My colleague John Sadlow posted a provocative opinion piece in the Financial Times/Ignites (registration required) last week in which he advocates for asset managers to take an integrated, multichannel approach to financial advisor communication. He pushes for this change in response to the increasing restrictions on advisor access, the shift to low-cost products (due, in part, to more aware, empowered end investors), and the advent of new and more granular data in the industry.
Those trends, while new in asset management, are quite familiar in another industry: pharmaceuticals. As those who have worked in the pharmaceutical industry will tell you, sales reps’ access to physicians has been on the decline for years. At the same time, consumers (patients) are playing an ever-increasing role in their own care, and are shifting product recommendations as a result. And the visibility that companies have into the prescribing process—while already comparably rich—has continued to grow and diversify.
With that in mind, I thought that I would reach out to one of my colleagues in ZS’s pharmaceutical practice to gain some insight into how that industry has adapted, in the hopes of providing some foresight and guidance to asset managers and wealth managers. I posed a few questions to Pratap Khedkar, managing director of ZS’s global pharmaceutical practice, and I think that his insights and guidance translate well into the financial services industry.
Q: Can you summarize the biggest macro-level trends in the last three to five years that have changed how pharmaceutical companies interact with physicians?
A: The biggest trend has undoubtedly been the decline in the sales reps’ ability to meet their customer (the physician) to the extent that they would like. In 2008, 80% of physicians could be seen by reps easily. In 2015, that number dropped below 50%, so when half of your customers push back on seeing your reps, you have to come up with other promotional channels that can be useful, instead.
There are many reasons underlying this trend: Physicians are less independent now, with two-thirds of them being employees and affiliates of corporate provider companies and hospitals that lay down policies that restrict reps. Younger physicians are much more comfortable with digital and non-face-to-face interactions. And teaching hospitals (where all doctors graduate from) have been hostile to pharma reps for several years now, establishing this habit in doctors.
The related trend that this gave rise to was the heavy use of digital and non-personal means—a trend that has accelerated as physicians increasingly turn to these means of acquiring information about pharma products. But not every physician likes every channel: Some are OK with pharma emails, but others prefer to pull information from websites when they want, while others prefer to hear from their peers, so most of these exposures are turned away without engagement, which is a waste of resources and of effectiveness.
With multiple channels proliferating, there is now a danger of excess: A high-value physician may be targeted by an interaction by the industry once every hour. Moreover, the multiple channels being used by the industry are poorly coordinated amongst themselves, so the left hand doesn’t know what the right hand is doing, leading to a poor customer experience. And this experience is having a measurable impact on sales. For cancer drugs, the impact could be as high as 7.5% of gross sales.
Q: You mentioned diminished physician access as a big driver. How have pharmaceutical companies adapted to those restrictions? Are they still marketing to physicians?
A: Sales reps still remain the most used single channel—the industry spends about $13 billion a year on the 65,000 reps it has in the U.S.—but the companies have started to use every other channel at their disposal. They use emails, websites, inside sales, mobile alerts, peer-to-peer meetings, even direct mail.
As I described earlier, this has led to an excess, where an individual company may have 180 “touches” to a single customer, while there are 2,700 touches by the whole industry on that same customer in a year. Customer disengagement and poor experience is the result. More and more channels also give the customer control. I can choose to not read an email, I can choose to not go to the website, so the reach and frequency of contacts is no longer up to the company. It’s up to the customer.
The other challenge in marketing is the content, the message. If a rep isn’t involved, the content better be tailored to what the customer wants to hear about. Otherwise, it’s difficult to adjust on the fly as a real human rep would do. In addition, the regulations in this industry are quite strict, so every piece of content, every message, has to have been approved by the FDA. It’s not possible to be too flexible with what you can say.
Q: What sorts of capabilities did pharmaceutical companies need to build in order to execute on that new approach?
A: There are five key capabilities that companies have to pay attention to:
1. Design the experience that you want your customer to have. Your customer is going to have an experience anyway, and he’s having a bad one now. The company needs to think about different customer segments and determine what the end result should look like. An important strategic element here is the “portfolio” versus the “product”: Which products are relevant for this customer, and how do they fit together?
2. Match the channel and the offer to the customer’s preference. Companies now have the data to predict this preference using analytics, and they can build it into their process, so each customer gets personalized marketing.
3. Integrate sales and marketing planning. Without an integrated plan, the customer will never get a coherent, coordinated experience. This planning has to be at both a budgetary and an HQ level, and also at a monthly cadence. And the plan is for each individual customer, or at least for micro-segments. This plan needs to take into account the synergies between tactics.
4. Orchestrate your customer experience using training for the reps, and the right tools on both the sales and marketing operations side. If the rep knows how the customer interacted with the other channels, and vice versa, the customer feels part of an ongoing conversation as opposed to engaging in disconnected transactions.
5. Change your metrics. It‘s not enough to focus on the company’s metrics (activity and sales performance). You have to relate the customer’s metrics to these and see how engagement relates to performance. The customer’s engagement and experience become the leading indicators for the company.
Q: I think that the investment industry in the U.S. is going through a similar change, driven by regulation and changing advisor and investor preferences, among other factors. Is there any advice that you would give to a company looking to compete in this new, multichannel, “consumerized” environment?
A: The investment industry has some regulatory constraints, too, and the consumer interactions generate a lot of data. I would think that many of the ideas from the list above would apply here—with some appropriate adaptations, of course. Knowing what your customer’s affinity is based on data and analytics; having an integrated, multichannel plan at a very granular level; and having the right customer metrics with proven predictive impact on sales—these would be the ones that I would look at first.
While many in the investment industry are struggling to contend with the changing competitive environment, it’s apparent that others have gone through similar changes in the recent past. The way forward, of course, needs to be industry-specific, but we can see many elements of the solution in the capabilities that our peers in the pharmaceutical industry have been building for the past several years.
And my guess is that the companies who succeed will be the ones that can actually do the detailed work of reshaping their systems, processes and people to deliver on the type of integrated experience that Pratap is describing. The value of effective execution certainly transcends industry boundaries.