Rolf Fricker is a partner. He can be reached at email@example.com. Stephan Danner is a partner. He can be reached at firstname.lastname@example.org. Nelia Padilla is a principal. She can be reached email@example.com. All with Strategy& (a PricewaterhouseCoopers LLP company).