THE STRATEGIC ROLE OF SALES PROFESSIONALS IN
THE PHARMACEUTICAL INDUSTRY
Ruxandra Ciulu
“Alexandru Ioan Cuza” University
Iaşi, Romania
ruxandra.ciulu@uaic.ro
Abstract
The pharmaceutical industry is one of the most spectacular industries worldwide in terms of
number of mergers and acquisitions, its exposure to globalization and its specificity in terms
of sales and marketing. Also, it has been one of the industries less affected by the crisis, which
makes us wonder about the its key advantages. At the same time, company sales force is of
growing importance, especially when analysing competitive advantages. Based on prior
empirical studies presented in the international literature, this study empirically examines
how salespersons in the pharmaceutical industry participate in strategic communication
activities. The role of sales persons has expanded beyond the traditional selling function and
includes a strong connection to the market, as well as information about competitors’
strategies. Therefore, salespersons have come to play a strategic role in gathering
information which can lead to change in company strategy. The degree to which company
managers accept suggestions and value market feed-back differs from company to company
and from market to market. The current study analyses the nature of strategic communication
activities in pharmaceutical companies in Romania. As the top twenty pharmaceutical
companies on the Romanian market is strongly dominated by multinationals, it is natural to
obtain results comparable to those at international level. Still, Romanian companies are
highly affected by deffective upwards communication, which can generate wrong strategic
approaches and ignorance in terms of market trends and competitors’ strategies. The study
proves that strategic communication activities encourage individual selling performance and
can lead to increase in company value.
Keywords:
boundry spanning, information asymmetry, pharma, sales, strategic communication
The concept of ‘sales strategy’ is highly debated in the literature and is part of dayto-day reality in all companies. Therefore, we do not aim at analysing the types of
sales strategies companies use or their effects on the market. Moreover, we are
interested in the factors that influence or should influence the sales strategy.
Namely, we have focused on the role of the sales professionals in providing useful
information to the company, in order to help it adjust the strategy to the market
conditions. Some would simply call it feed-back, while others analyse the strategic
implications of the information and refer to it as ‘strategic communication’ [7].
Strategic communication should be a consequence of current sales strategy and the
basis for the future (adapted) sales strategy.
Recently, research [18] elevated sales strategy from a tactical component in a firm's
promotional mix to a more strategic component with ramifications for the
performance of business firms. Sales strategy influences all three sales force
performance dimensions (behavioral, outcome, and CRM), as well as firm financial
performance, while it enables firms to better allocate resources (e.g., selling effort,
and sales calls) across customers [18].
1. MARKET ORIENTATION AND STRATEGIC
COMMUNICATION
Turbulence in the international environment during the first decade of the twentyfirst century has forced companies to reconsider their selling approaches and sales
strategies [1]. From this perspective, the role of the sales force has increased and
companies try to identify new ways of using its expertise as a strategic advantage.
As sales organizations grow in their use and understanding of teams, it is imperative
that they learn how the organization influences sales teams, how sales teams
function, how sales teams play a learning role for the sales organization, and what
makes sales teams effective [20].
On the open market, firms are used to putting the customer first and to adjusting
their output in order to fulfil the customer needs. Still, the current business
environment moves this further to understanding the customer’s end-use markets.
The seller is analysing the market of the buyer in order to build competitive
advantage together through market intelligence and superior market sensing
capabilities [17] (see Fig.1). This is the turning point from conventional selling to
strategic customer management.
Transactional Customer Demands
Salesperson as
Order Taker
Salesperson as
Order Maker
Salesperson as
Strategic Customer
Manager
Relational Customer Demands
Fig. 1. Evolution of the sales role [17]
In business markets, firms often rely heavily on the sales function to target
customers as well as to build differentiation by supporting customers and by
building strong and profitable relationships with customers [1]. Moreover, the seller
needs to actively manage the company processes that impact on customer value
[17], starting from internal (with senior management) and external communication
(with suppliers) to build understanding of the sources of company sales success and
how to sustain them. It is extremely important to build salesforce awareness
regading their role in implementing company strategy while customers become more
sophisticated and demanding, the environment is more competitive and market
channels become more complex [17]. Especially in conditions of high uncertainty,
customers become interested in investing in long-term partnerships with their
suppliers, therefore by encouraging suppliers to adjust their objectives and strategies
for the relationship [18].
In the context of change which affects markets and customers, some [14] even
question the role of the salesforce. If customer expectations change even faster than
organizations can respond with new products, service strategies, sales strategies, it
can be argued that salesforce may become obsolent.
1.1. Boundry spanning and information asymmetry – the basis for strategic
communication
A boundaryrole person (boundry spanner) is defined as an individual who is
responsible for contacting people outside his/her own group [20] and this type of
activity is considered an important aspect of strategy formulation and
implementation.
Boundary spanning involves five classes of activities: (1) transacting input
acquisition and output disposal; (2) filtering inputs and outputs; (3) searching for
and collecting information; (4) representing the organization and (5) protecting and
buffering the organization from external threats and pressures [20]. The boundary
spanner’s role as information processor helps to protect the organization from
information overload as boundary spanners filter, interpret, and channel relevant
information to appropriate functional departmental areas of the firm [22].
On the other hand, information asymmetry exists when the salesperson acts as as
boundry spanner and has more precise information than the sales manager about the
selling environment [10]. The salesperson has the advantage of being closer to the
customer and, therefore, has the opportunity of gather more and better information
(in terms of quantity and quality).
Essentially, the issue is related to the fact that boundry spanners may know more
about customers than the company knows. Should this be the case, another issue
arrises – pricing authority or pricing delegation. When customer types, needs and
requirements are similar, salespeople do not need to have pricing authority as the
price will probably be fixed. When customers are heterogenous, the salesperson is
more likely to receive pricing authority in order to be able to negotiate the price
based on specific customer information. From this point of view, customer
heterogeneity can function similarly to information asymmetry [10].
Pricing authority can also have drawbacks, especially for risk averse salespeople.
They can be tempted to sell at lower prices in order to close the deal, as they are
evaluated based on immediate results [10]. Therefore, even if decision-making
autonomy can be motivating, a survey performed in 2008 by Hansen, Joseph, and
Krafft [11] found that only 11% of all firms fully delegate pricing decisions, while
28% of the responding companies offer no pricing authority at all to their sales
forces, price being determined by the headquarters.
1.2. Strategic communication
As the environmental instability increased and the sales organization becomes more
aware of customer needs, it must be ready to change as quickly as the changing
needs of the customer. The sales force assume that the organization is ready to
change to maintain a sustainable competitive advantage [20]. Also, if the
salesperson believes that long-term relationships with customers are important,
he/she will also be more likely to be an active participant in strategic communication
activity. As a consequence, salesperson trust in the manager leads to greater
participation in strategic communication activities [7]. Webster [24] even suggested
that the salesperson's ability to gather information is perhaps an even more critical
capability than their ability to promote, as it can influence mid- and long-term
market approach and can be decisive for success or failure.
By synthesizing information, employees may affect upper-management's view of the
organization which, in turn, can determine how limited resources are allocated [6].
Cohen and Levinthal [4] argue that the ability of a firm to recognize the value of
new external information, assimilate it, and apply it to commercial ends is critical to
its success.
Sales teams are responsible for detecting changes in the business environment,
gaining knowledge about customers, and improving members’ collective
understanding of various business situations [20]. Harker and Harker [12] support
the idea that sales teams play a vital role in a company’s turnaround process, as they
generate income while developing and implementing successful strategies.
Salespeople engage in strategic communication in addition to conventional selling
roles by becoming ‘linking pins’ between customers and management, therefore
they are often in the best position to participate in strategic communication [7].
According to Floyd and Lane [8], top managers are generally involved in
decisionmaking, middle managers engage in strategic communication roles, while
operational-level employees engage in roles focused on reacting to information and
conforming to uppermanagement. Flaherty & Pappas [7] argue that salespeople's
perceptions of (1) their firm's orientation toward change, (2) their firm's orientation
toward long-term customer relationships, and (3) trust in their manager all play an
important role in their likelihood to engage in greater strategic communication
activity.
While some managers may be open to creative ideas and strategic solutions coming
from sales personnel, others feel strongly that employees should focus solely on
their main role [8]. Some managers believe that the employee is not only capable of
performing but also valuable to the organization in the sense that he/she can
effectively implement new strategies [7].
2. THE ROLE OF SALES REPRESENTATIVE IN THE
PHARMACEUTICAL INDUSTRY
During the past fifty years, the pharmaceutical industry has had a spectacular
evolution, especially due to investments in research and development and to a
qualitative jump towards new methods of preventing and treating a broad range of
maladies. It is a mature industry, proved by the low expansion level at the end of the
20th century and it is dynamic as it generates a scientific and technological
revolution.
The pharmaceutical industry has gone through a large number of mergers and
acquisitions between 1990 and 2010. Some specialists consider that the
consolidation of the industry is not over yet, even though it seems that a small
number of companies dominate the market. At the beginning of the 21st century, a
‘superleague’ of large pharmaceutical companies is obvious. The top 5
pharmaceutical companies have doubled their market share up to a total 30%, while
the last 5 in top 20 add only 1% to their market share of a total 7%.
The pharmaceutical industry has an important dilema: who is the customer? The
customer can be 1. the hospital or the distributor (or their decision-makers) who
purchase the product directly from the manufacturer, 2. the medical doctor or the
pharmacist who prescribes / offers alternatives to the end-user; 3. the end-user or the
patient who uses the products. In strictly commercial terms, the customer is in the
first category. When discussing prescription drugs, it is probably realistic to say that
the medical doctor is the customer and maybe the pharmacist can influence in a
small percentage what is sold. In terms of over-the-counter (OTC) drugs (e.g.
vitamins), which do not require prescription and can be advertised in the media, the
customer and the end-user are the same.
The pharmaceutical industry deals with two types of products: 1. blockbuster drugs
(innovative, patented drugs, who generate worldwide sales of at least 1 billion USD
per year and, as estimated in 2007, who require investments of at least 1.3 billion
USD to develop [3]) and 2. generic drugs (former innovative drugs whose patent
expired and which can be produced by any manufacturer worldwide). Some
companies target innovation (e.g. Pfizer), others are not interested in innovation or
do not have the financial support to innovate, therefore they focus on generic drugs
(e.g. Teva), while many combine the two, trying to replace themselves their
innovative drugs which go off-patent with generic drugs (e.g. Novartis and its
generics division Sandoz). Based on this market approach, companies develop their
sales force accordingly, trying to reach the customer in the most appropriate manner.
Many companies go for the mass-distribution techniques, especially when
promoting blockbuster drugs worldwide. Since the discovery of the human genome,
the new tendency is to develop personalized drugs which address the genetic
requirements of each individual.
In this new world, the role of companies in the pharmaceutical industry is difficult to
predict. The implications of personalized drugs on companies that focus on mass
promotion of innovative drugs can be rather devastating. They will be forced to
bring changes in several stages of the value chain, from product discovery, through
development and until distribution. New technologies for innovation and
development will be required and distribution of personalized drugs will have to be
made differently. This is where strategic communication becomes absolutely
essential in shaping company strategy and in being able to address the needs of each
customer.
One study performed on American pharmaceutical companies suggests that
performance in sales and marketing provide for 42% of increase in financial
performance. Each important innovative product is lauched through a global and
extremely expensive marketing campaign. This campaign involves a full set of
marketing tools, including advertising in the media, large information packages,
special events for doctors, presentations during conferences, dedicated sales force
and, more and more, the Internet [21].
At the end of the 20th century, when regular sales mostly turned to electronic sales,
many believed that about 50% of salespeople would lose their jobs. In 2000, even if
the industry was revolutionised by online exchanges and Web-based ordering,
Merck announced the expansion of its salesforce by 30 per cent to build sales of
existing and new products [17]. The Internet is not the only option for the
pharmaceutical industry and not even the first option. Contact with the customer is
essential and, probably, it will never be totally replaced.
Sales work in the pharmaceutical industry is almost exclusively team work. Most
companies do not have their own sales force, they only employ people specialized in
the field (e.g. medical doctors, pharmacists, people with other backgrounds who
have experience in the pharma business) as medical representatives to promote their
products to medical doctors and to decision-makers. In this case, sales should be
automatically generated based on prescriptions from doctors and on orders from
hospitals who use products internally. Regardless of type of team members, the
pharmaceutical industry is generally using team performance as a factor in
determining the compensation of individual salespeople [16].
In 2002, a study published by McKinsey in the Wall Street Journal argued that team
mismanagement if highly pervasive in the pharmaceutical industry, while others
estimated that the opportunity cost of retaining one area/regional sales manager who
co-ordinates three average or below average teams can be up to USD 20 million per
year [16].
The pharmaceutical industry is confronted with at least three challenges which affect
customer behaviour: 1. medical doctors are less and less willing to discuss with
medical representatives or with salespeople; 2. at international level, governments
aim at reducing costs for their health systems; and 3. patients are more and more
involved in the therapy they are prescribed, leading to failure of some marketing
campaigns and of investments made by pharmaceutical manufacturers. As argued
before, in changing times, in uncertainty conditions strategic communication
becomes essential, therefore it should become one priority for companies in the
pharmaceutical industry.
3. RESEARCH DESIGN
Research was partially designed based on a prior study by Flaherty and Pappas [7]
who analysed strategic communication in sales organizations in the healthcare sector
in the United States and partially based on the author’s expertise in the Romanian
pharmaceutical market. Similar research designs were chosen to enable to compare
results for Romania and the US.
The top 20 pharmaceutical companies in Romania (see Table 1) were considered the
most relevant for the study. They account for 77.1% of sales on the market and they
are companies with large numbers of salespeople (mostly over 100 per company).
Each of them was approached by telephone, then one area sales manager (ASM)
from each company was e-mailed the materials. The area sales managers were
randomly chosen by the company and we did not have access to their names. They
received: 1. cover letter explaining the purpose of the study and prior work in the
field. Area sales managers were asked to choose three subordinates (one aboveaverage – Q1, one average – Q2 and one below-average – Q3) to fill-in the
questionnaire. Only the ASM knew the significance of the codes, so that no
disconfort can be created to the team. They were asked to return the questionnaires
to the author by e-mail from private e-mail addresses which did not mention the
name – they were only asked to mention the company in order to make sure that
results can be connected; 2. supervisory questionnaire, which included questions
about company products, company sales strategy and assessments for subordinated
who filled-in the questionnaire (e.g. why they were included in the first, second or
third category).
All core questions included in the four types of questionnaires (ASM, Q1, Q2 and
Q3) were based on a 7-point Likert-type multi-item scale. The questionnaire
comprised 25 core questions and 7 identification questions. ASMs were ask three
suplementary questions on general information about the company and three
questions about each type of employee. Core questions were divided into six
categories for research purposes, then mixed to prevent respondents from connecting
questions and answering similarly. Respondents were classified based on current
position in the company, work experience (number of years: 0-5, 6-10, 11-15, 16-20;
over 20 was not necessary as pharmaceutical sales have only been established in
Romania starting with 1990), level of studies, duration of working experience with
the current supervisor, type of company (local or multinational) and frequency of
communication with the supervisor on the overall strategy of the company.
Table 1 – Top 20 pharmaceutical companies in Romania [23]
Market share %
Rank
Company
(Sept-Dec 2009)
1.
Sanofi-Aventis (including Zentiva)
9.7
2.
Hoffman La Roche
9.1
3.
Pfizer
6.7
4.
GSK (including Europharm)
6.2
5.
Novartis (including Sandoz)
2.4
6.
Servier (including Egis)
5.2
7.
Merck & Co (including
4.6
ScheringPlough)
8.
Daiichi Sankyo (including Terapia
3.8
– Ranbaxy)
9.
AstraZeneca
3.5
10.
Abbott (including Solvay)
2.7
11.
Bayer-Schering
2.5
12.
Antibiotice
2.4
13.
Eli Lilly
2.4
14.
Menarini
2.1
15.
Labormed (including Ozone)
2.0
16.
KRKA
1.9
17.
Actavis
1.7
18.
Johnson & Johnson
1.6
19.
Gedeon Richter
1.4
20.
Reckitt Benckiser
1.4
Market share %
(Jan-Apr 2010)
9.4
8.8
6.7
6.1
6.0
5.3
4.6
3.6
3.8
2.7
2.4
2.3
2.4
2.0
2.0
1.9
1.5
1.8
1.5
1.5
Hypotheses were chosen in accordance with the Flaherty and Pappas study so that
results can be compared. We used four hypotheses:
H1. Orientation toward change is positively associated with salesperson strategic
communication.
H2. Relationship selling is positively associated with salesperson strategic
communication.
H3. Salesperson trust in the manager is positively associated with salesperson
strategic communication activity.
H4. Participation in strategic communication activity is related positively to
individual-level sales performance.
4. ANALYSES, RESULTS AND CONCLUSIONS
Out of the top 20 pharmaceutical companies initially included in the study, 5
provided complete and usable questionnaires, corresponding to a rate of 25%. Even
though they were all explained that name of companies or of respondents would not
be made public and that information would be used exclusively for academic
purposes, Romanian managers are still much more reluctant than managers from
developed countries to answer questions, especially when the purpose of the study is
not directly linked to their daily job. Some argued that confidentiality agreements do
not allow them to answer, even though the questionnaire was anonymous and it did
not ask any question which could infringe such an agreement.
The sample of respondents all have at least university studies, if not master degree
or doctoral studies. ASMs are generally more experienced in the industry then their
subordinates, with an average number of 8 years of experience in the field. All
respondents discuss with their managers about company strategy at least once a
week or once a month.
Before beginning the analysis, all answers were grouped together and each
respondent received an identification code, which would allow us to link his/her
answer to his/her peers and ASM. Then, all core questions (together with answers)
were regrouped into the six original categories for analysis. The validity of the
hypotheses was then tested.
Hypotesis H1 was confirmed, as respondents with inclination towards change are
more likely to engage in strategic communication. Even if the vast majority of
repondents regularly scan the market for information, they do not come up with
strategic suggestions to the managers. This can be due to strict procedures and to
lack of trust in others’ judgement, especially if coming from subordinates. 86% of
repondents indicated that their managers are keen on innovation and change,
creativity and new ideas, proving that, at least at strategic level, these are company
goals.
Hypothesis H2 is partially confirmed, as subordinates express their interest in
strategic communication, but they either aren’t confident enough to put things into
perspective for the managers or they are not allowed to do it.
Hypothesis H3 is also partially confirmed. Subordinates trust their manager, 62%
argue that they would never be interested in spying on their boss, 25% answered that
they would do it seldom, and only 13% say that they would like to do it many times.
They would also like to have the manager influence them to some degree. Still, most
of them (62%) would never let the manager have full control of their future in the
company. Some of the subordinates who really trust their manager reported being
involved in typical activities of strategic communication. Still, others do not get
involved, even though they trust the manager. This makes us wonder what other
barriers (possibly organizational barriers) they can encounter to putting strategic
communication into practice.
In our study, hypothesis H4 is not confirmed. We were not able to identify a pattern
for respondents engaging in strategic communication. This can be due to different
perceptions on what we generally consider ‘strategy’ and some repondents might
consider executive-level tasks as having strategic implications, while others can be
too modest. Other study limitations can be linked to studying only one industry,
receiving a low percentage (25%) of usable respondent sheets due to the perception
that any small piece of information that leaks from the company can have
devastating effects and a rather short time for performing the analysis (April – June
2010).
The results of the Romanian study are consistent with the US study results. As
Flaherty and Pappas concluded, selling performance of sales professionals is at least
partly determined by their participation in roles and activities that extend beyond the
traditional selling function. Also, their findings indicate that participation in strategic
communication activities is positively associated with individual sales performance.
Further, they found that salespeople's perceptions of (1) their firm's orientation
toward change, (2) their firm's orientation toward long-term customer relationships,
and (3) trust in their manager all play an important role in their likelihood to engage
in greater strategic communication activity. If the manager demonstrates an
appreciation for change, flexibility, and innovativeness, then the salesperson will
engage in a higher level of strategic communication activity.
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