Pharmaceutical Executive Europe - May 2008 - (Page 28)

28 Sales and Marketing May 2008 Pharmaceutical Executive Europe IC Success in Four Steps In the second of three IMS articles on precision compensation schemes, David Ziedman looks at best practice in the design of incentive compensation (IC) plans. Change driver — the market There are many different triggers being pulled in the market place prompting the need for IC planning today. The scenery is changing and pharmaco sales roles, organisational structures and key competences are changing with it. This has led to the emergence of a number of identifiable industry-wide initiatives, for example, customer relationship management (CRM); key account management (KAM); and team-based selling. These, in turn, are impacting on the design of tomorrow’s most effective IC plan. Some of these innovations, already apparent in other industries, place greater emphasis on the ‘softer side’ of sales: the strength and endurance of a relationship is now becoming at least as important, to some companies, as the volume of sales generated by a sales rep in the short term. This development alone affects the future desirable constructs of an IC plan and Figure 1 below illustrates how customer-centred/output criteria are beginning to replace — or stand alongside — the measurement of traditional activity/input based performance criteria within IC plans. The element of total remuneration driven by the achievement of these ‘soft’ objectives appears fairly consistent across European pharmacos, at around 4–8%. This is still only about half of that attributable to the attainment of ‘hard’ objectives such as sales targets. This suggests that a gulf remains between what might be theoretically desirable and the extent to which companies have adopted soft measures within their IC plans to-date. Most of the pharma companies surveyed earlier this year1 do, however, acknowledge that soft measures have a role to play in IC and that they should be looking to adopt them. Some, on the other hand, appear to have grown disillusioned with their use, finding them hard to apply or not useful in motivating sales in practice. Plainly there are challenges that have still to be overcome in this area – although typically companies did report they remained open to fresh ideas around increasing the proportion of bonus paid on achievement of ‘soft’ targets. Current plan not fit for purpose Beyond the change drivers apparent across the whole market referred to above, individual clients are reporting concerns that other flaws may be appearing in their current IC plan design. Amongst other business critical objectives, IC plans are designed to help deliver the strategy; ensure the successful launch of a vital new product, drive the right behaviours, reward high performance and retain talent. When they begin to lose their efficacy, this translates into higher costs (eg, due to higher than expected staff turnover) and/or lost sales revenues (eg, due to unforeseen vacancies in the sales force or a loss of motivation among stellar performers). A plan is typically designed to meet the objectives from a new product launch — to drive initial sales and penetration. Over time, as the product matures and as competitors or generics enter the market, companies may find that they need to re-focus away from incentivising top-line sales growth of this product to preserving their market share and staving-off competitors. The implication is that companies may therefore need to change how success is measured and what behaviours are rewarded by the plan. Figure 1: The shift to customer-centric selling will underpin IC plan.

Table of Contents for the Digital Edition of Pharmaceutical Executive Europe - May 2008

Pharmaceutical Executive Europe - May 2008
From the Editor
News and Analysis
Rising in the East
Use Your Strategic Discretion
A Blueprint for Success
Market Access and the Patient
Activating Effective Product Differentiation
What Doctors Want
IC Success in Four Steps

Pharmaceutical Executive Europe - May 2008