Dear Colleagues! This is Asrar Qureshi’s Blog Post #639 for Pharma Veterans. Pharma Veterans welcome sharing of knowledge and wisdom by Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi onWordPress, the top blog site. Please email to asrar@asrarqureshi.com for publishing your contributions here.
Opening Note
February 2022 marked my completing 47 years of working in Pharma Industry. Allah be praised. I am still working. My journey of near half century is also the journey of Pharma Industry in Pakistan. Great changes have occurred in this time and a lot could be written about it. In my blogs, which were started about four and a half years ago, I have covered several topics related to Pakistan Pharma Industry. This multi-part series is the SWOT – Strengths, Weaknesses, Opportunities, Threats – Analysis of the Pharma Industry and propose strategies.
Strategies to Avert Threats/Risks
In this last set, we shall discuss strategies that shall help in averting threats and risks. These may be prevailing now and may be coming up in the near future. The nearness of future is important factor, because some of the shadows are already lurking. In the strategic language ‘Clear and Present Danger’ is which is here and now and serious. Some do belong to this category also.
We shall start from the present and move into future.
- Rationalize Selling Cost – The cost head which has increased disproportionately is the selling cost. Selling cost includes cost of Marketing and Sales Teams, cost of promotional materials, cost of promotional activities, and cost of customer services. Cost has increased in all heads. To put it in perspective, I may mention that our marketing/sales budget in 1997 in an MNC was 8% of sales turnover. Three years later, it was 14% of turnover in a local corporate because the turnover was lower. Currently, it ranges between 35 – 45% for medium and large corporates; much higher for smaller ones.
- For many years, there was no marketing team even in multinational companies. The promotional materials came from parent offices and were reproduced/reprinted here. Gradually the local marketing activity but in a controlled fashion. The promotional folders/items designed here were sent to parent office for approval, who would object/suggest changes etc. The folders were not changed very often. One promotional folder may be used for six months or even more. The parent offices took responsibility for everything: they appointed their own representative as the head of operation here, they were responsible for profit and loss, they were responsible for support from parent office because even the gift items came from parent office. The products pricing was also done on regional basis; developing countries like ours got less transfer prices as compared to developed countries. Things changed rapidly. Much before Mergers and Acquisitions, the corporates started offloading unnecessary responsibilities and made local corporates independent and accountable. The MDs were also gradually replaced with local people, the pricing became universal and local affiliates were given autonomy in many areas including marketing and sales. Budgets and P&L were monitored by the parent offices and became their only concerns. Lately, the parent offices included compliance in monitoring after complaints from many parts of the world that the local affiliates of MNCs were indulged in unethical practices.
- Marketing then started in earnest. Brand management became integral and elaborate marketing structures were introduced. The number of brands handled by a brand manager kept declining as the size of brands increased. Presently, for large brands, one brand manager is allocated for one brand, or even a variant thereof. Marketing budgets were increased liberally because the results were coming in. for many years, it was considered that there was a linear relationship between input and outcome and that it would keep increasing no matter what. There came a time when it stopped happening, but by that time, the companies had entangled themselves in very high cost of marketing and are now finding it hard to get away. The MNCs took the shield of compliance of ethical marketing practices and international monitoring and stopped several practices. The Local Pharma had no such shield nor bothered to have one and are suffering.
- Marketing makes plans for product promotion, activities, and customer services; sales teams execute their plan. The lines may not be clearly drawn in many companies, but this is the general format. Budgets may be prepared by marketing and sales separately but are merged under cost of selling.
- Sales teams have a similar history. The average size of team that covered the entire country used to be 25 – 30 salespersons with 7 – 8 managers. Only major urban areas were base stations where representatives were based. Peripheral towns were covered from there. Several things evolved simultaneously.
- The population increased exponentially, small towns became big and big ones became bigger.
- Rural urban migration fastened, and cities came under enormous pressure. The government decided to offload pressure on cities and appointed specialists at divisional headquarter hospitals.
- Relative affluence came in for majority of population. People could afford to get medical treatment.
- Access to healthcare improved with private hospitals sprouting everywhere.
- Number of medical colleges increased, more doctors were produced increasing access to healthcare.
- Doctors who came from remote areas for education opted to go back to their hometowns for establishing medical practice.
- Government appointed specialists at the district level. Number of consultants and specialties were added.
- The consultants sitting at district/divisions established lucrative private practices which motivated more consultants to leave large cities and move to peripheries.
- Government established medical colleges in all division headquarters and attached divisional headquarters hospitals as teaching hospitals.
- Diagnostic facilities increased greatly, and early detection and diagnosis became possible.
- Disease awareness campaigns were run highly successfully making people consult a doctor.
- The upshot is that the medical facilities, access, quality, variety etc. has changed for better. More people are getting diagnosed and treated.
- It was logical to increase the number of salespersons, base headquarters, and teams to match the burgeoning health market. This led to the proliferation and expansion of sales teams which in some cases is 10 – 15 times of what it used to be.
- The cost of sales teams has increased horizontally and vertically. Horizontally, due to geographical expansion; vertically, due to increase in salaries, working allowances, incentives, perks, and benefits etc.
- The cost of sponsoring local medical conferences has become humungous due to insatiable greed of organizers.
- The expense on traveling both domestic and foreign, for CME – Continuing Medical Education program should be reconsidered.
The overall cost of selling must be rationalized because this single head can drown the company due to its sheer weight. Particularly, the huge expense incurred on sponsorships of medical conferences and traveling on the pretext of medical education must be revisited.
To be Continued……
Disclaimer. Most pictures in these blogs are taken from Google Images which does not show anyone’s copyright claim. However, if any such claim is presented, we shall remove the image with suitable regrets.