The compensation structure for large organizations specializing in the pharmaceutical industry dictates the quality and breadth of the effectiveness of sales. At the heart of every compensation program lies the need to incentivize an activity that’s beneficial to the parent company.
The more that a pharmaceutical company is able to compensate its sales representatives, the more likely they are to work harder to push the product. The following provides a basic overview of the current compensation structure and the need for improvement in various areas:
The Landscape of Pharma Sales Compensation Today
The current pharmaceutical market is worth $300 billion with an expectation of growth exceeding $400 billion within the next three years. The majority of sales are controlled by 10 major pharmaceutical organizations. Six of these are based in the US, and the others are based overseas.
Most companies have established sales representatives, and their goal lies in keeping these people happy and productive. The four basic aspects of current compensation plans include:
- The base salaries
- Additional competitive incentives and awards
the compensation plan is constantly changing and evolving with more mature products, and the need to introduce new components. Each time a plan expires, it needs to be restructured in a way that continually motivates the sales force.
Information and Tips to Better Structure a Pharma Sales Compensation Plan
A Linkedin article by Kate Flemming suggests “ditching the cookie cutter plans,” and she’s absolutely correct. It’s important to look at each compensation plan as an individual entity. Understand the types of products that are being sold, their availability, their therapeutic class, the way that they are approached by prescribers, and their overall marketability.
Coming up with a cohesive plan needs to be based on all of these factors and on the type of sales force that you’re working with. A veteran sales force will have a better level of adaptability for different types of products. Foster your relationships with these particular representatives and focus on increasing their compensation. Match the right product to the right area and incentivize sales.
The Best Practices for Large Organizations to Build and Implement Sales Compensation Plans
One of the most important things to consider when building your compensation plan is to work with all of the involved departments. This includes everyone from your finance department to human resources and marketing. Covering all of your bases is the best way to make sure that the compensation plan works with the company culture and doesn’t step on any internal toes.
Utilize representatives from every area within the company to create a team dedicated to forming the sales compensation plan. Involving outside consultants can be a good way to get an objective perspective on the process, but they should be used with their purpose in mind.
The need for a commission-based plan, a quota-based goal, or a bonus model will be determined by the mission of the company, and the mix of sales personnel. Don’t be afraid to think outside the box, and to change your sales compensation models in an effort to evolve with the pharmaceutical landscape.