Include the sales force in incentive compensation

Products rise and fall in the marketplace for many different reasons, including formulary access, physician prescribing behaviors and competition. However, a cornerstone to a new therapy’s commercial success is the sales rep. How a rep is motivated can significantly impact whether a product is either a blockbuster or a bust. But designing a fair and balanced incentive compensation plan can be challenging, especially for an emerging pharmaceutical company looking to launch its first product.

Emerging pharma companies – smaller companies with a few specialty products – typically serve a limited patient population with a small number of target physicians (In rare cases, there may be more physicians than patients.) Poorly designed incentive compensation plans can result in significant variability across territories and unequal pay across the sales force. Further, emerging pharma companies likely have little, if any, data or benchmarks for its commercial team to set accurate sales targets.

Amid these challenges, companies must determine fair and motivating compensation and, at the same time, avoid over- or underpaying the sales force. A poorly designed incentive compensation plan can result in high sales force turnover and could ultimately lead to disappointing product performance. Fortunately, commercial teams can take several steps to ensure their incentive compensation plans support successful product launches.

Listen to your sales force

Commercial teams at emerging pharmaceutical companies may hesitate to incorporate sales force feedback into their incentive compensation plans. Since changes to the plan directly impact payout, some commercial teams may think the sales force has too much “skin in the game” and that their advice would lead the company to adopt an unsustainable, costly plan.

Yet, many emerging pharma companies find value in engaging the sales force in incentive compensation plan design – and it’s an advantage that established pharma companies with hundreds of reps may not have. One emerging pharma company’s commercial team invited its sales force to participate in a retreat to discuss a new incentive compensation plan. Before the retreat, the company invited all sales reps to design their own incentive compensation plans. The commercial team then reviewed and rated each plan.

At the retreat, leadership discussed what they learned from the sales reps’ plans, presented the pros and cons of each and recognized individual reps for their contributions. If a plan submission proved fair, balanced and motivating – and also met the company’s key objectives – the commercial team looked into how to incorporate these sales-force driven elements into the new plan design. This initiative served as a creative way for the commercial team to collect feedback on what worked and motivated the sales force – and what did neither.

Involving sales reps in incentive compensation plan design can help a company’s commercial and leadership teams build trust with the sales force, explore new ideas and build support for the plan.

Embrace flexibility to meet objectives

The only constant with an emerging pharma company’s incentive compensation plan is change. What worked well as the company launched its product rarely works well in the post-launch phase of commercialization. So, by adopting a flexible incentive plan, emerging pharma commercial teams can put themselves in a better position to adjust to changing market conditions and meet key launch objectives, such as total number of prescriptions.

In fact, most companies should alter their plans six months after launch. These changes could include moving to a goal-based plan from a commission plan and adjusting payout rate formulas and scales. Companies should also consider adding targeted, one-time incentives to the plan if they have a need to meet short-term launch objectives.

Companies have many options when it comes to deploying these short-term incentives, or “kickers.” For example, an emerging pharma company may challenge its sales force to gain a certain number of new prescribers over a certain period of time. To incentivize reps, the commercial team may choose to award bonuses to reps who visited new physicians who then prescribed the product. If a company looks to grow in a particular region, its commercial team can implement team-based goals to drive market share and reward the entire team when it meets that goal.

The commercial team might also devise a one-time contest to help achieve a goal. For example, if an emerging pharma company has a goal-based incentive compensation plan and wants to increase its depth of physician/account writing the commercial team may implement a contest to encourage the sales force to visit physicians who have written prescriptions, but not recently. The commercial team typically sets some guidelines, but for the most part allows the sales force to have ownership over which physicians they want to target for the contest.

Allow reps to own the territory and the plan

Commercial teams work hard to identify appropriate physicians and allocate them fairly among sales reps. But such good deeds don’t often go unpunished. When sales reps receive a set list of target physicians, they may feel the deck is stacked against them and that they are being forced into a predetermined payout. That can diminish motivation.

Yet, here’s where emerging pharma companies have the advantage over their more established competitors: Emerging pharma commercial teams can provide their sales reps the opportunity to “own” their sales territories by allowing them to modify their lists of target physicians, while established pharma companies may be less flexible in tailoring their target lists if they have rigid systems and processes. Allowing sales reps to customize their targets adds human insights to the commercial team’s analytics-driven target list. For example, the analytics-based target list would have pulled physicians in an area who specialize in rare diseases, but an emerging pharma sales rep may know a new physician who just entered that specialty and add this individual as a target to the list she received from the commercial team.

Further, a sales rep who recognizes physicians with similar characteristics – such as treatment preferences, philosophies, or biases – may share similar topics of interest. The sales rep may also learn certain physicians are averse to prescribing certain types of drugs, such as those administered by injection, and can avoid visiting those physicians if her product fits into those categories.

In addition to giving reps the chance to fine-tune their list of target physicians, companies can equip sales reps with calculators they can use to determine their payouts in various scenarios. Payout calculators can be effective motivational tools that allow reps to fully master their incentive compensation plans and maximize performance.

Emerging pharma commercial teams who value the sales force’s expertise, encourage relationships with physicians and collect feedback prior to a product launch can partner with those reps to build a fair, balanced and motivating incentive compensation plan.

The devil is in the details

Incentive compensation plans, even for small sales forces, involve dozens of variables. Administering these plans requires painstaking attention to detail and can quickly overwhelm commercial teams. For this reason, pharmaceutical companies often either hire an internal team to manage incentive compensation plans, or seek outside consultants. Hiring an outside expert with the proper experience developing and managing incentive compensation plans can help the company ensure quality control and integrity in data and reporting. In the end, this support from an outside expert can make the commercial team more confident and the sales force more motivated and satisfied.

But no matter what resources an emerging pharma company deploys to develop its incentive compensation plan, it must prioritize the individuals who are the focus of the plan: the sales reps. Involving the sales force in plan design will engage and motivate reps and help the company develop a motivating and fair incentive compensation plan that drives product results.

About the author

Kevin Frymire ([email protected]) is an associate partner at pharmaceutical sales and marketing consulting firm Beghou Consulting and has counseled emerging pharma companies since 2010. He specializes in sales force planning, design and data management. Kevin has an MBA from the Kellogg School of Management at Northwestern University.