Current issues
Marketing pharmaceuticals is like playing battleships
'The valuable targets are out there, but identifying and targeting them is more luck than judgement'
Customer Relationship Management (CRM) is becoming increasingly topical in the pharmaceutical press. Many computer systems are available which offer access to this new ideal, but can a computer system alone really deliver?
PA Consulting Group has just completed a survey of sales, marketing and commercial directors among some of the UK's largest pharmaceutical companies (including SmithKline Beecham, Merk Sharpe and Dohme and Roche) which begins to suggest an answer.
The first of PA's findings was that the industry is aware of its shortcomings, but lacks direction in addressing them. The question in most people's minds seemed to be "If I had £1 Million, would I spend it on ten new sales reps, or a CRM system?". This article sets out to look at the issues, and consider improvements.
"We are lucky if a sales rep gets four or five five-minute visits a day", commented one sales director.
Whilst a sales force is not a highly efficient mechanism, it remains the best method of selling that is available to the industry. CRM cannot replace the sales force, but can ensure that it is used to best effect.
Fig 1 illustrates the benefits of building longer, stronger relationships with customers. Happy customers increase profit through referrals to colleagues, reduced operating costs (costs of sales) and increased purchases.
When put into the context that it costs on average five times more to generate a new customer than it does to retain one, this provides a compelling argument.
- From a customer perspective, people want to buy products from a company which they know and trust, and which they feel is able to provide them with the best solution for their specific needs.
- Industry wants to work with customers who are efficient and profitable, whom they know well, and whom they can retain as advocates for their services.
The pharmaceutical industry is aware of this. When asked if they concentrated on the 'quality' or 'quantity' of relationships, 100% said that they were moving toward trying to establish 'quality' relationships. However, when asked to score themselves out of ten for their ability to do this, no-one gave themselves a score of more than six.
Figure 1
One of the most effective ways of building quality relationships is to segment customers according to their preferences, approaching each segment accordingly. This allows for a much more personal approach, and for the company to target its marketing activities where they may be most effective. Seventy per cent of the companies surveyed claimed to be segmenting their customer base, but reported that - whilst the information was often in house - it was hard to come by. "We don't know what we know", said one respondent.
Instead, segmenting is done on an ad-hoc basis. None of the companies scored themselves higher than seven out of ten for this activity, with some scoring as low as three. All respondents said that they could do better.
We asked the companies what the major barriers are that prevent them from segmenting and targeting their customers effectively. The three top answers were lack of customer information, cultural inertia and dysfunctional IT systems. Here we examine each of these issues.
The information required to segment and target customers effectively exists but is not available.
Currently, there are numerous data collection opportunities, with respondents citing drug information, sales reps, customer services and drug safety as examples. Whilst all these data collection opportunities exist, none of the companies that we interviewed had a system in place to share the information. One respondent accurately summed up the situation as:
"Information = Data + Systems + Processes"
Information collected by sales representatives is rarely shared with their employer and, according to the respondents, they rarely have incentives to do this. The information often resides in the representatives' heads, or in paper files in their cars.
One respondent, a medium-sized company, expressed concern that good quality representatives were increasingly difficult to recruit, as they were being attracted to larger companies. With this situation becoming increasingly common, the only way to a level playing field, and for smaller companies to remain competitive, is to bring the information in-house.
PA believes that by putting the right systems in place, and giving representatives the incentive to share information, they can become effective more quickly, thereby retaining a higher percentage of customers.
Many of the IT systems currently used are not able to share, analyse and extrapolate the information coming into the company every day. ETMS systems' inability to communicate with drug information, drug safety and customer service systems means that the sales force can never be made aware when a customer contacts the company.
Without this information, or the ability to collect it, segmenting and targeting the best customers becomes a game of battleships. Inability to target the best customers means that companies have to play the numbers game, relying on the laws of averages and high call rates to ensure that the best customers are 'hit'.
With the increasingly competitive atmosphere out there, to quote one respondent: "The companies who can change will survive".
In the light of our survey, the answer to this question is 'not enough'. Despite the fact that all the companies PA questioned recognised that CRM is business-critical, only one company was taking any steps to address this issue.
Although all the companies interviewed undertake market research - either directly, through focus groups, or other means - none regularly 'mine' their data for new insights and ideas. All companies said they try to 'churn' their least profitable customers. However, when we probed deeper, they admitted that they were unable to accurately identify who these were.
On a scale of one to ten, the majority of companies interviewed scored themselves six or less on their existing ability to build strong customer relationships.
A portfolio review
To begin with, a look at the portfolio is necessary. Whilst some individual products may not respond directly to CRM, if the overall customer experience is improved, opportunities for new products may develop.
An efficient information flow
It is then necessary to identify where the potential customer interactions take place, how the data will be processed, and who needs access to the information. One of the more common ways to address the customer is through a single front office. Diagrammatically, the whole system might look something like this.
It is worth noting here, the relatively low number of individual customers when compared to, for example, FMCGs (fast moving consumer goods). PA estimates that less than 80,000 individual customers or customer groups need accommodating. Compare this to some of the larger telecommunications companies, who are running CRM programmes for millions of companies, and the task ahead comes into perspective.
A GP calls the Drug Information department of a company to enquire about a product that is soon to be launched. The local representative is automatically notified of the call, and sees on his system that the Medical Department is currently looking for GPs to take part in a post-marketing study of the drug. The system also tells him that his territorial predecessor was instrumental in this GP becoming the local PCG-lead for this disease area. With this information, the representative provides the GP with the relevant papers, and arranges for the GP to take part in the clinical trial. The GP is so impressed with the product, and the intelligence of the company's communication systems, that he recommends its use on the PCG formulary.
This simple yet realistic scenario shows how knowledge of a customer's interests can enable a sales representative, and add significant value to the product and the company that supplies it.
PA's survey revealed a general acknowledgement of the need to implement CRM, yet only one company was (very slowly) developing a CRM strategy. It suggests two possible reasons for this reluctance.
There is a perception that a CRM system could cost millions of pounds. However, with only 35,000 GPs, and less than 80,000 customers, the capacity of system is relatively small.
The efficiencies gained could lead to reductions in the size of the permanent, often massive sales forces within pharmaceutical companies. This requires a bold move on behalf of sales directors, whose empires would shrink as a result. Whether or not they have the courage to change this well-established sales practice in favour of a more cost-effective solution remains to be seen.
However, it is clear from the survey that an effective CRM strategy will address information, systems and cultural issues. Everyone knows it must happen, but it will take a great leap of faith. As someone once said, "Knowledge is power".
Implementing a holistic approach to CRM gives the industry the tools it needs to obtain knowledge, increase profitability and gain the power to win against the opposition.
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