Metrics: Flawed Measurements, Better Options
Most pharmaceutical company teams use some sort of tracking and management for sales activity and marketing ROI. But despite much measurement, effectiveness problems remain.
By on Jun 2, 2009Most pharmaceutical company teams use some sort of tracking and management for sales activity and marketing ROI. But despite much measurement, effectiveness problems remain.
Could this be due to the fact that the currently used metrics are inappropriate and insufficient, and often counterproductive?
In this article we examine the common metrics used for sales effectiveness and ROI, and show how better alternatives can promote the right behaviors and improve business.
Sales Force Effectiveness
The industry is increasingly aware that the current model of sales rep attrition is not working optimally. The main reasons seem quite clear:
Increases in targeting technologies in the United States have allowed reps to call upon those physicians with strong market volume potential. But everyone has the same targeting data, meaning inundation of reps.
Access to physicians is decreasing. Where previously physicians may have welcomed new data and discussion with sales reps, now fewer than 40% of physicians feel the pharmaceutical industry is trustworthy. Physicians actively provide barriers to sales reps.
The number of follow up actions required or requested as a result of each sales call and promotional activity translates into 10,000 follow up actions per working day and many companies do not have the resources to capitalize on all the leads they create.
Sales force size and share of voice are really not key metrics to examine when attempting to improve sales force efficiency. How about another common metric, sales calls per day? One of the lures of the frequency of calls metric is the ease in use. Unfortunately there are just as many problems with this sort of metric:
By focusing on sales call quantity, reps are encouraged to make as many calls a day as they can to meet their targets. The focus becomes accessibility of physicians rather than their value as a target.
Focusing on sales call quantity necessarily means less focus on sales call quality.
By focusing on sales call numbers, the company implies the only sales tool worth considering is the sales call. When it comes down to actual sales, this is often not the primary method of success.
Sales call frequency measures encourage sales reps to focus on the calls at the expense of all else. This includes those activities that may assist the sales rep in the performance of their job.
Metrics focused on sales call frequency ignore potential problems with marketing plans. Sales call frequency numbers focus on a uniform strategy that doesnt allow for customized marketing.
Absent from many existing measures of sales force effectiveness is a consideration of the impact that the marketing message actually has on the customer. Logging sales calls is a fine method to ensure the sales reps are active. But is that all a company wants? Sales call metrics do not answer questions such as:
Has the physician actually understood the benefits offered to his or her patients by prescribing the particular product on offer?
Is what is being offered relevant to the physicians practice?
Does the product being offered answer a need or satisfy a goal of the physician?
Is there a benefit to the physicians practice or patients by prescribing the pharmaceutical brand?
How much impact on brand prescribing is the sales force actually having compared with other marketing activities?
Current metrics are more focused on efficiencies rather than effectiveness. A better tool to measure financial impact is an imperative for this very significant budget allocation. Lets examine this distinction in more detail:
Sales efficiencies includes things such as procedures, calls per day, minutes per call, cost per detail, cost per minutes and so on.
Sales effectiveness is focused on productivity, looking at the impact of behaviors on prescribing, impact of each interaction, content requirements of interactions for improved financial return, and so on.
The direction from here is clear: companies need to refocus on effectiveness. Better metrics can lead directly to better performance and productivity. By focusing on effectiveness rather than efficiency, reps are encouraged to target their efforts more, leading to more appropriate messaging and more relevant marketing. Physicians are much more likely to respond with prescriptions when the message is tailored to their needs, their practice, and their patients.
To truly optimize a sales force and ensure high productivity and sales, better metrics must be incorporated. To get support for this shift, objective evidence-based analytics are needed so that the company understands the need for change. This evidence needs to be collected regularly to ensure approaches are adapted for the changing environment as well.
There are tools that are accurate in assisting sales managers do this task with a high degree of confidence. Eularis (www.eularis.com) has developed just such a tool the Sales Force 94.8 Analytics Tool. This metrics system helps companies know how much their sales force are contributing to their brand growth and overall company growth, as well as identifying territories with the highest business potential. It also helps analyze what messages and what rep behaviors have positive financial impact, and how these behaviors and messages should be time-allocated in a sales call. This tool collects vast quantities of data from physicians and then validates this data against prescribing to uncover real rather than perceived influencers. Then powerful analytics are applied that help sales managers identify what is needed and how to change for maximum sales growth.
This type of analytics is critical to ensuring sales force efforts actually increase sales and market share, and demonstrating sales force return on investment. An optimized sales force will drive company productivity. Reps will be pushed to succeed by knowing the areas in which they excel and need work. Theyll have support with appropriate goals and physician targets. Theyll contribute directly to company sales by increasing product use. And theyll justify their own existence, with metrics that show sales management and upper echelon management their significant return on investment.
Marketing Effectiveness
Marketing measurement and metrics are progressing. Despite the progress, however, the gap in using relevant marketing measurements and analytics is still high. This gap must be closed if companies are going to effectively bring the discipline of financial performance analysis into marketing.
There are a number of methods pharmaceutical companies use to demonstrate accountability. These range from basic activity tracking to really analyzing and optimizing cross country and brand portfolios. All of these have their place. But not all of them neatly or accurately tie into guiding what strategic marketing decisions must be made moving forward for real bottom line return now or in the near future. ROI is a term or a concept used in multiple ways across and within companies. It does not always mean ROI in the traditional Return on Investment formula approaches. Regardless, given the dynamic nature of our market environment, ROI formulas are not well suited for making decisions on marketing mix allocation moving forward.
Due to the inherent predictive limitations of the traditional ROI formula models, many pharmaceutical companies have been using ROI models such as econometric models, promotional response models and other such resource allocation tools that utilize historical data. In the simplest terms, these models measure past relationships between variables (usually marketing activity spend and sales or market share) and then attempt to forecast how changes in some variables will affect the future course of others. Typically 3-5 historical points in time are chosen on which to conduct the analysis. Econometric models were embraced initially by the finance sector many years ago.
But the problem is this. Without taking the changing market dynamics into account by using solely econometric models based on historic relationships between input and output, real predictions cannot be made. These models, relying on historical data, are particularly inadequate today given the dynamic nature of the pharmaceutical industry marketplace. Historical performance is not going to be able to prove the return on a marketing program for the future as it may not pay off in the same way, as the environment in which it is operating is dynamic.
The bottom line is that, without access to current validated customer-based data, analyzed hand-in-hand with models using predictive algorithms, it remains impossible for company executives to effect change with any real degree of certainty that their efforts will produce the right results. The past does not equal the future; this maxim must be kept in mind when evaluating different ROI models, especially in a todays unstable pharma environment.
If one wants to really demonstrate strong bottom line growth, there is a need to examine and incorporate all the relevant components possible in a marketing return measurement model -including such constructs as the market environment, customer attitudes, brand and competitor sales and marketing activities, brand sales/market share & econometric models. The Eularis 94.8 system collects current up-to-date data, validates this against all brands in the category and prescribing behavior so the underlying real influencers can be identified, then analyses this in predictive algorithms that include market share data and brand spend data. This provides a prediction that has the highest degree of mathematical certainty possible. The accuracy is largely due to taking both validated current customer market data and hard financial data into account.
The Eularis 94.8 Analytics system is simply summarized.
Phase 1 - Understand key issues for brand team
Phase 2 - Data Collection To Reflect Current Reality and Not Historical Data
Phase 3 - Validate Data Against Prescribing To Uncover Real Influencers
Phase 4 - Apply Predictive Algorithm Analytics and Dynamic Modeling
Phase 5 - Develop Implications and Report findings
Forward thinking pharmaceutical companies now use this unique diagnostic management tool, proven to provide real and actionable data on the strengths and weaknesses of brand activities and the implications for their market share. This analysis, in a format executives can understand and trust, is then done twice a year to ensure plans are on track and further refine the approach. Year-to-year consistency, in terms of which indicators are examined, is important to refine and improve the marketing return. This kind of ongoing modeling can be seen as developing an expert system. Results are compared with predictions and the parameters adapted progressively for maximum impact. It can identify discontinuous change more quickly (as unexplained variance) and marketers can systematize marketing performance assessment to
Conclusions
Typical pharmaceutical metrics for sales force effectiveness and marketing ROI are deeply flawed. With a sophisticated analytics system like Eularis at your disposal, you can move past the limitations of traditional metrics and build business.
Author:
Dr. Andree K. Bates
Eularis
www.eularis.com