CRM The "Ecosystem" Difference

Successful pharmaceutical sales and marketing organizations operate much like healthy ecosystems: each interdependent group fills a critical need for the company's growth and survival. (See "Sales and Marketing Ecosystem," ) Yet many pharma com-panies can barely sustain past growth performance, let alone attain a higher level. If the trend continues unchecked, several pharma companies could falter.

To survive-and prosper-in today's environment, most companies believe they need to make just one key adjustment to their sales and marketing eco-system: Implement any form of customer relationship management (CRM) software-typically, a sales force auto-mation (SFA) system. Yet, an ASI Business Solutions survey of 20 large and mid-sized pharma companies revealed that only a few using such systems actually enhanced their sales and marketing performance. In fact, most of the CRM implementations only magnified a company's inability to effectively operate as a single unified business by distracting managers from their real responsibilities-marketing and selling the products that assure their companies' financial success.

Sales and marketing ecosystem

That result is disappointing in view of the significant time and money companies devote to CRM projects. The survey revealed that most respondents took 12–18 months to implement systems and invested between $20 and $90 million in start-up costs and between $10 and $40 million for annual upkeep.

This article describes the difficulties most pharma companies experience with CRM installations, explains why it is critical to use those systems effectively, and suggests 11 practices companies can follow to build a healthy CRM system that will help increase sales.

Forces for Change

It's clear that the industry's fast-growth, high-revenue days of the 1990s are over. Most companies have lowered their revenue and profit projections, because they expect to earn less from blockbuster products, and there are fewer potential blockbusters in the pipeline than there were during the last decade. To make matters worse, at the regulatory level, the new-drug approval process has generally slowed.

A more fundamental reason for lower revenue and profit projections is price pressure from federal regulators, key members of the US Congress, and managed care organizations, which have succeeded in lowering drug prices for their members and are pushing to bring low-priced generics to the market faster. Generics already account for nearly 50 percent of all prescriptions written in the United States, the largest prescription drug market in the world.

And companies' efforts to squeeze more sales from existing products are running into regulatory hurdles. FDA is reviewing more direct-to-consumer advertising and lobbying efforts and issuing more citations for sampling and physician incentive programs.

Although blockbusters were the revenue saviors of the past, contributing an average of $2 billion annually each, expectations for future products could be as low as $500 million.

Complex Ecosystem

In view of the complexity of companies' sales and marketing divisions and their resistance to change, alterations in the business environment pose a major challenge. Of the companies surveyed, not one views its promotional operation as a single, unified entity. On the organizational level, business units serving discrete market sectors such as primary care, specialties, and managed care operate on an autonomous basis.

On a functional level, senior executives, sales management, marketing, market research, product managers, and field sales reps tend to work independently and have limited ability to exchange ideas and information.

Because of that culture of separation, most of the companies surveyed were unable to solve the basic problem of creating a consolidated body of information that the various and highly mobile users in the sales and marketing operation could easily access and share. Instead, information is maintained in separate silos, which provide no access to managers outside one business unit or functional area. Further, those silos tend to favor the primary care business, to the exclusion of institutional, specialty, and managed care units. In the absence of a holistic view, many companies have become bogged down in elementary issues, such as trying to capture reliable data or reporting sales electronically or on paper, and thereby wasting time, money, and human resources.

The separation of business units, managers, and information severely limits a company's ability to effectively market products. Because each unit operates in a vacuum with partial information, no one in the company benefits from a consistent method for measuring the business, let alone looks at it in a way that factors in all of the marketplace relationships and interdependencies. Thus, for example, most pharma companies consider it virtually impossible to maximize a managed-care contract by generating a pull-through list of prescribers.

Improvement Scorecard

Although all of the large and mid-sized companies surveyed sought to use some form of SFA or CRM system to improve their performance, they were at different stages. Some had recently completed installations, some were implementing new systems, and others were replacing systems provided by suppliers who had gone out of business. But only three of the companies seemed to derive benefits commensurate with their investments.

Those winners were using technology to make information available to their entire sales and marketing team and to measure the effectiveness of their sales programs more quickly than their competitors. That information included details about prescribers and healthcare plans as well as targeted business analyses and measurement of the teams' sales success. It also allowed team members to identify and exploit business opportunities rapidly, manage their different sales regions as empowered entrepreneurs, and enjoy overall sales growth.

One mid-sized company with a blockbuster product used its CRM system to manage co-promotional efforts at an inter-company level- with a sales and marketing partner-allowing the two companies to exchange data on detailing and sampling efforts and to make their multi-company sales team more effective. As a result, managers were able to measure performance, to deliver updated target lists to individual sales reps, and to redirect sales efforts based on newly identified opportunities.

By contrast-even though the executives surveyed found it hard to admit-failure, delay, and waste prevailed among almost all of the remaining companies. (See "Cost and Time Savings.") Ten companies suffered delays of 9–12 months in implementing their CRM systems, and their expectations for increases in revenue suffered a setback. The main reasons cited were unrealistic expectations set by their vendors, poor information quality, vendors' lack of industry knowledge, and the implementation teams' lack of CRM experience.

Cost and time savings

Among the companies that succeeded in implementing CRM systems, a few were forced to revert to paper solutions during the transition period. And, according to the latest feedback, two major companies still deliver standard sales reports to their field sales force in the form of paper printouts provided by an outside supplier.

Most of the implemented systems had limited capabilities. The majority of the companies reported that their systems failed to satisfy basic requirements, such as capturing data about detail visits and sampling programs, consistent with the data-collection role of SFA. That level is below true CRM, which aims to provide improved customer targeting and decision support that increases sales and marketing effectiveness based on the company's long-term strategy.

All of the respondents used, or intended to use, their CRM systems to meet the needs of only the primary-care sales force, which represents the largest group of users in most pharma companies. They paid little or no attention to the other sales forces, including those serving institutional, specialty, and managed care, which are critical in maximizing sales. Only one company used its system to monitor all of its business units' sales efforts, allowing for better coordination and performance.

Impediments to Progress

Admittedly, selecting a CRM system is a complex, emotion-charged process that commits entire companies to major investments of time and money and affects the careers of numerous senior executives. The survey made clear that most companies sought a certain comfort zone and defaulted to what they believed to be a safe commitment. Rather than selecting the strategic advantages of true CRM, they selected the more limited capabilities of SFA's data collection. (See "Sales Force Automation vs.True CRM,")

In its details, the survey results clarify the reasons for those choices and why the implementations failed. Based on their knowledge and preferences, most companies were predisposed to prefer the more limited SFA. For one thing, many of the managers displayed conservative attitudes and an unwillingness to adopt innovative solutions. They also exhibited a clearer understanding of SFA than of CRM, a fact that placed SFA in their comfort zone and limited their expectations of what a full CRM system could contribute to their companies.

Sales Force Automation Versus True CRM

The software solutions that the surveyed companies typically selected were application-based rather than organization-specific. Application-based software requires a company to change business practices to match the software, rather than adapting the software to meet organizational requirements. As a result, the companies were forced to change their sales and marketing processes to work within the limits of the software or face costly and lengthy implementations. Furthermore, any changes to tailor the software to match organizational needs led to a system that was excessively costly to maintain or upgrade.

In a few cases, however, companies attempted to use the CRM systems to automate their existing processes, even when those processes were part of an overly complex, flawed structure. In that pursuit, the systems failed. They would have had a better chance of success if those implementing the system had tried to simplify and correct internal processes before attempting to automate them.

In some cases, the companies turned over operational responsibility to the vendors, then felt they had lost control of their own destiny and were being held hostage for large fees. Their response was to bring the project in-house, even though they did not have the requisite skills to do so.

Still another problem had to do with the difficult role of information technology. In most cases, the IT group was asked to select technology that was both flexible and capable of satisfying the unique and complex requirements of the business units. In most cases, IT was unable to find an appropriate solution, and the business units became disillusioned. Thus, the business units and IT found themselves pitted against one another rather than working together toward a common goal. In all of the companies surveyed, that tension was immediately apparent and was one of the reasons the companies selected SFA rather than CRM solutions.

Eleven steps to success

Critical Success Strategies

How, then, can companies gain the benefits of true CRM systems? Survey results and experience identify the following critical factors that increase the chances of achieving an optimum implementation of CRM systems and thereby contribute to healthy sales and marketing ecoystems: (See "Eleven Steps to Success.")

1. Define terms. For all participants in a CRM program to understand the need for the project and the expected outcome, it is essential to define certain terms, such as "customer." Is it a prescriber, an institution, a managed care organization, or all of the above? Without a common understanding, business, IT, and finance units cannot discuss CRM or understand why they need it, what they get by using it, and what the real cost is beyond the demo and high-level theory.

2. Get executive commitment. It takes strong commitment from executives at the the most senior levels-CEOs, CFOs, and CIOs-to ensure that the various groups work cooperatively.

3. Integrate business units. Business users within the ecosystem-senior executives, market researchers, product managers, managed care, sales managers, and field sales reps-must exchange business ideas and information. To maximize sales potential at the organizational level, companies must integrate primary care, managed care, specialty, and institutional sales to work as a single, unified group.

4. Create an IT/business partnership. The information technology unit must work closely with the integrated business units to ensure that they employ CRM in the most cost-effective way. True cooperation requires full and open communication between all parties involved.

5. Identify business processes. Managers must understand and optimize their business processes to ensure that the system will serve the company's strategic goals effectively. When necessary, they should consider reengineering those processes to make them more effective. The rationale, "This is how we have always done it," doesn't hold up with innovative technology solutions.

6. Ensure information quality. CRM forces the integration of disparate data sources and, without the right kind of information, adoption and use of the system is doomed to failure. The task of integrating masses of data and distributing them to disparate mobile users is highly complex and should not be underestimated. Vendors with large-scale experience in this area should be at the top of any company's selection list.

7. Adopt a plan and budget for it. An entire CRM system cannot be put in place in 90 days, but it shouldn't take 18 months, either. Companies should plan to deliver business benefits every three to four months. From a budgeting perspective, managers should demand fixed prices. The most cost-effective systems are often superior to systems that cost a great deal more in time and money. An excellent CRM system should cost no more than $11,500 per member of the sales and marketing organization for implementation and $3,500 per user per year for ongoing support.

8. Own the project. Companies should never hand off ownership of a CRM system to surrogates. Each company is ultimately responsible for its own success. By using selective outsourcing and managing vendors effectively, companies can leverage skills that are unavailable in-house without losing control.

9. Find vendors with industry expertise. It is important to look for vendors with industry expertise and proven execution capability across all of the company's business units. That will lead to shorter and less costly implementation cycles, because experienced vendors can quickly deliver solutions that yield immediate business value.

10. Use trusted strategic vendors. CRM project leaders should beware of vendors proclaiming a need for an army of consultants and/or a truckload of software. Industry expertise, ability to execute, customer service, vision, and ethics are the important factors in selecting vendors.

11. Select the right technology. Given the pharma industry's dynamic environment, it is critical that managers understand how much effort is required to implement and maintain a CRM system. They should consider best-of-breed solutions for the maximum competitive advantage, because no single vendor can provide the best components in every class: customer profiling, call reporting, sample management, sales reporting, analytics, targeting, and customer segmentation.

Take the Plunge

Implementing a true CRM system is daunting. Nonetheless, pharma companies must be prepared to embrace the challenge and break the status quo of re-implementing just the SFA portion that is so pervasive in the industry. To control their own destiny, companies need to avoid chasing the next great technical tool without a well-thought-out plan.

CRM systems will be even more necessary in the future. The winds of change are already blowing, with even more dramatic changes yet to come: single digit growth resulting from price pressures and the generic invasion, more mergers, reduction in the number of sales reps, and a switch to sales consultants rather than sales reps. Pharma companies need definitive strategies to solve serious operational inefficiencies and overcome organizational silos that they can no longer camouflage with revenue from blockbuster drugs. Merging won't solve the problem, either. A healthy pharma sales and marketing ecosystem is no longer an option. It's a business imperative.