Sales

A good forecast process is undoubtedly crucial to avoid surprises (especially negative ones) regarding supply issues and company results as a whole.

A good forecast process is undoubtedly crucial to avoid surprises (especially negative ones) regarding supply issues and company results as a whole. But, even more important is assuring that there is a good set of indicators to monitor whether strategy is right and the path to achieve the objectives according to forecast - is really well paved.

When it comes to sales forecasts, there are a wide range of methods/tools in place. Some factors to be considered before choosing the one that fits best are:

Demand results (sell out) are more appropriate than sales (sell in) for forecasting the budget for upcoming years. This avoids skewing by situations where, for any reason, inventories are above average at the end of the year.

At least three years of demand/sales history are required to understand sales/demand behavior and precisely where a product is in the cycle life. Based on historical data, a powerful tool like KXEN* would be a good choice for predicting future sales.

Direct competitor performance is key, adding this to the list of factors that must be revised in a yearly basis. Market composition is a competitive advantage and sometimes a product that is supposedly not competing directly in the market may be doing so indirectly.

Prediction of market behavior class-by-class, new entrants, generics, eventual restriction of promotional activities and opportunities with alternative channels (including hospitals, government, business) should be considered.

And because the process is complex and must be tailor-made, naturally more variables must be considered depending on the specific case.

So, lets consider what to monitor in order to guarantee excellence of implementation and ensure full alignment between sales and the forecast, as well as the best demand outcomes. Some elements to be tackled are:

o Targeting: customer panel composition is undoubtedly a critical success factor in forecast accomplishment. Nowadays, segmentation is necessary to customize the approach and follow up according to the situation (different metrics for different segments).
Examples:
? Segmentation based on prescriptions profile: each segment requires a different strategy, according to competitors characteristics
? Segmentation based on prescriptions potential: a resource allocation policy must be in place
? Segmentation based on social profile: approach is totally different comparing, for instance, analytical and entrepreneur MDs

There are other segmentation models or even combinations, but the point is that one single approach for all customers will lead the company to run risks regarding forecast accomplishment, especially if the sales target is overly ambitious. A segmented customer panel will allow the company to allocate resources smartly in order to effectively measure ROI.

o Resource Allocation level: all resources provided to the Sales Force must be monitored in order to guarantee an optimal distribution across the different customer segments. The most important ones are:

? Sales Rep Time: this is the most precious resource, so its allocation is a critical success factor. More time needs to be allocated to visiting the right doctors and it is fundamental that by the end of the year at least 80% of them have been visited with the right frequency** (according segment). This approach is individualized and more straight to the point compared to calls per day or total amount of calls in a cycle.
**if the year is divided in 10 cycles and the MD is a double-call frequency, ideally he/she should be visited 20 times in a full year.

? Samples: a very expensive resource whose distribution is easily followed by ETMS systems. Ideally, tracking should be by segment with higher potential targets receiving a higher concentration of the resource.

? Scientific support: must exclusively be driven to top customers

o Call Effectiveness: Any time spent is wasted if the contact does not add value or there is not good message retention by the doctor. So, it is necessary to assure that Sales Reps are well prepared and MDs are really capturing and being receptive to the central idea (message= competitive advantage) after the promotion. Three points to be tracked:

? Product knowledge: through unaided and open tests it is possible to evaluate how sales people are prepared. Scores (ranging from 0 to 10) over 9.0 are the goal.

? Message retention: an unaided test can be applied to evaluate the retention of a products core messages usually around three key messages by Sales Reps. Expected retention rate is 100% to guarantee 0% message leakage between Product Managers and Sales Reps.

? Sales skills: product knowledge and message retention is certainly the goal, but there will be no message transference if there is no attention from the other side. District Managers are responsible for training Reps in the field and they need to have a gold standard as a reference in order to work objectively with them.

? Message recall: This is an unaided test - by phone or in person conducted by a third party (such as amarket research company) to evaluate what percentage of doctors recall the key messages for a product. This is one of the best measures to assess strategy effectiveness and, as a consequence, whether perceptions of the company and customers are the same. If perception is vastly different, the strategy and the forecast must be changed (get higher or lower).

When the key messages of a given product are evaluated for message recall, if the final index is above 60% (outstanding results), high levels of prescriptions can be expected. On the other hand, if a recall index <30% is achieved, the strategy must be revised, because either the product was not well accepted, or the message was not understood by customers.

o Activities ROI: Promoting an event, sponsoring a Congress or starting a Commercial Campaign (generics, OTC) requires a significant investment and demands time and planning to make sure that everything is going to work well. Some methods are available to help companies measure effectiveness of these initiatives, but the point is that, once a scientific event is programmed, a return is expected and the forecast for the month must take this into consideration.

Companies have at least one chance to adjust sales figures during the year. If initial figures are not as expected, then revised ones must meet projections in order to not preserve credibility. Once the strategy is well implemented, it is highly likely that the forecast will be accomplished with no supply issues. This is why sales must feed forecasts, and vice versa, in a continuous and dynamic process.

Forecasting the numbers and ensuring the complexities are worked through to reach the final figures, is only the first part of the game. The effort must be coupled with a good set of indicators and excellence in implementation to achieve those predictions at the end of the day.

*KXEN : a powerful data mining tool from KXEN company (France)