The European pharmaceutical industry – Delivering sales excellence in turbulent times

• For the first time, over 200 managers of leading pharmaceutical companies across Europe were surveyed on sales efficiency
• Companies are starting to focus on better quality over additional sales employees
• 40% of pharmaceutical managers want to increase investments in sales excellence
• Individual sales and marketing strategies are being developed for different target groups
• New sales models are being tested

The sales models of the European pharmaceutical industry are under pressure. Regulatory changes, new purchasing behaviors, declining prices and weak product pipelines call for new approaches. The traditional model of hiring more sales people to increase volume is no longer viable. Instead, pharmaceutical companies are hoping to raise sales force effectiveness by focusing more on specific customers, individual targeting, employee training and better call quality. These are the results of a pan-European study by Roland Berger Strategy Consultants on "The European pharmaceutical industry – Delivering sales excellence in turbulent times". For the first time, over 200 managers of leading pharmaceutical firms across Europe were surveyed.

"The secret of future success for European pharmaceutical companies is a rigorous focus on sales effectiveness," says Stephan Danner, Partner in the Pharmaceutical & Healthcare Competence Center at Roland Berger Strategy Consultants. The goal is to reach the right customers, at optimum intervals, with the right message and the right promotional mix.

The survey of 200 managers at the leading pharmaceutical firms across Europe was conducted at Europe's largest conference on pharmaceutical sales in March. The focus is shifting away from the "size sells" strategy. Over the past five years, the number of pharmaceutical reps in Europe grew by 60% from 60,000 to about 100,000. However, companies now want to downsize their sales teams. Of those surveyed, 31% expect that they will dramatically reduce their sales headcount over the next two years. A further 60% believe that the number of jobs will remain constant, and only 9% expect to hire new sales employees. This is a clear departure from the previous strategy: almost half of the companies (44%) had been expanding their sales headcount over the past two years.

European pharmaceutical companies are beginning to shift their focus toward investing more heavily in sales quality. According to the study, nearly 40% of pharmaceutical managers plan to increase their investments in sales excellence over the next two years. One third of large companies in Europe intend to allocate over EUR 5 million to sales excellence, 26% between 1 and 5 million, and the rest less than EUR 1 million. Mid-sized pharmaceutical firms have lower budgets overall – 28% of them invest less than EUR 1 million in sales excellence; 22% allocate between 1 and 5 million and only 6% over EUR 5 million.

Payer influence on the rise

Danner explains: "Companies can create competitive advantages by individually tailoring their sales and marketing strategies to the various stakeholders, including general practitioners, specialists and, increasingly, payers." The study indicated that the pharmaceutical industry's attention is especially directed toward payers (e.g. health insurance companies) and medical specialists: 34% of those surveyed expect to see an increase in the significance of payers over the next two years. Until now, only 14% saw them as important. Groups of specialist doctors remain the most influential group at 32% (previously 33%). Opinion leaders, such as internationally renowned professors at university clinics, are becoming more important (from 10 to 18%). The influence of general practitioners remains unchanged, although, relatively speaking, it would seem that they have lost some ground.

Sales and marketing have to work together better

The study showed that the really weak points lie in the relationship between sales and marketing. 20% of the study participants experienced considerable problems in this area over the past two years. Tailored customer targeting did not always produce the expected results. Major IT projects and the introduction of KPIs often could not be brought to a satisfactory conclusion.

"Commitment on the part of management is very important for increasing sales effectiveness, especially on European level. Nowadays, the pharmaceutical industry is not purely a national issue," said Danner. If the sales force is to work effectively, management must stand behind their sales goals. Whether sales effectiveness is controlled centrally or decentrally is not as important, since the majority of initiatives to raise sales force effectiveness will be applied across all of Europe anyway. It is more important to incorporate operational management early on, which holds true for both large and mid-sized companies. This is borne out by the results of the study, which found that in 26% of cases where goals were not reached, the problem lay with operational management. The support of national management is especially important for large pharmaceutical firms, whereas support for small to mid-sized companies needs to come more from the European or group levels.

To ensure that excellent sales achievements last, they must be developed in a sustainable way. According to Danner, "Pharmaceutical firms can concentrate on easy to implement tools such as tailored customer targeting over the next one to two years. However, at the same time they should be looking to build up long-term effective structures. Examples might include training for reps and sales managers, to improve call quality."

The majority expect to design new sales models

This change in direction means developing new sales models. Danner explains that "new consumer structures and changed relationships, regulatory changes and increasing margin pressure are forcing the pharmaceutical industry to rethink its current sales models." For this reason it is essential for the European pharmaceutical companies to consider the changing healthcare systems in each country and respond to those changes. 60% of those surveyed expect to pilot innovative models, while 24% want to wait for developments first. Only 8% believe that there will be no major changes.

The new sales models are going in two basic directions. In one direction, companies would clearly separate competencies into two groups: "elite reps", whose target group will be primarily specialists, and "low profile reps" who focus on general practitioners. To develop skills, companies will invest heavily in elite reps, while other customer groups will be targeted by more cost-effective communication media, such as the Internet. In the second direction, companies will use regional business reps as the only contact for all target groups. Their success will be measured by territory results including ROI. Further action points for better sales performance are: leveraging progressive sales and marketing concepts from other industries (e.g. life cycle management) and embedding firm structures for fostering relationships with important customers (key account management).

To achieve excellent sales performance in individual European countries, successful pharmaceutical firms combine central, cross-border strategies with operational strategies at local level. Specifically, this means that management determines goals and standards for sales improvement for all of Europe, which will be implemented locally. These country-specific programs can help regional managers achieve measurable success in their territories.