Pharma sales is a tricky industry to manage. It’s regulated, in that many forms of advertising are either restricted or tightly controlled, which can put a damper on many of the usual strategies a sales team might use. Nevertheless, pharmaceutical companies want their sales teams to be as effective as possible.
A common way to encourage more performance out of sales teams is incentive compensation. These are in place in some form or another in virtually every sales team, but how can pharma companies enhance their existing incentive strategies for more effective sales? We’ve put together a list of tips and recommendations to help.
Review and Evaluate Sales Objectives
The first step to any improvement plan is identifying the current state of affairs. Answer these questions about your current incentive compensation and strategies.
- What are your current objectives with your pharma sales team?
- What metrics are you measuring and recording to determine performance and payouts?
- What metrics are actually important for your stated objectives?
- How are your sales team members working within or around the current incentive system?
Your goal is to develop a big-picture overview of your current incentive structure, so you can determine its strengths, weaknesses, and points of failure.
Keep in mind that objectives that seem like relevant metrics to monitor may not actually be effective to incentivize.
For example, if you reward call volume, it actually incentivizes your sales team to make as many calls as possible, keeping them as short as possible, which results in less effective sales. If you reward number of sales, it incentivizes your sales team to cherry-pick through the low-hanging fruit in your client list, and the more difficult – but potentially lucrative – leads are left ignored.
It’s very common for companies to set sales objectives and simple metrics that are easily exploited for bonuses. Sales team employees don’t necessarily have a real incentive to make the company grow; they want to see their own compensation grow and will happily do whatever it takes to achieve that goal, regardless of whether or not it offers long-term value to the company.
Identify Behaviors to Incentivize for Desired Outcomes
To expound upon the above, one of the most important ways that you can optimize and enhance your incentive structure is to evaluate it and align your monitored metrics and goals with the behaviors that result in sales, not with the end results of those sales. It’s not always the best policy to reward something like the volume of sales or the volume of calls. In fact, any time you’re optimizing for a single metric, your sales team will find the most effective ways to boost that metric, often to the detriment of other equally important metrics.
What you need to do is build up a list of goals for the long-term health and profitability of your pharmaceutical company. Then, identify the behaviors of the sales team that lead to those goals. Finally, build an incentive plan that encourages those specific behaviors.
- Consider metrics beyond simple sales numbers. Often, in the pharmaceutical industry, some of the most important factors are intangible. They focus on things like the relationships you build with potential leads, the longevity of your existing client relationships, and the ability to improve a sales contract over time.
- Think about specific metrics to measure these intangibles. They can be metrics like site visits, engagement levels, and even feedback left by the leads.
- Offer additional incentives for teamwork and collaboration. While sales is often a high-pressure competitive atmosphere, it’s rare that an individual sales superstar is the one in control. More often, it’s a team of staff working on a given lead, and the whole team – not just the person who makes the final call – should be rewarded for the success.
It’s also worth reinforcing the ethics and regulatory compliance aspects of pharma sales. Since pharma is heavily regulated and there are significant ethical concerns around selling medical devices and treatments outside of FDA-approved use cases, compliance with laws, regulations, and ethical practice should be incentivized.
Analyze and Adjust Targets for Compensation Awards
Setting specific goals is just one part of the incentive compensation plan and the optimization of its structure. Once you have chosen the behaviors and actions you want to reward, you need to pick thresholds that make it worth the reward.
There’s a balancing act that needs to be performed here. If your goal is too high, your sales team will recognize that it’s not actually feasible to reach, and they won’t try. If the goal is too low, they’ll achieve it quickly, and with no further incentive, motivation to continue will drop off.
Your goal is to pick tangible, quantifiable goals that are challenging but achievable. However, there are many factors that go into determining this, and they change all the time. The goals for the first financial quarter may need to be different from the goals of the fourth quarter because different pressures, considerations, and even annual timing can play a significant role in how well a sales team can perform.
One of the greatest points of failure with incentive programs across the board is companies that create one structure, often with a one-size-fits-all approach, and never adjust it. It very quickly becomes optimized and exploited to its maximum degree and never changes.
Implement Company Performance-Based Objectives
Another option to help encourage the right behaviors out of your sales team is to implement an additional bonus structure that adds incentives for overall company performance. Since your sales team is going to be a significant driver of overall company performance, rewarding them for overall increased performance can make sense.
This way, several things can happen.
- Sales team members can feel part of a growing organization when they’re rewarded with a cut of the growth of the company, rather than feeling like they’re left behind while management reaps all of the credit and rewards.
- Sales teams can push themselves above and beyond the usual cap of performance incentives to grow the overall company, knowing that they’ll increase their bonus from that vector as well, so their efforts are still valuable.
- Particularly motivated and creative sales members can go out of their way to experiment and try things that haven’t been formalized as part of the sales process and, if it works, get a bonus from that success.
How you structure this bonus will vary, and it likely should not be limited entirely to the sales team. Other teams are part of the success of your company as well, whether it’s the marketing team, the R&D team, the production team, or anyone else. Everyone should benefit when the company benefits, not just those at the top.
Offer Varied Rewards to Suit Different Needs
Incentive programs, rewards, and bonuses can take many different forms. They all have their pros and cons, so picking the right selection can be very important. Remember, sometimes an incentive will work great for one person and be completely irrelevant to another.
Purely financial incentives, for example, are fine for people who are in need of more money, but for the financially secure top performers, they may not find it as motivating as something like a trip.
- Monetary rewards are simple and easy, though setting the right value for different kinds of behaviors and metrics can be very tricky. How much is a given metric worth to your brand, and how much can you afford to pay out in commission to the people who perform them?
- Non-monetary rewards in the office, such as praise and recognition, tickets to a show, company swag, limited gift cards, continuing education and training, flexible hours or days of remote work, or personal meetings with upper management can all be varyingly beneficial to different sales members in different stages of their lives and careers.
- Formalized recognition programs can be valuable for self-esteem, networking, and company-wide recognition, particularly in larger organizations and in areas where the recognition is meaningful for the furthering of their careers.
- Tuition reimbursement or other financial assistance programs, for encouraging additional education or helping with life milestones like house payments, can be helpful as a monetary-but-limited form of compensation.
It’s not uncommon for a company to offer a catalog of various kinds of rewards, ranging from pure cash bonuses on the paycheck to all-expenses-paid trips to exotic locations and everything in between, to allow individual sales team members to pick their own ideal rewards.
Maintain Transparency and Communication
An important but often overlooked attribute of an incentive program is transparency and communication.
Transparency, and the ability to openly communicate about how incentives are calculated, what metrics are monitored and how, and what is paid out to who, are very important for sales team members to have faith in the program. All too often, an incentive program will be obtuse and full of niche rules and qualifications that serve little purpose but to obfuscate and deny claims of success to avoid paying out. Companies that are so draconian with their incentive programs rarely last long in other fields, as well.
With clear rules and open communication, you ensure that your incentive program is clearly defined. Your employees know what is expected of them and how their performance is monitored. There are no surprises, good or bad, waiting for them when reconciliation comes.
Communication also helps build excitement and motivation to participate and compete. If people keep their performance a secret, it’s hard to be motivated as a team or in individual competition. Likewise, an incentive is only motivating if people know it exists.
Transparency is also critical for the fairness of incentive administration. Without it, you have many issues with people feeling like they didn’t get what they were owed, which reduces participation and motivation in future incentives.
Solicit Feedback and Improve Incentive Programs Iteratively
Communication also feeds into this final tip, which is to emphasize the feedback loop between your incentive program, management, and sales team. Every month or so, or even on an ongoing basis, your incentive programs should be open to comment and review, with goals adjusted, structures optimized, and metrics changed.
The hard part is that if you change too much too often, you run into issues with clarity and with expectations. If the rules are always changing, the effort it takes to learn the incentive program is lost, and many team members will just ignore it and treat it as a happy accident if they get anything out of it.
That’s why the key is feedback and iterative optimization, not change for the sake of change. You’re not shifting entire metrics or behaviors every quarter; you’re changing numerical goals to be challenging to your team’s current performance level, as balanced with the outside environment.
Work With Professionals
Everything above likely seems like a lot of fiddly details and work, and all for what; to improve sales team performance while also paying more for that performance? Truthfully, balancing an incentive program with the level of additional business growth it brings in can be very tricky, and that’s made all the more difficult in an industry as regulated and fickle as pharmaceuticals. If your pharma company needs an optimized, effective incentive program, one of the best things you can do is talk to professionals.
That’s where we come in. At Level 6, we are extremely experienced at engineering customized, turn-key incentive programs for all types of businesses and teams. Whether you need a boost to your sales team, a push for loyal customers, or recognition for your corporate team, we have the means to develop the perfect program for you.
Whatever you need, we can engineer something to meet those needs. Just schedule a call, and we can discuss everything you would need for your incentive program, top to bottom, and we can work out exactly how to manage it for you. We look forward to hearing from you.
Do you have any questions about anything we discussed in this article? If so, we’re more than happy to help you out! Please feel free to reach out to us at any time, and we’ll gladly answer any of your questions as best we can.
Claudine is the Chief Relationship Officer at Level 6. She holds a master’s degree in industrial/organizational psychology. Her experience includes working as a certified conflict mediator for the United States Postal Service, a human performance analyst for Accenture, an Academic Dean, and a College Director. She is currently an adjunct Professor of Psychology at Southern New Hampshire University. With over 20 years of experience, she joined Level 6 to guide clients seeking effective ways to change behavior and, ultimately, their bottom line.