Editor's note: This article appeared in the June 14, 2010, edition of Quirk's e-newsletter.
2009 was a year filled with change for the health care/pharmaceutical industry, and it's now only beginning to show signs of recovery. It's reported that 15,000 industry sales positions were eliminated in the U.S. in 2009, while estimates of pharma sales force losses in France, Germany, Spain, Italy and the U.K. range from 15-30 percent.
Due to this dramatic decline in sales reps, the trademark spray-and-pray method of barraging physicians with frequent visits from sales reps spouting the same spiel and hoping that the message connects with the right physician along the way is no longer preferred or even plausible. Instead, according to an annual study from New York research company Kantar Health, the stress on the industry as whole is compelling pharmaceutical companies to focus their resources on customer retention.
Pharma companies are attempting to strengthen their performance on key satisfaction drivers to create and maintain more brand Apostles - physicians who are both satisfied and loyal and willing to spread good word-of-mouth along to their colleagues. On the flip side, impersonal, uneducated and poorly-targeted marketing efforts and sales visits - along with a weak portfolio - can create brand Rebels - physicians who are both dissatisfied and disloyal and likely to generate negative word-of-mouth.
Kantar's study is designed to serve as a barometer for how physicians feel they're interacted with by the top 16 companies in the pharmaceutical industry by evaluating sales reps, their skills and how they influence the physician's intention to prescribe a brand (customer retention). Companies were evaluated on eight attributes: representative conduct; representative knowledge and expertise; quality and value of visit; patient management, education and support programs; physician education and information services; practice and staff support services; Web-based information services for physicians; and Web-based information services for patients, according to Mark Sales, head of global brand and stakeholder management, Kantar Health. The study is based on feedback from over 1,500 primary care physicians and 250 oncologists and highlights customer retention as the key metric in the changing pharmaceutical marketplace.
Overall, Novartis ranked No. 1 for the third consecutive year in its ability to drive customer retention by primary care physicians, although Novartis' TRI*M Index score, which monitors and measures company performance in stakeholder relations over time, dropped three points from 2009. Novartis had the strongest performance in sales representative relationship-building, achieving top TRI*M scores in four of the six surveyed countries: the U.S., Germany, Spain and Italy. Novartis has maintained these four first-place positions six years running.
"Novartis has the ability to be consistently good across all key metrics; their portfolio is broad, but they also focus where they make sure they're strong," says Sales. "They are creating an environment in which their customers are receptive to their offer."
AstraZeneca rose one point on the TRI*M Index, narrowing the gap behind Novartis in relationship-building, ranking first in the U.S. and U.K. and second in France and Italy. Oncologists in the six markets gave Roche/Genentech top marks for customer retention.
Sales representative relationship performance scores were mixed among the six countries. In the U.S., eight of the 16 companies' scores rose, causing four companies to tie for first place: AstraZeneca, Merck, Novartis and Takeda, with Takeda showing the greatest increase in retention scores, from 73 to 83. Scores from British primary care physicians increased over 2009, with AstraZeneca and Pfizer receiving top scores. Merck and Novartis received the top relationship-building ratings in Germany, although overall industry TRI*M scores declined for the third consecutive year. In France, Sanofi-Aventis held the lead position, but overall scores in the country fell. Although down slightly from last year, Novartis led in Spain with a score of 91 - the highest primary care physician TRI*M score received by any company in any country in 2010. For the third year in a row, Italian primary care physicians ranked Novartis No. 1.
Kantar also divided physicians into four different categories: Apostles (satisfied and loyal); Mercenaries (satisfied but disloyal), Hostages (dissatisfied but loyal); and Rebels (dissatisfied and disloyal). Roche/Genentech achieved the highest number of Apostles (61 percent) among oncologists across all countries.
"[Having a high number of Apostles] perpetuates a virtuous circle because, if you think about having a lot of people who are satisfied and loyal with what they get, they're probably going to be ready if you launch a new product and be early-adopters. If they find that what you're giving them is good, you're probably going to draw more people in because your Apostles are the people shouting from the rooftop trying to convert others," says Sales.
Another dimension of customer retention and loyalty is word-of-mouth, which carries significant weight in the health care industry. The number of Apostles and Rebels a company has can impact the corporate image for better or for worse. For every three Rebels a company has, it needs 10 Apostles to cancel [the Rebels' negative word-of-mouth] out, and the Apostle::Rebel ratios that Roche/Genentech achieved are extremely rare, according to Sales.
So while Novartis, Astra-Zeneca, and Roche/Genentech are succeeding in sale representative relationship-building and driving customer retention, the industry as a whole is performing only at an average level in physicians' eyes on physician education and information services. This may be a hidden opportunity as it proved to be an influential driver of customer retention. Some companies have invested in this area, but their opportunity may be to broadcast or advertise their accomplishments in this area.
In the end, pharma companies are looking for a new measure beyond sales, and customer retention seems to fit the bill. "[The industry has] always used reach-and-frequency - How many times did you see your target doctor with the right message? - and I think, as the stakeholder ecosystem becomes more and more complicated, that metric becomes less and less valid. It's all about delivering quality and changing behavior," says Sales.
The focus has shifted from armies of sales reps and sheer volume of visits to building relationships with physicians and following a service model to improve customer retention and brand recommendation, namely during the innovation gaps between blockbuster pharmaceutical rollouts when the next big thing is tied up in research and development for several years.
"Pharmaceuticals companies maybe have a four- or five-year gap in innovation before the new blockbusters come out where they've got to be smarter, and we know that shareholders are being as demanding as ever," says Sales.