The importance of CRM

CRM Roundtable with Rob Halkes of Van Spaendonck, Vivian Hunt of McKinsey & Company and CDM’s Torben Vogt.

“CRM should cover relationships with all stakeholders and specifically with their decision-making units”
-Rob Halkes

What is your definition of customer relationship management?
Rob Halkes. CRM is the company’s attempt to make the most of its relationship with buyers. It relates to the company’s value orientation on customers throughout the company with an accent on its business model. However, CRM systems in pharma are predominantly used as a sales reporting system and for the segmentation of target groups to be visited by the reps of the company. To create sustainable and profiting relationships with customers, it needs to see the individual customer in its personal context of influences from other stakeholders. If the proposition of pharma turns into a commodity, its relation with stakeholders turns into a commodity.

Torben Vogt. CRM is a way to organise your business. Embracing all aspects of the relationship between the customer and the supplier, CRM is a structured process with which a company can maximise the efficiency of all customer related activities, ultimately increasing revenues.

For pharmaceutical companies, CRM is a tool for organising a dialogue with the healthcare environment, strengthening the perception of the company among doctors, healthcare personnel and other stakeholders thus enhancing reputation and brand value. The customer oriented processes of CRM are typically supported and automated by an IT application known as the CRM system.

Vivian Hunt. We think of CRM as a collaboration between marketing, sales, customer service and IT to reevaluate and optimise how a company most effectively interact with its customers. It should be much more than a technology tool and requires a clear viewpoint on value creation. Our experience suggests that those organisations that excel at CRM share a number of characteristics. They invest in superior insights taking a segmented view of customers and have a deep understanding of the value drivers; they use CRM as the basis of focused sales and marketing activity, aligning marketing and sales resource with opportunities, and understanding which vehicles and channels should be optimised to capture those opportunities; they tailor customer service to the needs and value of segments; and they link CRM to overall business unit strategies and continually measure impact.

Why should a pharmaceutical company consider implementing a CRM system? What are the advantages?
TV. The main benefit of a CRM system is that it enables pharmaceutical companies to increase the efficiency of all customer related activities, enabling them to grow their revenues without expanding their resource spending. For example, a well updated CRM system allows the company to see if its sales efforts are working effectively by measuring both the influence on healthcare contacts as well as hard sales facts.

Implementing the right kind of CRM helps coordinate collaboration between Sales, marketing, and regulatory and customer service departments, presenting one face to the customer. This ensures that sales representatives and marketing keep the pharmaceutical company in the top of mind of doctors and other key stakeholders.

A CRM system is pivotal in maintaining the greatest asset of a pharmaceutical company – its good reputation. In the close-knit world of healthcare, the negative experience of one doctor that has an interaction with the company may ruin the hard earned reputation of the company for years to come. Having a CRM system that is used optimally will counteract this.

To sum up, CRM is extremely important for the professionalism of pharmaceutical communications and a cornerstone in maintaining the company image and brand.

VH. Successful CRM organisations view every customer interaction as an opportunity to create value: offering the right product or service to the right person at the right time. Equally important is to focus on the activities that offer the highest return on investment by taking a holistic view of the value potential of a customer, and the costs to serve them. We would argue that both should matter as much to a pharmaceutical company as to any other commercial organisation.

Typically the distribution of value from customer accounts is very wide and the 80/20 rule applies: a relatively small group of customers often account for a disproportionately large amount of value. Understanding which customers generate most value, and why, can have a significant impact on the bottom line, directly impacting the selling process in three areas. The first being coverage and contact strategy: focusing sales resource on the current customer accounts that offer the highest potential value, by virtue of their absolute size, cost to serve and propensity to work with your organisation. This isn’t just about having the right reps in place, you need to make sure you cover the touchpoints that matter most to you customers, providing the combination of channels they need. Equally importantly, helping identify higher potential new accounts.

The second is opportunity spotting and bid management: identifying opportunities to increase share with the customers that account and defending against potential competitor attack; and the third is pricing. Effectively using the pricing and discounting opportunities available to set your overall pricing strategy, optimise tactical pricing and to tailor commercial propositions to customers needs and value

RH. The effectiveness of pharmaceutical promotion to individual prescribers is quickly diminishing. Market conditions change and networks around the prescriber get more influence. CRM should cover relationships with all stakeholders and specifically with their decision-making units. This is conditional for effective promotion in advanced markets, but probably not sufficient for keeping up sustainable performance. When decision making in therapy and drug selection gets more complicated, pharma needs to follow up on that.

Advantages of a CRM system are both in coordination of relationships with stakeholders, and in the generation of relevant stakeholder information. Used adequately, CRM renders information that indicates where preferences, concerns, interests and needs of stakeholders are heading. New segmentations may be done for specific campaigns, and one could distinct new trends that could be relevant for one’s business.

What tools and solutions would you recommend to ensure a company gets maximum benefit from a CRM system?
RH. Maximum benefit will lie in sound alignment of the CRM system with the specific business approach that accommodates with specific market characteristics. If the influence of networks around the prescriber on drug selection is raised, stock taking of these networks and their decision-making units is needed. If done right, this segmentation will lead straight to a target hierarchy of DMU’s of networks with which quick wins are possible, down to those that need longer lead times. Hence, a system of focused account management will be more effective to cover relationships with these networks than just a promotion effort by reps only. The question of who in the company will do what, with whom of the targeted account, will quickly be made possible. One would also need to install real account managers that will account for the development of the network and will be the spokesperson and coordinators to the relevant people of the network for the company.

TV. Start with a business process review and improve/redesign it with industry best practices. Identify the 3-5 technical and/or economical key success factors for CRM in your company. In our experience high user adoption is probably the most important in ensuring maximum ROI on your CRM investment.

The sales and marketing tool moving ahead of all today is Microsoft Dynamics CRM. The key to its success is that it is seamlessly integrated with MS Outlook, the IT system in which sales people typically spend more than 80 percent of their IT time.

CRM should not be a data island in it self and it is thus important to get the CRM platform integrated well with other systems – and Microsoft meets this challenge with Dynamics CRM. This platform offers the lowest TCO of any solution in the market. It is the fastest growing CRM platform globally, with more partners, solutions and technical resources available than any other.

VH. CRM tools do not always have to be sophisticated, and there is real merit in considering what fits best within your existing sales and marketing culture. At one end of the spectrum are dynamic tools that automatically generate recommendations. They tend to have high compliance rates but their obvious drawback is the upfront investment cost. The lower tech solution of static handheld PDAs (the modern equivalent of handouts) can work well for reps giving them fast access and the ability to record information real time.

Regardless of the system adopted addressing the challenges associated with launching a CRM initiative is critical to overall success. For example, companies that reported successful CRM implementation in a recent study we conducted were almost twice as likely to report that implementation specifically addressed the cultural shift required to adopt the new system. Even more claimed that modules were launched at intervals to prompt adoption.

How do you see CRM developing in the future?
VH. We believe that CRM and the importance of understanding your customer may actually be becoming more critical in pharma as healthcare providers struggle to control the growth of their budgets and demonstrate they are achieving value. This puts increased pressure on pharma to ensure they understand, anticipate and meet the needs of their core customers now and into the future. Added to this is the mounting pressure to create value as the commercial model undergoes radical change in many markets.

TV. Briefly put, CRM will move back to basics. Pharmaceutical companies – in particular big pharma – have a long experience with CRM. This is often one of expensive and un-successful implementation projects, as pharmaceutical IT and sales directors have seen large systems featuring loads functionality go virtually unused by the sales sand marketing staff, due to high complexity and unclear processes. Thus we see a growing focus on quicker implementations of smaller, more user friendly and cost effective CRM solutions, which will sure help increase the success rate of CRM projects.

An emergence of new communication channels will significantly broaden the concept of CRM in the coming years. CRM systems need to coordinate these, keeping communication with healthcare contacts uniform. Examples of emerging new channels include web 2.0 and the newest communication tools like Web meetings, e-Learning, 1-to-1 videoconferencing, and e-Detailing. Only CRM systems with flexible integration points will be able to handle this.

Finally, we see a huge increase in CRM deployed as hosted or Software as a Service implementations. However, the hosted CRM systems with the greatest success will be those built on familiar and widespread technology such as .NET and that are tightly interwoven with mail programs such as Microsoft Outlook.

RH. In several countries the future is here already. We have seen developments in which variables for target group segmentation are augmented with methods of profiling. This profiling is aimed at further behavioural segmentation of prescribers – one expects that specific personal and psychological variables will further differentiate between targeted persons in terms of drug, therapy preferences and/or attitudes. This detailed segmentation will also direct the process, substance and communication style of rep calls. Advocates of this profiling hope that this will generate more effectiveness of calls. But this stays within the framework of the traditional promotion to individual prescribers and will get obsolete with the further development of a more complex structure of drug decisions.

Therefore, the pharma company needs to reconsider added value to stakeholders. On the basis of the company’s own detailed information about the drug and its administering characteristics, effectiveness, side effects, adverse reactions and the like, one is able to develop added value propositions relevant to the quality of healthcare itself. Support and information to prescribers and users of the drugs to enhance compliance, reduce feelings of uncertainty and raise experience of satisfaction with the treatment opens the way to co-create healthcare experience.

This is already being done. But the difference in using these services lies in the market approach with these propositions. Companies will need to think of specific kinds of services marketing and concepts, experience marketing, experience co-creation and the like. Differentiation between accounts will make the difference in effectiveness and efficiency. New segmentation methods and account management will show a tremendous change of how pharma companies will set up their market approaches and consequent CRM systems.

CRM innovation will go together with value innovation. When pharma companies will not do so in a coherent way of rethinking and redesigning their business model, both will be too costly and insufficient to render business results.

Rob Halkes is a consultant to the market of pharmaceutical and life sciences for 20 years. He works at strategic change, innovation and professional development with executive, marketing, sales and medical management. In the pharmaceutical industry he is currently developing value innovation as a new business model.

Torben Vogt has more than 20 years experience from the Life Science sector, with various leading positions in sales, marketing, finance, IT, logistic and planning. This includes three years for Novozymes in Brazil, managing the planning and logistics for Latin America. At CDM A/S Torben is VP of Sales and Marketing.

Vivian Hunt is a Director of McKinsey & Company, based in London. She is the head of McKinsey’s UK Pharmaceutical and Medical Products Practice and leads its Medical Technology Practice for Europe. She has a 15-year career serving a variety of healthcare clients across the full value chain.