Sales Force Effectiveness – A Path to Success
Article by Evangelos Mantzafos – Business Development Manager – MaBiCo
The Growing Importance of Sales Force Effectiveness
For many years, Sales Force Effectiveness (SFE) has been an important subject of discussion among many pharmaceutical companies. That is because the largest costs for big pharma have to do not only with research and development for new therapies but mainly with sales and marketing. Undoubtedly between these two categories of costs sales & marketing exceeds R&D. For instance, according to research from GlobalData it is clearly demonstrated that the ten biggest pharmaceutical companies spend almost 50% more for sales and marketing than they do for R&D. Therefore it is no surprise that “Sales Force Effectiveness” is an important issue for pharma companies.
Sales force effectiveness is probably the most important driver of revenues because it defines the relationships of every company with its clients (i.e. the health care professionals). Due to the growing importance of sales force effectiveness, many pharmaceutical companies appoint a manager specialized in SFE. His most important role is to monitor and benchmark the activities of the sales force so that every call to physicians becomes more impactful and therefore more profitable.
“Sales force effectiveness is probably the most important driver of revenues for every company because it defines its relationships with its clients”
Defining Sales Force Effectiveness
But how do we define “Sales Force Effectiveness”? It’s true that many sales leaders struggle to define SFE. For MaBiCo “Sales Force Effectiveness” is above all a set of activities that a company performs in order to improve the competencies and the productivity of its sales team.
The next question is what drives sales force effectiveness? Undoubtedly there is no simple answer. As a matter of fact sales force effectiveness is a set of initiatives that every company has to take in order to become successful. The most important factors that define whether a sales force will be effective are the following:
- Market Segmentation
- Value Proposition
- Sales Force Size
- Recruiting Methods
- Territory Design
- Frequency of Calls (i.e. visits) to HCPs
- Goal Setting & Performance Management
Certainly this is not an exhaustive list of all the SFE drivers. For instance we have recorded thirty different drivers that define sales force effectiveness but these ten are the most impactful. As a rule of thumb every SFE manager must focus on activities that advance customer interaction and increase customer coverage. These activities should also improve the performance of the sales team and enable sales reps to become more efficient. In order to understand better sales force effectiveness and its drivers we will review in brief some of the aforementioned factors.
“Sales force effectiveness is a set of initiatives that every company has to take in order to be successful”
Important Drivers of Sales Force Effectiveness – A Brief Review
Market Segmentation: Certainly no sales team can be effective if it visits the wrong set of health care professionals. For that reason big pharmaceutical companies keep very detailed records of HCPs which they update on a regular basis. Therefore it is no surprise that some companies specialize in providing this information as a service to their customers. It is way more efficient to target certain customer segments than to target all of them at once.
Value Proposition: What makes your product different than others is an important factor that drives success. For example if a company’s product is similar to other competitive products but significantly lower in terms of cost, then it should be communicated to HCPs. Therefore sales and marketing departments have to find a value proposition that will help sales reps address to their clients more effectively.
Sales Force Size: The size of a sales force impacts both coverage and frequency. When deciding about the number of reps, sales leaders should keep in mind that a suboptimal team size can lead to disappointing results. Consequently the whole organization might be discouraged from selling a promising product. On the other hand a too large sales force will lead to headcount decrease in the future. As a result sales force morale will drop significantly.
Recruiting: No sales force effectiveness method will work unless the sales team is staffed by the right people. Therefore every company has to make sure that there are clear processes in place so that it hires the right people and recruits top sales talent.
Territory Design: If you want to build an effective sales force then you should design territories very carefully. Particularly territories should be divided among reps in such a way as to avoid large differences in territory potential. Otherwise sales reps covering the lowest potential territories will feel that they are treated unfairly by the company.
Incentive Schemes: Incentives programs have to be designed in such a way as to create excitement among sales people and keep them committed to the company’s targets. Hence sales force effectiveness depends on the attractiveness of the motivation plan and on the level that it reflects business priorities.
Goal Setting: Another driver of sales force effectiveness is goal setting. If the targets are set too high then the sales force morale will be too low. On the other hand if targets are low then the sales team will not be excited and will become complacent. Generally speaking sales leaders must forecast sales correctly in order to set the right goals for their teams. However this is sometimes hard especially when talking about new products.
Undoubtedly there are several approaches and statistical methods to help SFE managers assess some of the aforementioned drivers. For example in order to decide the optimal size of their sales force most sales leaders use five common approaches. However in MaBiCo we suggest four additional statistical models with higher reliability than those commonly used. The point is that no matter what method a company decides to use for each sales force effectiveness driver, it should produce consistent results in order to make the sales team more productive and efficient.
The Future of Sales Force Effectiveness
During this decade many pharmaceutical companies have made serious efforts to transform their traditional sales reps to “orchestrator reps”. To clarify, an “orchestrator” is a sales rep that combines traditional and multichannel sales approaches in order to increase his impact. Due to the fact that the need for information has increased overtime, it is essential that pharmaceutical companies deliver a more tailor-made message to the doctors. Nevertheless this is not an easy step to take because the pharmaceutical industry is much regulated. Despite that some companies have already managed to combine most modern tools in one sales rep.
Research has shown that if a physician receives an email from an external company (i.e. other than the licensee) the chances that he opens it are 8.5%. However if the same physician receives the same email from the company that holds the product itself, then the open rate increases at 14.8%. Similarly if the physician receives the email from the med-rep that visits him then the open rate reaches 29.5%. Moreover the chances that a physician will visit the website of a product after a sales call reach 20%. In other words multi-channel marketing efforts improve significantly if these actions are performed by the sales team itself. Therefore multi-channel tools can play a significant role in improving sales force effectiveness.
“An orchestrator is a sales rep that combines traditional and multichannel sales approaches in order to increase his impact”
To sum up many major pharmaceutical companies are currently experimenting with different approaches in order to improve their sales force effectiveness (SFE). Until recently most SFE drivers were falling into the broad categories of physician interaction, HCP coverage as well as sales force performance and enablers. So far investments in multi-channel marketing that improve the productivity of the sales reps seem to yield positive results. Although it’s going to prove challenging for pharma companies to implement such tools seamlessly across their sales teams, it will definitely impact their bottom line results positively and will be worth the investment. In short the companies that will win the sales game, are those that will manage to maximize the impact of their sales calls.
The New Science of Sales Force Productivity – Dianne Ledingham, Mark Kovac and Heidi Locke Simon – https://hbr.org/2006/09/the-new-science-of-sales-force-productivity
Sales Force Effectiveness: A Framework for Researchers and Practitioners – Andris A. Zoltners, Prabhakant Sinha and Sally E. Lorimer –https://www.researchgate.net/publication/247887231_Sales_Force_Effectiveness_A_Framework_for_Researchers_and_Practitioners
A Human Performance Improvement Approach to Sales Effectiveness – Michael Leimbach – https://www.wilsonlearning.com/wlw/research-paper/s/hpi-sales-effectiveness
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5 Simple Ways to Dramatically Improve Your Sales Effectiveness – Deb Calvert – https://www.wiley.com/network/professionals/career-advice/5-simple-ways-to-dramatically-improve-your-sales-effectiveness
Big pharmaceutical companies are spending far more on marketing than research – Ana Swanson –https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/?noredirect=on&utm_term=.d09578b5db69
Pharmaceutical industry gets high on fat profits – Richard Anderson –https://www.bbc.com/news/business-28212223