Useful Advices - Business

This article answers the following questions:

How do most companies look at return on investment (ROI) for their sales compensation expense?

What portion of sales compensation expense do companies allocate to managing existing

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

accounts versus pursuing new accounts?

Do most companies expect their salespeople to generate new, additional gross profit each year that is equal to or greater than their compensation?

One conclusion I

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

ave reached after working with many different kinds of companies is that there is little commonality in how they establish the desired return on investment (ROI) from their sales compensation investments. Every company's circumstances are different; as a result,

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

hat might constitute an acceptable ROI for one company will not be considered acceptable by another company.

Here are some questions to consider as you determine the desired sales compensation ROI for your company, and how that ROI should be split betwee

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

existing accounts and new accounts:

What is the value of each sales dollar produced? Is the value different if a sales dollar is produced by an existing account versus a new account?

How does the time and effort required to

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

aintain (and grow) existing customers compare to the time and effort required to bring on new accounts?

Do accounts operate pretty much on "autopilot" once they have been brought on board, or must your salespeople continue to invest significant

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

effort (in terms of internal prospecting, opportunity qualification, proposal generation, relationship management, etc.) to maintain sales volume and profitability?

Once an account has been brought on board, can ANY salesperson

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

anage the relationship, or is there something special about the relationship that exists between the current salesperson and the account? I have seen cases where management held the opinion that ANYONE could manage and maintain the v

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

lumes of business that were being produced by major accounts. They questioned why they should continue paying high compensation to the salespeople who were managing those accounts.

In some cases management chose to reduce commission rates, which caused the sales

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

eople who had been managing the accounts to leave the company. In other cases management simply switched account assignments and assigned less "expensive" (in terms of compensation) salespeople to the major accounts. Far too often the outcome from either approach

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

was a slow decay in revenue that eventually added up to millions of dollars in lost sales.

Why did this decay in revenue occur?

Close inspection identified two key reasons:

The replaced salespeople had enjoyed
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a
g>truly special relationships with key players in the accounts. The key players' loyalty was to the salespeople, not the salespeople's employers. When the salespeople left, the key players saw little reason to continue to favor the salespeople's (previou
dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod
) employers with their business.

The replaced salespeople were extremely responsive and provided extraordinary levels of service. In some cases these salespeople were unusually successful in navigating

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

their employers' informal networks. This enabled them to solve problems and do favors for their customers with a timeliness that other salespeople could not match. If you determine that some of your salespeople DO have enough bandwidth to br

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ng on new accounts, here are questions to consider as you set their "new business" goals:

What level of market penetration has your company achieved to date?

How much additional market penetration can your company reasonably expect to

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

accomplish within a specified time frame?

How many potential prospects exist in each sales territory?

How do these potential prospects compare to your existing customers in terms of revenue potential?

How many

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

new prospects will a salesperson need to close to make any appreciable difference in their numbers? Here are some final questions for you to consider:

What percentage return are you currently receiving on your sales compensatio

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

investments?

Do your salespeople produce multiples of their compensation in terms of profits back to your company?

Is it really reasonable to expect your sales compensation ROI to grow every year?

Conclusion
.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
ng>

The questions asked in this article can help you determine the desired return on your sales compensation investment, plus develop targets for ROI from existing accounts and new accounts. Don't let the fact that some salespeople earn high compensation cause y
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip
u to set your ROI goals too aggressively. Instead, focus on the question, "How much return do we receive on the sales compensation we pay?" A solid return on your investment means you are completely justified in making that investment!

Copyright 2005 -- Alan Rig

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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