A proper incentive compensation (IC) strategy is key to driving sales rep-physician engagement and motivating the salesforce to achieve performance goals.
However, nationwide lockdowns shuttered doctors’ offices and compelled commercial operations to get remote. Subsequently, life sciences companies faced new challenges, including weak field productivity and detailing restrictions.
In 2021, the industry understands the pandemic’s effects on IC plans better than it did in the early pandemic. Together, Axtria and it’s clients are testing new, effective strategies to increase sales rep engagement while securing sales operations. While these ideas were once novel, new understanding enables us to continue refining proper IC planning protocol across different therapy areas.
Challenges Throughout the Pandemic
The following consequences of the pandemic opened both challenges and opportunities in salesforce restructuring:
- Lockdown limited sales reps’ access to health-care professionals (HCPs). Restrictions on in-person promotion disrupted relationships between sales reps and HCPs, thus impacting operation models.
- Disruption varied significantly among different therapeutic areas, geographies and levels of lockdown mandates. As patients come to new norms with HCPs, expectations for salesforce-HCP interactions continue to change, since the world knows no concrete end date for the pandemic. While patients and HCPs are becoming acquainted with new norms in their interactions, we anticipate regionally driven disruptions to continue through 2021.
- The pandemic caused delays in routine checkups and physician follow-up visits. Further, clients needing nonessential services or suffering from noncritical conditions were less likely to seek treatment. While regular nonessential visits have increased since the beginning of the pandemic, recent surges in COVID-19 cases keep patients from coming in person at pre-COVID rates.
- Telehealth and digital services became HCPs’ new medium, urging sales reps to work remotely through virtual channels. By optimally employing remote management for patients in specific populations, HCPs might have more time for necessary face-to-face interactions. Significant cost savings and a positive return on investment (ROI) on patient outcomes due to telemedicine could motivate private payers to expand their reimbursement policies.
- The economic recession significantly impacted market access. Economic dynamics affect salesforce deployment based on varying regional drug demands. Such factors during COVID-19 include people’s loss of health insurance from high unemployment, decreased personal income and the switch from private, third-party commercial insurance to Medicaid. While the recent pandemic recovery is dampening these effects, many people remain unemployed or are enrolling in Medicaid. How long it will take people to re-enter private-sector jobs and have health insurance is still unclear.
“Covid-19 has accelerated the need for life sciences companies to engage with customers using an omnichannel approach, causing sales reps’ roles within the commercial ecosystem to evolve.”
The Omnichannel Acceleration
COVID-19 is accelerating the omnichannel marketing switch in pharma. IC is the “last mile” in the commercial model. As that model changes, IC must also change to provide support. COVID-19 has accelerated the need for life sciences companies to engage with customers using an omnichannel approach, causing sales reps’ roles within the commercial ecosystem to change. IC needs to back this evolution while driving the right sales behaviors for the models in place today.
While the life sciences industry’s commercial transformation was already underway before COVID-19, the crisis began fast-tracking the process. Meaning, life sciences companies have had to beef up their digital engagement capabilities and facilitate online HCP-sales rep interaction because of social distancing and access restrictions. Life sciences companies planning their return to “normal” will need to not only accelerate digital operations but also rethink new skills, core capabilities and, in some cases, new roles to prepare for the future and beyond.
“While a good portion of direct sales rep-physician contacts may return, there will be a permanent dip in in-person engagements.”
Salesforce Operations Impact
For the next salesforce optimization cycle, sales execution assumptions will have to account for COVID-19-induced limitations and productivity changes in the historical data from this time. In these processes, localized intelligence will be critical.
- The situation neutralizing should be accounted for when optimizing salesforce structure. To do so, consider which effects indicate permanent industry shifts and which are temporary changes to discount when the pandemic subsides. For instance, pharma companies can expect some permanent long-term loss of sales rep access to physicians. These organizations must quickly adapt to these changes and develop long-term expertise in the commercial model’s broader technology applications for such adjustments.
- Avoiding significant territory changes can minimize sales rep-physician relationship disruption. Here, vacancy management will be critical. While some COVID-related disruptions will be temporary, others may indicate more permanent changes to how life sciences companies interact with customers and how patients interact with HCPs. Sales territory alignments might need adjustments to reflect telehealth, traveling scripts and more. Assessing the cost of disrupting existing rep-physician relationships is a critical aspect of evaluating territory alignment changes.
Consider life sciences companies that use long-term care (LTC) sales teams to promote their brand alongside a regular sales team. Given COVID’s impact on LTC facilities, LTC sales reps have limited or sometimes zero promotional opportunities. Such a situation requires a reassessment of the alignment structure, target coverage and the sales team’s optimization. - The pandemic has disrupted call planning and face-to-face detailing. While a good portion of direct sales rep-physician contacts may return, there will be a permanent dip in in-person engagements. Given the long trail to normalcy and different regions planning to reopen at conflicting times, reps must continuously leverage e-detailing and video calls with HCPs. Virtual versus in-person detailing varies between areas and companies. Companies are trying to optimize call planning and promotion mixes by figuring out which data sources they can best leverage, such as mobility data.
Companies are leveraging new data sources to assist with call planning and optimizing virtual versus in-person calls. For example, Axtria has been using aggregate mobile phone location data to measure the recovery over time in foot traffic to target locations in territories. This tactic shows strong correlations with sales rep access to HCPs and new patient starts on therapies. Generally, the data covers most physician or account locations and is updated weekly to give a close-to-real-time snapshot of foot traffic recovery across the country. - IC motivates the salesforce, supports brand strategy and measures sales rep performance. Plan restructuring requires considering the roles IC plays since COVID-19 has disrupted operational models. Reps will use in-person detailing to build customer relationships while leveraging virtual engagements to provide physicians with relevant information at the right time.
- Early in the pandemic, many companies cautiously approached IC, aiming to avoid demotivating sales teams or incentivizing them to take risks. While those concerns still exist, IC plays a crucial role in sales teams’ ongoing efforts to return to normalcy. Some groups have narrowed the range of possible IC outcomes, providing some downside protection to reps with less available upside. Many brands have seen new patient starts declining and are aligning IC with this critical focus. Some teams have incorporated management by objectives (MBO) metrics to reflect changing sales roles better — the need for coordination across functions, focus on digital adoption, etc. Others have been exploring how best to use the foot traffic recovery data to create more accurate goals and improve IC fairness.
- Any long-term COVID-19-driven changes in salesforce operations will require reworking sales-related reporting. For instance, a pharma company might use mobility data as a new sales reporting dataset to better understand its customers and customer access. Another example is a company who only needs to record how often a patient saw a doctor in pre-COVID times. Post-COVID, they might have to change their systems to report whether these visits were in-person or virtual.
New Approaches to Restructuring IC Plans
Axtria has partnered with pharma companies to rewire IC plans for increased motivation and sales outcomes. Some successful approaches included:
- Narrowing the IC focus on the most critical brand objectives: Some rare diseases and specialty brands saw new patients drop significantly. These sales teams shifted patient starts on therapy as the primary or sole IC plan component to tackle this issue. By simplifying the message, the sales teams could ensure that reps focus singularly on the most crucial brand objectives.
- Reassessing payout curves and levels to build in downside protection: COVID-19 disproportionately impacted brands that require medical site administration of therapy and products (e.g., elective surgeries, infusion-based treatments). Territory-level sales impacts have been significant and highly variable, depending on the conditions in their geographies.
i. Real-life use case: One of Axtria’s clients who administers products in infusion centers experienced uncontrollable sales drops. Axtria recommended they include downside protection in their IC plan, which helped reps remain engaged and motivated with some safety against unpredictable sales. - Measuring sales performance against market competitors: Brands in stable markets with well-defined competitive baskets could leverage market-based plans to reduce COVID-19 impacts.
i. Real-life use case: One large specialty team measured their reps by comparing their product growth over the baseline to the market in their territory. After, the group ranked reps relatively on their performance versus the national market. This approach considered the varying local conditions across the country for measuring sales while also ensuring consistency in IC budget utilization. - Incorporating foot traffic recovery in territories using mobility data: Measuring foot traffic recovery each week and comparing it to pre-COVID data can provide an updated view of a territory’s “openness.” Traffic recovery has shown good correlations with key promotional modeling, call planning and IC metrics. Using this method, companies can identify weeks where COVID-19 likely impacted sales to smooth out the baseline in goal-setting, measure IC plans’ overall fairness against the effects of COVID-19 and assess the need for changes. Some companies are exploring other uses, such as direct IC adjustments and ranking segmentation.
- Introducing MBOs to account for new behaviors and difficult-to-measure results: Some businesses want to incentivize and reward reps for performing to new expectations as the sales model evolves. However, measurable sales outcomes might not follow behavior changes immediately because of low IC data or COVID-19 impacts. In such situations, companies have used MBOs for a portion of IC plans to drive these changes with salesforces and give them a chance to earn rewards outside of typical IC metrics.
For more real-world examples of how pharma companies adjusted their IC strategies to balance spend and brand performance in 2020, read Axtria’s Incentive Compensation Benchmarking Study.
“Companies are trying to optimize call planning and promotion mixes by figuring out which data sources they can best leverage, such as mobility data.”
Don’t Make These Mistakes
In restructuring IC plans, pharma companies should be conscious of the following errors, which could have costly outcomes:
- Not communicating the IC plan approach early enough: Issues may arise when companies wait to find the perfect IC plan, leading to extended periods without communication or plan certainty. Communication lapses may negatively impact motivation and engagement more than rolling out a less-than-perfect IC plan.
- Making manual — not systematic — IC adjustments: COVID-19 sales impacts caused some companies to adjust their plans during or after the IC period. These adjustments are often a result of managed care changes, natural disasters and pandemics. The best practice is to adopt an established process with clear objective criteria. There is always some “art” to these approaches. But, if the science of the process is not well-defined and data-based, then companies create confusion and difficult-to-defend decisions.
- Not clearly identifying up-front if and how retroactive IC adjustments will be made: Making retroactive IC adjustments can be effective, and sales reps may receive changes well when circumstances are out of their control. However, it is best to have a clear standpoint on such changes and an established program within the program in advance. Based on the circumstances, the exact mechanism of adjustments can change. However, IC program leads should align on IC adjustments with the governance committee in advance.
- Making no IC plan/forecast/goal adjustments and hoping everything works out: Some companies attempted not to change their IC plans or forecasts, whether because of irregular sales trends or COVID-related modifications to the sales model. As a result, they scrambled to make forecast and goal changes after the fact or build in protection after reps saw large earning hits. Here, the best practice is to plan and detail the possible approaches for assessing the necessity of IC changes in advance. Even if you are waiting to see if you will use these changes, plan for success.
- Unintentionally overutilizing IC spend by protecting the downside with an unlimited upside: In the sensible push to protect sales reps during unprecedented times, some companies wove downside protection into IC plans using payment floors or “better-of-performance-and-target” approaches. During COVID-19, companies used IC to protect reps and retain their salesforces. Downside protection had merit because sales teams were unable to do their jobs in the field. However, if the IC plan’s upside remained the same, unintentional overuse of IC spend resulted. While IC spends can (and should) go over budget to achieve key goals, some companies unintentionally utilized more than 100% of their budget. The net result was a larger-than-planned, unnecessary expenditure without yielding the typical promotional benefit associated with that sales IC spend.
While budget management is crucial, Axtria generally advises against hard-capping IC plans. Studies show that capped IC payouts can negatively affect the sales team by facilitating sales rep engagement problems, causing rep dissatisfaction and high turnover rates. Instead, companies must manage within the IC budget and balance the available upside and downside protection.
“… IC plays a crucial role in sales teams’ ongoing efforts to return to normalcy. Some groups have narrowed the range of possible IC outcomes, providing some downside protection to reps with less available upside."
What Is the Path Forward?
Most companies we have spoken with are looking to continue the path to normalcy. However, as the latest catchphrase states, “virtual is the new normal.” Ideally, sales reps should now understand how to operate in the current environment. Simultaneously, changes to supporting sales operations tools and processes should enable reps to perform better. For many companies, this has meant returning to a more normal IC plan for 2021 with less protection and more lucrative opportunities.
To ensure 2021 IC plans are fair in the current environment, we recommend using the foot traffic recovery data to check for any COVID-related biases in the program. If the plan is generally fair, companies can establish the sales teams’ confidence by sharing the results. If there are any biases, the foot traffic data provides a ready-made source for making plan changes to offset these issues.
We also recommend that businesses invest in creating a culture of analytics that senior leadership supports to prepare themselves for the risks and uncertainties inherent in operating a global pharma company. Such tactics include building an efficient database structure to enable analytical applications, instituting artificial intelligence and machine learning (AI/ML) powered systems for early detection of changes in the pharma commercial environment, and deploying analytics to determine nex best actions (NBA).
Overall, the key to maximizing returns on salesforce investments is partnering with an organization that fully understands the connections between IC plan design and the attainment of strategic objectives derived through the salesforce optimization process. These partners should have the expertise and experience to develop strategic and tactical thinking, deploy solution-oriented analytics and technology-based platforms, execute commercial operations plans and provide efficient data management systems to help pharma companies succeed amidst uncertainty.
“…as the latest catchphrase states, ‘virtual is the new normal.’ ideally, sales reps should now understand how to operate in the current environment.”
