SFE in the emerging markets of Asia-Pacific: big growth, big opportunities

IMS Health, which annually studies market performance, confirms there is a shift in growth from mature markets to emerging ones.

By Editor on May 22, 2007

IMS Health, which annually studies market performance, confirms there is a shift in growth from mature markets to emerging ones. According to the group, sales grew only 8.3% in North America to $290.1 billion and increased just 4.4% in Europe to $123.2 billion in 2006. Asia, Australia and Africa, however, saw growth of 10.5% to $66 billion in 2006, up from $46.4 billion in 2005.

Over the next five years, the market in China has the potential to grow at 15-18 %, and to become the seventh largest market worldwide by 2010, Ray Hill, IMS Health's global consulting general manager predicts.

India, the region's second largest market, logged growth of 17.5% to $7.3 billion in 2006, making it one of the fastest growing markets in the world, the group says.

Strong market gains also are being seen in Hong Kong and Singapore and Frost & Sullivan reports tremendous growth potential in Southeast Asian nations, including Indonesia, Thailand and Malaysia.

Regionalized SFE

Despite the impressive growth figures, however, Asia-Pacific markets are not without their challenges.

Market experts agree that success in the region will rely on transferring effective approaches developed in core markets, but adapting them to the diverse needs of local areas within the region, which are all at varying stages of evolution.

To sustain growth, pharma companies need to stay ahead of the dynamics that are rebalancing the marketplace worldwide, says Murray Aitken, IMS Health's senior vice president for corporate strategy. It will require a sharper focus on R&D and portfolio strategies, a demonstration of the value of medications among key stakeholders and the realization of productivity gains from sales, marketing and launch investments, he says.

Pharmaceutical executives surveyed by eyeforpharma say healthcare cost containment, competition from generics and increases in codes and regulations are among the biggest challenges for companies operating in Asia-Pacific. And the biggest gains, they agree, will come from developing strong pipelines and increasing the efficiency of their sales forces.

What they disagree on is whether sales force size will grow, but that may be due to regional differences. Fifty-one percent of survey participants say sales force size will increase at least 5%. Some (14%) say sales force size will hold steady, while 35% believe it will actually decrease by at least 5%.

Talent search

Despite their differing views on sales force sizing, survey participants overwhelmingly agree that finding, developing and retaining top talent are the greatest challenges facing companies in the in Asia-Pacific. Targeting and segmentation, overcoming the silos between sales and marketing, the lack of customer data and implementing customer relationship management systems and change management processes also are key challenges in the region, participants say.

One sales director for a top-five pharma in the region says talent management is a big issue across all markets in Asia-Pacific. Finding, recruiting and developing sales managers and directors that understand the business model is changing and that they need to embrace coaching and performance management is a key challenge, he admits.

The executive director of a top-ten pharma in Hong Kong agrees that getting the right people is significant hurdle. Many candidates have spotty qualifications and limited experience, says a business strategy director for a top-five pharma in China.

Particularly in locales where the size of the sales force is expanding rapidly, he says, there is a huge training load. And the sales director of a top-five pharma in the region says part of the struggle lies in overcoming cultural norms that have not embraced coaching and training in the past.

In China, in particular, there is a dearth of talent at every level of the business, IMS says. And with sales force attrition at 30% annually, the group stresses, it is very difficult to develop and execute a long term strategy.

Hill recommends that the talent pool, especially in China, be expanded beyond urban areas to include rural environs. He also suggests that companies must invest in competitive salaries, training and increased benefits that will inspire loyalty among employees.

The arms race is already starting in the region, the executive director of the top-ten pharma says, and the market is becoming saturated. Although there are more reps, he warns, productivity isn'st good. This disconnect, he says, prompts the need to consider alternative selling models.

Targeting and segmentation

Bain and Co. suggests that by taking a systematic, data-driven and disciplined approach to reinventing sales processes, top organizations are better able to respond to new market environments like those in Asia-Pacific. But IMS says reliable market measures are only just beginning to appear in the region.

The geographic and economic diversity of countries like China, however, makes national level market research time-consuming and expensive, Hill says. IMS recommends that until more reliable market data is available, companies will have to rely on experts on the ground, who understand the country, government and systems to answer critical questions on investment and resource allocation.

Despite the difficulties in securing data, Hill says that to ensure continued growth, companies must focus their efforts on transforming their approaches to customer segmentation, determination of call rates and the development of promotional messages.

Because of the large disparity between China's 650 cities in terms of development and behavior patterns, IMS suggests there is a need to build city and region-based strategies.

It is important to view the country as a collection of cities, broken down into three distinct tiers, rather than an individual market, the group says. Historically, pharmaceutical companies have focused on the big tier 1 cities, such as Beijing, Shanghai and Guangzhou.

IMS predicts, however, that future growth will occur in the tier 2 (mid-size) and tier 3 (small) cities. By 2008, the group says, 86% of the Chinese hospital market will be outside the larger cities.

Experts say improving customer base segmentation and daily call rates, as well as developing more targeted promotional messages and targeting new channels and alliances will also be important.

We are used to segmenting customers around relationships, rather than around high economic needs, admits the sales director for a top-five pharma in the region. Cultural norms have caused us to put a stronger emphasis on the relationship than on the product. We must differentiate brand messages instead.

Conclusion

The Asian-Pacific market is a growing and dynamic one that multinational pharmaceutical companies cannot afford to either ignore or mishandle. Cultural nuances and a fast-changing market landscape create many challenges for companies operating in the region.

Sales force effectiveness is and will remain a key issue as companies expand into geographically and economically diverse regions facing major transitions in healthcare delivery and accessibility. The ability to forecast and react to rapid change will be critical to success in the region.

The evolution and streamlining of healthcare delivery in the region, IMS cautions, will have profound implications on the current engagement and selling model for pharma companies. Changing stakeholders and incentives will make some of the conventional thinking and existing practices obsolete, the group warns.
Successful companies in the region will recognize the need for a unique balancing act between tradition and innovation in their approaches to SFE.

To learn more about SFE in the region, please make plans to attend eyeforpharma's Sales Force Effectiveness Asia-Pacific conference 11-12th September in Singapore. For more information or to register, please visit www.eyeforpharma.com/SFEAPAC .