Healthy Skepticism Library item: 19635

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Electronic Source

Simms P
KAM: Build the skill sets
eyeforpharma.com 2011 Oct 5
http://social.eyeforpharma.com/sales/kam-build-skill-sets

Full text:

Key account management (KAM) requires high-level capabilities, both from individuals and from organisations. Phil Taylor explores whether the pharmaceutical sector is lagging behind other industries in adopting the approach

KAM involves developing deeper and more valuable relationships between a company and its customers, moving away from a simple selling relationship and becoming an active member of the healthcare delivery team, with deeper understanding of customer needs.

The pay-off is improved customer loyalty, customer-driven innovation and customer-centricity, which can in turn drive growth and profitability.

Traditional sales reps can make the step up to a KAM role, but adoption of KAM requires fundamental changes not only to individuals but also the culture and processes within an organisation.

“For companies to successfully implement KAM, it is essential to focus on the capabilities that matter most,” according to Angela Bakker Lee of sales and marketing specialist ZS Associates.

“But figuring out what matters most is easier than it sounds.”

Unfortunately, there is no ‘recipe’ to transform a sales force into a KAM organization, mainly because the competency gaps are not the same for every company implementing or even improving KAM, for numerous reasons.

“Companies may have differing ideas about how they define KAM, and the behaviors they expect from individual KAMs,” says Bakker Lee.

“The most successful companies today are taking the time to diagnose and customize what they need and to prioritize, rather than leaping to build a standard set of ‘KAM capabilities’.”

Successful KAM transformations

Successful KAM transformations follow a three-step process, she noted.

Firstly, companies should diagnose existing strengths and challenges in the team, evaluating the current status and comparing it with expectations in the context of the KAM role definition, KAM selling process activities, and competency model.

The second objective is to develop training programs and tools to fill the gap and build/enhance capabilities.

The third is to roll out the new program with field advocacy and plenty of coaching support.

Says Bakker Lee: “It’s good to ensure that the first few KAMs experience personal success with their accounts during a pilot phase and that they have the opportunity to share those stories with peer.”

One of the key challenges for pharma is to break out of the product-selling mindset, and think about how it can add value through additional bundled services, information and expertise, according to David Wrightof customer management consultancy Imonic.

Pharma’s traditional role as a product supplier means that it has had to acquire new skills in bundling products and services together, which can be challenging given the tighter regulatory restrictions on the industry in terms of its relationship with payers and ultimately the consumers who take its medicines.

“Pharma has not traditionally been a solutions provider,” says Wright, who notes that much of the impetus in the services area is coming from healthcare services companies—often locally-focused—taking business that arguably could have been captured by drug makers.

“Drug makers need to increase the bandwidth of services they offer by coupling services with their products,” Wright says.

Giving an example from another sector, Wright pointed to the actions of UK vehicle breakdown service company RAC, which supplies automotive manufacturers not only with core breakdown cover to bundle with car sales, but other elements such as call centers, software, dealership training and auditing and mystery shopper services.

“That’s how they got deep in with motor manufacturers, and that’s what KAM is really about,” says Wright.

“They’ve created a situation where they are almost locked in with their customers.”

Broader set of benefits

Pharma’s efforts in this area to date have tended to focus on driving product sales, rather than being positioned as revenue streams in their own right.

Shire is one company pushing this a little further, as its expertise in attention-deficit hyperactivity disorder (ADHD) has allowed it to branch from healthcare into other areas, such as community care, according to Wright.

This has meant its ADHD products have become associated with a broader set of benefits, such as helping hard-to-teach children, prevention of teenage pregnancy, avoiding delinquency etc.

“For Shire, connecting these different stakeholders is in the early stages, but it remains a good example of KAM in pharma,” he says.

Good examples of the benefits of KAM outside pharma can be found in the IT equipment industry, according to Bernard Quancard, president and CEO of the Strategic Account Manager Association (SAMA) in the US.

He describes the case of Xerox, which reportedly almost went out of business because it decided not to go into the small copier business when Japanese firms created the market segment around the turn of the 21st century.

“Eventually, they got into that market, but had already lost a lot of ground and only started to recover by diversifying into services and business processes,” Quancard explains.

Similarly, IBM lost its battle for dominance of the PC and laptop market—the mainstay of its business in the 1980s—and in 2005 sold the entire division to Chinese company Lenovo.

But because the company had already transformed its business into a services and software company, it was making 70% to 80% of sales from the latter just a decade after the switch.

“With pharma, companies still making 90%-plus of revenues from product sales, similarly courageous thinking will be required to achieve the same sort of transformation,” according to Quancard.

Senior management involvement

One of the key obstacles to this culture shift can be resistance from senior management, who sometimes do not buy into the new paradigm and objectives and fail to provide appropriate levels of support.

Strategic sponsorship by C-level executives is an absolute requirement for successful KAM, according to Quancard.

He cites the example of Siemens CEO Peter Loescher, who is known to spend fully 50% of his working day with customers in order to develop a deep understanding of their business needs and requirements.

“That is how senior managers in pharma will encourage the adoption of KAM,” comments Quancard, who added that those senior figures should also be directly involved in the KAM recruitment process.

Selection of appropriate accounts in which to apply KAM is a key consideration, with greater success coming from concentrating on the most important stakeholders.

Don’t try to be too ambitious and transformative too soon.

Working out how senior managers in pharma encourage the adoption of KAM within their organizations is the $64 million question in pharma today, according to Bakker Lee.

“I hear many pharma executives asking about their KAMs relative to other field-based roles and saying, ‘Now that we have added (or expanded) KAMs, who owns the decision makers and influencers?’” she says.

“’Who decides or leads in terms of interactions with different customers?’”

It is hard to ensure good coordination and active collaboration given how many different individuals touch top accounts, but this again is a decision that must be taken by each company individually as it depends on how the field organization is structured.

“The most successful companies tend to elevate the KAM role and to utilize it to build strategic partnerships with customers,” she says, “where the KAM is joined by a cross functional team of colleagues, each of whom take the lead with different stakeholders [and] work from a common account plan or playbook that they contributed to and which the KAM maintains. The most successful KAM teams expect their KAMs to act as quarterbacks for everyone touching the account.”

Cost-benefit considerations

While the benefits of KAM are many, there is no doubt that adopting it can be an expensive process, and doomed to failure without top-level support from the drug maker’s management in the face of what can initially seem to be a hefty price tag.

The cost of running the team around the KAM, involved in supporting not just product sales but also provision of related services, is a key reason for that cost increase.

Moreover, KAM-based teams generally require staff with a higher level of academic qualification, and this drives salary costs up.

Quancard cites a case involving one company with around $1 billion in sales that was making use of 50 to 100 KAMs.

The cost of that KAM program was around 1% of sales, thanks to the need for more intensive follow-up compared to conventional sales costs.

However, the gross margin was two or more points higher than other sales approaches.

“That meant KAM was costing 1% more but generating 2% more in revenues,” says Quancard.

“The return on investment was therefore easy to measure.”