Pharma IQ recently spoke to Frank Gehres Vice President and General Manager of Convatec with responsibility to Germany, Austria, Switzerland, and the Nordic Region about Segmentation and targeting and how to use segmentation to grow customers, drive sales and profits.
Pharma IQ: Can you give an overview as to how organisations can use segmentation and targeting to grow customers and sales?
FG: I speak mostly on events around the pharma medical device industry, but, customer segmentation, sizing of resources, is basically important for every business where you’re going to sell something to customers.
Today many businesses are dealing with limited resources – we need to think about what makes a business successful. Some clear principles are: setting the right objectives, understanding where you want to go and setting the right strategy.
And, of course, then you sell a product, it should have a competitive advantage. It also comes down to people and finally commercial execution, but at that point it is important to be aware that things can go wrong.
Segmentation of customers is key to gain commercial execution. One of the most important fields selling a product to customers is to understand where the potential lies, the best way to undercover that potential and accelerate existing resources to uncover the market potential.
Pharma IQ: What are the first few steps an organisation should take when it comes to segmentation and targeting?
FG: In the end it’s about identifying who has the highest potential for your product and who can actually generate the highest revenue with your product.
So begin by trying to understand who has the most consumption of your product, who’s going to use the product the most in a B-to-B chain and if it can actually be implemented.
It is best to list the following criteria before drawing up a segmentation plan:
• The Dimensions of the segment and customers
• Existing business
• Existing potential in a certain company/customer, which two dimensions define your segments
• Category of groups in those companies
• The target groups you are speaking to: marketing, sales or medical
So imagine you have an account which has pretty low potential for your product, but it might have easy access because your competitors might not look after those accounts because of the low potential. Where an account has high potential every competitor in the business will actually look at it, so that could be a way of thinking about the companies you want to approach.
Pharma IQ: What are the top three priorities that you ask your sales team to consider before going out into the market?
FG: No matter how great your strategy, product or how good your people are, if you don’t get the job done you won’t be successful so, in the end, commercial success is based on hard work and getting the job done.
When we realistically think about the industry we’re in, the times of the major blockbusters which sell on their own has actually gone. We’re all under pressure from a pricing point of view, the reimbursement point of view, if you sell into the pharmaceutical industry there is pressure on cost, so execution and getting the job done is my primary key message to the audience I’m talking to.
All businesses are suffering from limited resources, whether it’s in terms of people, financial resources, product availability, product resources and time.
I guess time is the best example because; you have only a certain time to spend and that time needs to be most effectively spent. You can only do that if you actually segment your audience and your target group by potential and by your competitors’ share to make sure every resource you spend is spent in the best way and is actually spent to the best and high potential accounts.
Pharma IQ: How do you envisage the sales landscape to look in the next five years?
FG: I still think in our industry, the person on the ground will make a difference in the future, and I’m still a strong believer in people make the difference in sales and not product, services, price or promotion. I think people in the end and the relationship we have will make the main difference.
Now, will the number be reduced and will that resource, people, be limited? Definitely. Let’s take an example: Iimagine you have a group of 100 customers and you segment them by potential and by market share, and you say 20 of them have high potential and you have very low share, I’m sure those are accounts you will look after in person and send a person because you know once you get access and form a good relationship, you can move your share.
Imagine you have another 20 accounts where you have high potential and high market shares, so your loyal accounts, using your product big time, I guess you still go there because you have built that loyalty on relationships, so you still go there but maybe you go there a little bit less because they’re your friends, and even if it’s nice to go there but maybe you can reduce a little bit of time, and you maybe email them, or you send them a letter, or you make them part of a loyalty programme which means they have access to an online platform where they can actually get information from, even with priority, but you can reduce face-to-face calls.
And then you have a group of lower potential but customers who have high share, and people you have seen a lot in the past but their potential is actually limited, so you’ve got to shift resources from there to your high potential accounts. You would maybe reduce the number of face-to-face visits to those accounts and you would maybe use different ways; you would email them, you would call them, you would use another online platform, a different way of approaching those customers.
So when you think about segmentation… and then you have accounts with low potential and where you have actually not much market share, you would actually skip them at all and you would not even look after them because it doesn’t make sense. So when you think about this, I think it’s going to be a combination. We will have limited resources, all of us will because we all in this industry have price pressure, we have to cut down cost, we have to be profitable.
So we will need to save resources and reduce our face-to-face resources, but I think there’s still a lot of accounts we have to look after in person to keep and build relationships. In other accounts you will use different tools like mailings, calls and online platforms, so I still believe it’s a combination of the two.
And maybe as a summary, we will use different tools in the future. Where in the past we used paper tools to sell, maybe in the future we will use more tablets, PCs, and have quicker access to information, and we will leverage the time we have with customers just by using new technology which is going to helpmake it more efficient. So I think it’s a process, it’s an evolution, and I think it’s still a combination of face-to-face, plus additional direct media, plus more efficient face-to-face meetings with new technology.
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