CRM and keeping up with your customers Pharmafocus June 2006
All major pharmaceutical companies use customer relationship management systems but few are capturing the whole picture of their target customers, says John Hosken.
Customer relationship management systems are now universally used by major pharmaceutical companies, in fact many have several.
Evolving from their beginnings in the 1980s as electronic systems which tracked the calls of sales reps on doctors, CRM is now becoming a crucial tool in identifying and understanding customers - as well as measuring sales performance.
But a customer relationship management system can only be as good as the information it is given and experience in the field shows systems are not always fed data of sufficient quality or quantity to optimise their use.
The implementation of CRM over the past few years has focused on technical aspects, such as which hardware and databases to use. This was complicated by a process of evolution from laptops to PDAs to smart phones or tablet PCs.
Once those were in place, attention switched to encouraging reps to put data into the CRM, again using mainly technical fixes, such as more user-friendly hardware and software. The third part of the puzzle, adding in information from commercial databases, followed on later. The challenge is now in maintaining the CRM data, which observers say is where the main failing is at the current time.
Following NHS movements
Call reports are input more effectively than in the past, but there is another practical problem. Basic address details are expected to be somehow automatically updated, but this doesn't always happen, because the database details of doctors, hospitals or departments are not always kept up to date.
Principal consultant at the Sture Consultancy Roger Sture says some of the problems come from companies not working on validating their data against other sources and that GP and other lists soon become out of date.
"There has to be a mind et change towards collecting and recording pertinent customer information - i.e. a change in attitude and importance - and companies should monitor and perhaps incentivise them to improve their customer information data recording."
In an NHS undergoing tremendous upheaval, these basic details count more than ever before. New surgeries are popping up at new addresses, hospital doctors are on the move, and a whole new breed of prescribers in the form of nurses and pharmacists is emerging.
Companies lack the resources to keep track of all the personnel and organisational changes that have made the NHS vastly different from the way it was 10 or even five years ago.
Emiliano Gummati, marketing and solutions director of Dendrite, thinks it's the typical address book effect.
"Normally every one of us keeps adding info to our address books, often duplicating entries, or not updating phone numbers of friends we haven't seen for a while. This makes it more difficult to retrieve the proper phone number for the person were looking for. We might have several, but which is the right one?"
Additionally, if information about customers is not kept up to date throughout the whole database and over time, managers and head office personnel suffer even more.
To understand why, we need to consider the most common analysis done by every manager in pharma: coverage. In coverage analysis, managers compare the number of target customers versus those that actually visited. From this, a number of other considerations follow.
Many pharma companies have realised that accurate databases are crucial and are subscribing to customer databases managed by specialist companies.
This means companies don't need to rely on sales-force derived updating, which is often flawed by lack of accessibility.
Apart from tracking changes of individuals in the system, the industry also wants to keep up to date with new health service bodies, hierarchies and networks.
According to Jason Bryant, sales director of Binleys, many clients wish to implement the new world as soon as possible, but such new organisations often evolve slowly and unpredictably. Pharma companies that understand this process well can adopt a more realistic strategy and tend to get the most out of the process.
New structures and new prescribers
Good practice in CRM management also includes regular reviews of the current population in the system against the latest healthcare landscape - making sure clients are not left behind when new types of organisation emerge, such as the new prescribing groups of pharmacists and nurses.
So where do these new groups feature in pharmas CRM strategy?
According to Emiliano Gummati of Dendrite: "When you have a new customer group, you need to identify the needs of this group, what are their wins and their objectives in order to relate with them properly."
The more information you have on them and the further back it goes, the easier your job will be.
Most of pharma has now added the new prescribers to their database feeds, although it is early days for assigning targets for activity or sales against these evolving groups.
In managing long-term conditions, these groups will become increasingly important in influencing prescribing within the lucrative repeat prescription market.
Jason Bryant of Binleys adds: "When you consider the government's agenda to keep patients out of the consulting room and the 12,000-plus sales representatives chasing the business, it's fairly obvious that new prescribers will become ever more targeted by pharma. Our clients have certainly been incredibly keen to monitor the roll-out of these groups and their bite in prescribing terms so far."
So, as if keeping track of existing prescribers is hard enough, let alone catching up with new ones, CRM managers are also being asked to track influencers. The status of a key opinion leader is easy enough to recognise, but quite hard to define.
So what success has pharma had in tracking influencers of prescribing decisions? Influence mapping, as it is known, will become a key competitive advantage, but it is hard to accomplish.
Sales director at Cegedim UK, Chris Mitchell says pharma faces major challenges in determining exactly who they will need to influence in order to get their products prescribed.
"The certainties of older models, such as seeing everyone in a territorial coverage and frequency model, building relationships with PCO prescribing advisors, or generating spill- over from hospitals, are all undermined by the free market model introduced by Practice-based Commissioning - there are no rules."
Although companies are undertaking influence mapping, the process is very much in its infancy, so putting a hard ROI on influences is problematic.
There are reasons to be optimistic, though, and StayinFront's Nigel Huxtable believes CRM systems remain a must-have for pharma if customer relationships are to be managed.
"The CRM system can significantly advance a pharmaceutical company's market penetration into new and existing accounts, and will also ensure consistent and accurate reporting for various regulatory and compliance concerns," he explained.
Room for improvement
Prescribers and influencers are the main targets for CRM, but do companies, and their CRM strategies, suffer from any other information gaps?
Emiliano Gummati of Dendrite subscribes to this view: "In pharma, if I have to point out a gap, I would say that there are lots of data sources, but still there is the need to be able to integrate marketing and sales information in one single view."
Chris Mitchell of Cegedim agrees that pharma still isn't capturing the whole picture: "All too often the composite information required to accurately profile and understand accounts is scattered between multiple departments and systems. Bringing all this data together is not as simple as looking for the cliched and simplistic 360 degree view of the customer.
"The classic CRM model used by Amazon in which a complete history of past transactions is used to build up a picture of a clients needs simply does not translate to pharma, which is why so many deployments of the mainstream CRM applications have struggled to provide benefit."
Measuring CRM's ROI
But even if gaps in information exist, there will always be a need for calculating return on investment. So what price is put on having the right customer information, and how does pharma calculate ROI when filling its databases? The short answer is that there is no one simple method.
Measures include improved efficiency in placing the right calls, better call planning, reducing waste from calling the wrong doctors, more accurate segmentation and targeting, enabling a rep to learn a new territory, and reducing time to market at product launch. A price can be put on each of these to calculate the ROI of a universal customer database.
The most compelling story, says Emiliano Gummati, is provided by research that says that "42% of the differences in commercial performance between pharma companies are explained by five sales and marketing capabilities. The key is excellent customer information management, which means that having an outstanding customer database can improve the commercial performance of a pharma company by some fraction of a percentage point, or some millions of dollars."
There are a number of other models in use around client procurement departments. These range from comparisons between outsourced customer database management compared to doing it in-house, by comparing a service cost against the costs of full-time equivalent staff, to models built up from assumptions about wastage in marketing materials and lost calling opportunities caused by inaccurate databases.
StayinFront managing director Nigel Huxtable says these can be classified into three types of metrics for calculating ROI on CRM systems: hard returns, soft returns and intangibles.
"The best means of evaluating hard returns is by looking at the bottom line - increased sales. Soft returns support the hard returns, such as increased call count and market share, as well as the overall gains made through an efficient CRM system that supports the needs of the business and improves targeting.
"Intangibles include advancing a pharmaceutical company's ability to respond to the needs of the market. It gives the pharma company valuable information today that can be used to support better decisions now and in the future."
Some companies measure the cost of representative calling when calculating ROI and Total Cost of Ownership. This is quite an easy model to adopt because the user can quickly understand the cost impact of turning up at the wrong surgery or planning a territory meeting on inaccurate universe counts and so on.
Jason Bryant thinks this is often caused by a misuse of CRM: "In my experience, most clients view the CRM tool as the proverbial Ferrari without petrol, where a CRM is deployed minus a sound customer data management strategy.
"The old saying garbage in = garbage out also stills holds true when you consider that CRM places the customer at the centre of the universe, so how can CRM be expected to deliver any advantages to the organisation when the core customer information is missing, inaccurate or incomplete?"
It seems that most CRM selections are still made in isolation, with the customer information coming second in priority. This may be due to the relative costs involved, or it may indicate that not enough intellectual value is placed on the information itself as opposed to the CRM application.