Business Planning: Assessing Brand & Territory Performance

Business Planning is a chance to step back from our day to day tasks, to review the external environment and internal opportunities and set expectations, requirements and strategy for commercial success. Setting and defending your 2011 brand forecast assumptions however can be time consuming and frustrating. Marrying your intuitive insight with a defendable position, sometimes based on less than perfect data, can lead to unnecessary challenges and less than ideal outcomes on 2011 resources and targets.

While accessing reliable data is part of the issue, for many brands a systematic approach to the initial performance analysis can create a significantly more efficient and better outcome, allowing sales and marketing teams to focus on resource and action planning rather than multiple iterations of assumptions and portfolio plans. This article is the first in a series that will look at key business planning processes and how managers and sales and marketing teams can utilise best practice principles to ensure effective and competitive outcomes for their brands.

Be inclusive

When reviewing data sources for business planning you must include both input (resource) and output (performance) metrics. While brand sales vs. a benchmark, such as prior year sales, market growth and/ or potential are common to most performance analyses, sales vs. resource allocation provides insight to the effectiveness of current strategy and execution. Many teams miss this step and subsequently fail to identify critical issues and opportunities for future brand growth. It is like a doctor telling you that you are developing heart disease but not going to the trouble of finding out whether it is can be managed with diet and exercise.

Look for variance

Reviewing current brand performance has two objectives: identifying growth drivers and key growth issues. The way to achieve this is to approach the analysis as a search for variance.

Variance is where a metric is performing measurably better or worse than a benchmark and gives us the opportunity to ask why this has happened and what is driving it, effectively identifying and subsequently quantifying causes of change? There are many ways of doing this but generally the best processes review KPIs longitudinally to ensure that both positive and negative trends are taken into equal account. Similarly resources that fail to impact KPI trends over time need to be questioned.

Don’t be scared to ask more of the data

If you are measuring variance on incident data, such as current month performance, or even last 3 months, you run the risk of the most common mistake made in business planning: accepting poor metrics. When you set up or review your KPIs consider how compound measures can better help you understand brand and territory performance.

EI (evolution index) as a measure of a brand’s market share growth is not, on its own, necessarily very helpful in understanding whether or not a territory or account is performing at a high or low level. If you look at how it has changed over time and apply an additional benchmark, such as national EI performance, you suddenly have a KPI that gives you a more useful diagnostic of relative performance.

An easy test of whether or not a KPI is really going to help is to ask the following question: “How is this helping me to understand what actions we need to take to be successful?”

The final key to good performance assessment is to not dwell on factors that have not been measured or cannot be quantified. Teams that become fixated on non controllable or non quantifiable factors quickly lose focus and allow subjectivity to dictate strategy and planning.

Conclusion

Business planning is an opportunity for stepping back, identifying and quantifying brand and sales team performance drivers. Organisations and managers that include input and output metrics in their preparation can better utilise performance variance to identify and prioritise causes of change, ensuring sales and marketing teams can focus on strategy and action planning.

Introducing a Customer Centric Selling Approach for Multiple Brands

Many companies find it extremely difficult to aggregate the target audiences and call strategies when promoting multiple brands within and across sales teams.

As a consequence of this challenge, we often see a “Lead Brand” determining the Target Audience and first brand detail, with other promoted brands falling into line behind the lead brand and presented in a specific detailing order during every sales call.

While this makes it easy for the company to administer, the relevance of the second and third brands message may be lost to the Customer. It also means the second and third brands may be missing a substantial segment of their Target Audience which does not overlap with the target audience for the Lead Brand.

One way to get around this is to implement a Customer Weighted Portfolio Value approach to identifying Target Customers for the company’s product portfolio as described in an earlier article.

We have also helped companies drive additional efficiency by introducing one or more of the following processes;

 Introduce Brand detail objectives rather than sales call objectives. You should be measuring how many times your Brand was detailed to a Target Customer in a high value promotional interaction rather than the number of times a is seen called on (a weak metric that prevails across the industry)

 Introduced flexible Brand detailing order within a call to encourage the Sales Representatives’ to achieve their Brand detail frequency objectives for each customer for each Brand

The Brand detail objectives and flexible brand detailing have been shown to drive call value by increasing the number of “relevant” brand details per call – where the detailed brands are “relevant” to each particular customer.

Introducing Performance Metrics to Improve Targeting and Call Quality

Many companies find it extremely difficult to implement sales force activity to target customers as defined in their Brand plans. Consequently, we often see a very high percentage of valuable sales and marketing resource opportunities delivering low value calls to target customers or worse, still high value activities delivered to low value customers.

The reasons for this can be quite varied but typically include;

• Lack of co-ordination between business objectives and sales force performance incentives & rewards programme
  

  Poorly thought out call activity metrics that are financially incentivised will always encourage “Call fodder”.
  Worse, it may also encourage inappropriate profiling (to ensure activity metrics to ‘Targets’ are also achieved)
  

• Inappropriate territory structures or resourcing to achieve the call plan (under/ over resourcing by geography)
  
• Lack of alignment between the Brand Plan, Sales Action Plan and their implementation
  
• Lack of a Sales Representative Customer level activity reporting to identify Individual Customers who need to be seen in order to achieve Brand strategy
  
• Lack of a robust monitoring process to support Sales Management take corrective action
  

 

Introducing Customer Quality & Call Quality as Performance Metrics

Recognising that improved customer segmentation and appropriate brand strategies to the most valuable segments will put tremendous pressure on sales forces’ time and planning efforts to see these Customers, organisations may wish to consider weighting call quality versus call quantity (where quality is defined by the message relevance and value of the customer this is being delivered to) and decide which behaviours they want to encourage, measure and reward based on Customer and Call value. 

We have implemented a Customer Weighted Points Value metric to replace calls per day as a KPI. For example, Customers are valued from 2– 20 points (based on their segment) and absolute calls per day are replaced by call points per day (Call Points = Customer points value X Call Quality). This takes the focus off the “6 calls per day” quantity mentality (where all calls are of equal value), and replaces this with a Customer quality X Call quality approach. This also encourages planning and execution of sales force time and effort to high value customer calls, with the only sacrifice being a shift away from calls to low value customers.

Driving Innovation and ROI

“Innovation distinguishes between a leader and a follower”, Steve Jobs Apple founder. He has built and rebuilt Apple based on an ability to deliver innovation in design, function and customer insight. In a market of intense and essentially commoditised competition Apple have continued to deliver market changing products.

Innovation is an obvious source of competitive advantage in healthcare. Whether it is new therapeutic technologies or market changing promotional strategies and activities customers notice different. It creates awareness with customers and motivation within the organisation driving effectiveness and performance.

But innovation is perceived to carry risk too. Consumer research programmes, both here in Australia and overseas have shown that customers want to be confident in their purchasing decisions. They value heritage and consistent track records and are cautious of new brands, particularly when they do not feel a strong motivation to change. Nostalgia has become a driver of brand support and awareness.

Innovation vs ROI

Invariably this leads to a debate in many companies on the ROI of resourcing innovative sales and marketing strategies. With almost 2 decades of investment and share of voice based marketing strategies, often with modest ROIs if we are honest, the current period of fiscal restraint does not naturally lend itself to risk taking. But nor should it.

Risk implies that a project is exposed to uncontrollable influences. What we are talking about is identification of innovative strategies and tactics to leverage consumer desire for novelty. But without creating undue risk in execution due to a lack of perceived need or a desire for old and comfortable.

While on the surface this sounds like we want our cake and be able to eat it too, it is no different than what Apple, or any other innovation leader does.

Risk

The first step to managing risk with innovative strategies is to identify the key failure opportunities. These typically appear in the weaknesses and threats sections of a SWOT. Once you have these identified there are a number of ways teams and managers can manage failure opportunities, from TOWS analyses to 6 Sigma. For anyone unfamiliar with these the common elements of most approaches are as follows:

1. Prioritise the risk

2. Minimise likelihood of failure in the design of your tactics

3. Ensure you monitor execution and performance and…

4. Control for execution (internal) issues

5. Respond (quickly) to external issues

Measure, Monitor & Manage

These steps can also be categorized as “Measure”, “Monitor” and “Manage” and should really be built into any performance improvement process. To paraphrase a favourite saying of President Barack Obama, failure triumphs when good managers do nothing. With any implementation you need to allow for issues, and provide resources to ensure success. With innovative strategies the challenge typically comes from the novelty of the failures, rather than the magnitude. In this respect it is not that innovation carries a higher risk, more an unfamiliar risk, which may in itself require some novel solutions. So make sure you plan for the failure.

Learning from innovation

The final step to managing risk in innovation, and maximizing performance is to be persistent in your implementation while also critical of the success or failures. This can then be used to generate better insight into your business’s capabilities, customers and competitors.

A case in point: Rodger’s adoption curve traditionally identifies only 2.5% of consumers as innovators, but 47% as early adopters or early majority. The lessons you gain from your interaction with innovators will predict your success with your most valuable customers.

The bottom line

While innovation may require greater preparation and commitment in follow up than more traditional sales and marketing strategies, it also creates awareness, motivation and leadership opportunities.

Biopharma Sales Productivity Still Down

While reductions in field force sizes and marketing budgets has become a measurable trend in the industry an analysis of Biopharma sales productivity shows that 15 out of 20 companies have not improved their productivity in the last year. Analysis of SG&A spend vs. Net Revenue has become one of the metrics used to show how much bang for their buck companies are getting and is useful in comparing sales productivity across the industry. Vedere Group recently selected 20 companies, including both mature diversified healthcare businesses, such as J&J and Specialty Pharma and Biotech companies such as UCB to see what, if any, trends can be identified.

The first observation is that there is a more than 380% variance in yields between the number 1 and number 20. At the head of the pack, Gilead continues to grow its revenues ahead of Selling, General and Administration costs, rather than increasing infrastructure and expenses in line with fast sales growth. High yields and a positive trend are not the provenance of only the mid and smaller sized specialty businesses however. BMS, after significant local and global restructuring, has turned around previous trends and is now in our Top 5 performers on an absolute and trending basis.

At the other end, companies such as Shire, Allergan and Lundbeck appear to have significant opportunities to improve their yields compared with the industry benchmarks. Of these Lundbeck has already sought to drive a higher yield, while Allergan and Shire, in growth and new product investment phases are down and flat on a trend basis.

The second observation is the number of large primary care and diversified businesses that have flat yield trends. This approach to managing expenses vs. revenue has different implications depending on predicted revenue growth. For companies that are lower in the ranking and are not anticipating significant new product launches it may imply that future plans will include cost leveraging. Similarly, for companies at the upper end of the table, and have an upwards trend, we may see an increase in spend and infrastructure growth or acquisition over the next period.

So what else can be speculated based on this analysis? Specialty Pharma and Biotech are not protected from the challenge of managing selling costs, nor is Big Pharma excluded from higher yields. While Gilead’s industry leading yield of 8.55 is substantially ahead of numbers 2 (CSL) and 3 (Roche, including Genentech) companies number 4 & 5 are BMS and Sanofi Aventis.

Which brings us to a final comparator that may be worth thinking about: While not included in this Biopharma table how would this look if you include Generics companies? Teva, on the same basis as our 20 Biopharmas, scores a 4.01, bumping Sanofi Aventis out of the Top 5.

What does this mean for Australian managers? Firstly, pressure on sales and marketing operations, to reduce the sales force size and costs will continue. Secondly, greater focus on how marketing and other non sales force resources are being applied, not just as a cost cutting function, but from a productivity and efficiency perspective as well. Key activities such Segmenting customers and ensuring resources are only directed to the most productive and profitable target customers will need to move to a within year/ cycle based process. Validated, ground up territory size and deployment analyses will become another required variable in strategic and business planning processes.

How this plays out across companies will be interesting.

20 Drug Companies Ranked by Sales and Marketing Efficiency*
Rank	Company	2009 Yield	Trend
1	Gilead	8.55	Up
2	CSL	5.20	Down
3	Roche1	5.08	Up
4	BMS	4.77	Up
5	Sanofi Aventis	4.00	Flat
6	Amgen	3.76	Flat
7	Abbott	3.66	Flat
8	Pfizer	3.36	Flat
9	Bayer	3.26	Flat
10	MSD1	3.23	Down
11	Lilly	3.17	Flat
12	J&J	3.13	Up
13	UCB	3.12	Up
14	Novartis	3.09	Flat
15	GSK	2.96	Down
16	AstraZeneca	2.89	Flat
17	Novo Nordisk	2.81	Flat
18	Lundbeck	2.73	Flat
19	Allergan	2.43	Down
20	Shire	2.24	Up

¹Due to mergers and acquisitions Genentech & Schering-Plough, have not been possible to include as separate operating divisions and are therefore included in Roche and MSD analyses.

This analysis was conducted using companies’ annual financial reports of revenue and expenses. While Vedere Group have taken all care to accurately reflect the performance of included companies no responsibility can be taken for any mistakes that are the result of errors or omissions in official company reports.

Companies included in this article: Abbott, Allergan, Amgen, AstraZeneca, Bayer, Baxter, BMS, CSL, Genentech, Gilead, GSK, J&J, Lilly, Lundbeck, MSD, Novartis, Novo Nordisk, Sanofi Aventis, Schering-Plough, Shire, Teva and UCB

Introducing Customer Weighted Portfolio Value (CWPV) and how it can help you better define your Target Customers

Does your company take a ‘Lead Brand’ approach to selling? That is, does a specific brand preferentially occupy detail position 1 for a period of time with a particular sales team?

If the answer is yes, you are probably wasting 50% of your promotional effort…….Let me explain.

A Sales team will typically have responsibility for promoting a number of Brands —often in multiple therapeutic areas. Customers are often defined as “Targets” based on a ‘Lead Brand’, so individuals who are strongly relevant for the other Brands but not the Lead Brand fall out of the Target Audience. Additionally, while the Lead Brand dictates the Target audience, the sales team are asked to promote a second (and often third) Brand to this “Target” audience on all sales calls.

From our analysis of this common practice the company is often surprised to find that while they are achieving 2+ brand details per call, only ~50% of the total details are actually ‘relevant’ to the customer – i.e. ½ of all brand details were to non-targets for the brand detailed.

The triple whammy of this approach is;

• Up to 50% of brand promotional effort is irrelevant to customers – even when the effort is focused to ‘target’ customers
  
• Customers may be turned off the brand message of the relevant product due to the irrelevance second & third brand messages
  
• Some customer with a high overall value to the company (across a range of brands) are excluded from the target audience due to the ‘lead brand’ approach to targeting and are not adequately promoted to for any brands (lost revenue opportunity)
  

Lead Brands may also change from Cycle to Cycle, meaning Targets customers would change as well (driven by the lead brand target mentality), so consistency of promotional activity with key customers can be easily lost following the approach described above.

As previously discussed in our article about profiling & segmentation, it makes sense to profile and segment customers at the brand level rather than generalizing about a customer’s value across a range of products and therapy areas. In this way, you can tailor messages and promotional activity specifically for each relevant brand (refer to our article about differentiated brand strategies per customer segment).

But how can you best determine which Targets the sales force (and other channels) should focus promotional attention towards that will optimize the revenue opportunity for your company and ensure the highest degree of promotional relevance to your customers?

We advocate a Customer Centric approach which effectively dollarizes Customer value based on the aggregation of a Customer’s value for each of your Brands as follows;

• Determine a process that allocates a “points value” for each customer for each of your major Brands – based on their segment for that Brand
  
• Factor the points value to allow for each Brand’s strategic importance, product life cycle, customer segment responsiveness and return on promotional investment (ROI)
  
• Aggregate the individual points values for each Brand (weighted or factored) to determine a Customer Weighted Portfolio Value (CWPV) for each Customer (their overall value to your company)
• Use this methodology to drive sales force and marketing activity towards the “Most Valuable” Customers for the Team/ Company, while being able to define what constitutes each customer’s value at the Brand level and drive brand strategies accordingly

The benefits of this approach are as follows;

• Consistency in Target audience over time
• Ability to reweight brand importance or introduce new brands into the mix while still maintaining a standard process of defining Target audience
• Understanding of customers value to the company and the brand(s)
• Ability to drive a customer centric selling approach which improves the relevance of brands promoted to each individual customer (versus brand centric selling)

A Customer Weighted Portfolio Value approach to valuing customers has other downstream benefits as well, which include the ability to more easily balance territory resourcing requirements across a portfolio and restructure territories if required.

Differentiated Brand Strategies by Customer Segment

We have seen that the level and mix of resource to well defined Customer Segments will drive vastly different Revenue and ROI.

The worst thing a marketer can do (from my perspective) is to invest time and money in the process of profiling and segmenting their customer base and then not apply a well thought out differentiated Brand strategy to those customer segments.

Brand strategy is often limited to call frequency objectives per segment (e.g. A’ customers require 12 details per annum; B’s require 10 and C’s require 8 …etc) and little other brand differentiation.

Effective marketers consider and implement differentiated Brand strategies for their defined segments which include;

• Brand message (verbal communication strategy)
• Sampling strategies
• Frequency of promotional activity
• Value added service strategies
• Channel strategies

The most effective marketers also go beyond Sales Representatives to include all sales and marketing channels as part of their Brand Plan.

Complimentary strategies and/ or supplementary strategies can be leveraged through other channels.

• Supplementary – utilisation of other channels instead of using the sales force (e.g. Where Sales Representative access is an issue or for low value segments with whom sales force activity is too expensive).
• Complimentary – through direct mail and other channels to increase the effectiveness of sales force activity and create opportunities for additional sales force promotional exchanges with key customers (e.g. Pre-call and post call direct marketing/ e-marketing).

If this level of Brand planning is not evident in your organization, it may be due to the lack of differentiation in the customer profiling and segmentation process.

Profiling & Segmentation – what’s the difference?

We often find confusion among marketers and sales managers around the terminology of a “profile” versus a “segment”. The reason for this appears to be that Customers have been “profiled” on a single profile element and then these have been grouped and communicated as segments. Point in case; Doctors are often profiled based on their potential to prescribe drugs within a therapy area. ‘A’ customers are defined as having the highest potential, B’s as moderate potential and C’s as average potential. The sales force is then asked to allocate their customers into a segment bucket. In this way, the profile is seen as the segment.

The alternate option would be to ask the sales team to capture number of prescriptions written in a defined time period and these results would then be used to define segments at a head office level. Based on the individual results and distribution of these, customers will be grouped into segments that are equitable at the highest level.

Some organizations start with the premise that they are basing their segments on multiple profile elements (which we commend), but they then ask their sales team to capture the segment rather than the individual profile elements that make up the segment. (e.g. “A” customers have one or more of the following attributes…..). In this situation, the underlying rationale for how a sales person came up with the segment they placed a customer in cannot be defined, nor is the organization able to redefine segments or analyze detailed data about their customers because the base data was not captured. Our experience has been that organizations who take this approach have difficulty in recalling the profile elements they used to define their segments less than a year after implementing the segmentation exercise and the quality of resultant customer segments deteriorates very quickly with time, leaving them with a costly and frustrating exercise of having to repeat the process at regular intervals (unfortunately, often repeating the poor process they previously employed!).

Based on these types of segmentation approaches, it is also very difficult for organizations to identify meaningful results from any strategic analysis of these segments. The types of analysis we are referring to would include resource allocation modeling, scenario planning and response curve analysis. Their results typically show little variation across segments due to the coarseness and heterogeneity of the segments used. This in turn often leads to the wrong business conclusions being made (i.e. there is no difference in the sales responsiveness of customers to promotional activity or Customers in the A segment don’t seem to be any different to the C segment customers).

By intelligently capturing additional relevant profile elements about your customers and then building segments based on these aggregated profiles, we have seen a 10 fold difference in sales response between customers with the same level of promotional activity who were all previously defined as “A targets”.

By capturing each customer’s individual profile values (Profiling) and then grouping customers into homogeneous groups (Segmentation) based on these values, the understanding of profiling versus the resultant segments becomes clearer.

2X2 Customer Segmentation Model

By incorporating 2 profile elements and capturing the value of customers on these two dimensions, each customer can be placed into a discrete segment. In the example above, scores of 1-5 are typically used to define ‘value’ for each profile element, with 1-3 being grouped as HIGH.

A customer who scores 1-3 for the Brand Value and 1-3 for Market Value will fall into the Green segment. They have high brand value and high market value.

A customer who scores 4-5 for the Brand Value but 1-3 for the Market value will fall into the Yellow segment. They have low brand value but high potential. Traditionally, both groups would have been defined as A’s (because of their Market Value), yet they are quite different (as defined by their use of your Brand) and need to be marketed to differently.

This provides sales and marketing with opportunities to differentiate strategy and resources to these new segments. Importantly, a greater understanding and ability to measure cause and effect on sales also allows the organization to measure ROI moving forward.