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AS PRESENTED AT THE - BEYOND THE PILL - CONFERENCE - EYE FOR PHARMA * Identifying and understanding the "value-Gaps" and applying impact and control segmentation * A holistic approach for commercial alignment throughout the revenue life cycle (Marketing, Sales and Finance) * Embed the operating code into processes and systems with pervasive performance measurement
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More Revenue. Made Simple.
As a leader of Industry Solutions at Model N, James works with our customers and partners to propose, architect and deliver transformational revenue management initiatives. He has over 15 years of experience in consulting, product management and sales roles.
Presenter Slide
James Robinson
Director of Industry Solutions, Europe
E: jrobinson@modeln.com
A Value-Based Connection!
Aligning Commercial Strategy with Sales Execution
Presentation Topics
Market readiness for value-adding services and partnerships
Two dimensions of executing on value
Sources of “value-gaps” in the chain Principles of a holistic approach
Embedding value and revenue
maximization into the organization
The Market is in Transition...
Independent Buying
Group Negotiation
Integrated Purchasing
Power Selling
Independent Selling
Corporate Accounts
Manufacturer Customer
• Highly Differentiated, New Products
• Pricing power = pricing consistency
• Limited analysis of competitive or consumer behavior
• Physician/Surgeon Preference • Sophistication often prized over
Efficacy • Purchasing lock-ins with
established vendors
• Focus on Cost = price erosion • Voluntary utilization = non-
compliance • Dual/Multi-Source = loss of mkt.
share • Returns for ‘Sole-Source’ • Utilization mandated and monitored • Partnership Contracting approach
with win-win approach to structuring deals
• Relationships extend value beyond sourcing to ‘other areas e.g. operational excellence’
• ‘Price’ is not the starting Point
• Commoditization of Products and customer relationships = loss of customer loyalty
• Runaway Rebates and Discounts to meet demands ‘for higher return = margin erosion’
Fragmented Buyers Rise of the Aggregators
The Partnership Model
Increasing Commercial Complexity & Controls
+ 3-5 years
…sometimes “Value” isn’t for Everyone!
“Anti-Value” Payer Purchasing Practices
International Reference Pricing
Procurement via Tenders
Some Recent Statistics…
32% of organizations believe they fail to consistently communicate value.
52% of organizations agree that value & services are the full package
43% of organizations believe end user attach importance to value added services – the remainder still feel price prevails
Creating Value in the New World….
Old World New World
Comparative analysis vs
reference drugs
Negotiate once
Higher burden of proof
Drive to transfer risk
away from the payer
Payment related to
outcomes
Revisit and review
Dominated by clinical benefits Wider definition of value
Pre-launch trials
Economic studies and
quantification of outcomes
As evidenced by…
Planned budget increases / decreases in marketing instruments - Booz & Co (2009)
Challenges to Execution are Two-Fold
The two most important challenges to resolve before implementing Value-Based Initiatives are dominance of conventional methods of pricing and up-skilling sales team’s ability to sell value
- Macdivitt & Wilkinson (2012)
Part 1: Translating Strategy into Sales Execution
STRATEGY
EXECUTION
VALUE Creation, training
and communication Results, feedback and adjustment
Marketing
Sales
Components of Value
Value
RPG
RPG: Revenue or Performance Gain CR: Cost Reduction EC: Emotional Contribution
CR EC
Better patient outcomes
I like you! It costs me less overall
RPG
EC CR
The Value Triad A Unique Customer Combination
Communication & Alignment
Marketing Sales Buying Unit
Patient
Fails to translate into local setting
Created “top-down”
Defaults to type (PRICE)
Value not maximised
Blames product or market conditions
Builds mistrust Goes back to the drawing
board?
How do we “sell” and “capture” this added value?
Part 2: The missing link in Value Delivery…
VALUE Creation, training
and communication Results, feedback and adjustment
Marketing
Sales
STRATEGY
EXECUTION
STRATEGY
EXECUTION
Part 2: The missing link in Value Delivery….
VALUE
Marketing
Sales
PRICING CONTRACTS
Segmentation, targets and commercial best practice
Performance measures, exception approvals
Contract Planning and Development for Value
Discounting Rules
Pricing Approaches
Performance Criteria
Links to Product Strategies
Customer Targeting
Goals & Objectives
Contracting Strategies
1 2
3
4 5
6
The financial and non-financial objectives the organization hopes to achieve
Specific customers with whom the organization wishes to develop a contracting relationship
Consistency of overall brand strategies to
contracting strategies regarding pricing, competitor focus,
customer focus and product portfolio
management
The types of discounts and value-added services offered
in contracts
The amount of discounts and value-added services
offered in contracts
The contractual performance
requirements that customers and
suppliers must meet
Working at “The Sharp End”….
• What is the best deal strategy to use for this offer? – What matters to this stakeholder
– How should I bundle products and services?
– What commercial structures should I use?
• Where should I create and set
the performance thresholds? – How can we ensure a win-win?
– ….and change behaviours
• What discount / incentive for
each commitment? – On and off-invoice
– Ancillary performance obligations
….requires an Integrated End-to-End Process
Value Management
Life-Cycle
Performance Measurement
Agreement Settlements
Deal Management
Financial Compliance
Analytics
$¥€ Value & Price Strategy
Embedding Value Management
Annual Operating
Plan
Quarterly Business Review
Strategic Plan
Quarterly Business Review
Review Cycle
Monthly Contract Reporting Global Value Policy
Committee
Overcome internal barriers
Track results and refine strategy
Advise on best practices
Put in place controls
Disciplined Process Analytics Account Engagement
Redressing the Balance
The Innovator • Cash-flow to invest in R&D
• Predictability of revenues
• Access to emerging markets
• Appropriate price differentiation
• Fair return on capital
The Customer(s) • Make budgets stretch further
• Value for money
• Equality of access to healthcare
• Patient centric solutions
• Support and education for clinicians
Thank You!
More Revenue. Made Simple.
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