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Pharma – Diagnosing Poor Negotiating or Selling Performance

2011 June 22 by Mike

With millions of dollars at stake, many pharmaceutical companies  have sent their Account Managers through some sort of negotiating training. But buying negotiating training is a bit like going in for surgery; it’s hard to really assess the quality of what’s been done unless you have some expertise. The ability to differentiate as to whether there’s a selling problem or a negotiating problem can mean millions of dollars in swinging the organization’s performance one way or the other.

The truth is that a skilled negotiator (with the emphasis on “skilled”) will produce a good deal where a skilled sales person will fail. And a skilled negotiator will do it without damaging the relationship. Negotiating skills are not selling skills; many people don’t fully appreciate the difference. Most executives haven’t received practical negotiating training and don’t have enough experience in negotiating in the first place. But with today’s business environment (e.g. managed care and trade discounts), skilled negotiators create a competitive advantage and executives who run Account Management departments would do well to improve their ability to diagnose an organization with sub par negotiating performance.

What’s the best way to diagnose whether or not your organization needs to improve their negotiating performance? Here’s a list of signs and symptoms to look for?

SIGNS AND SYMPTOMS

  1. Customers for whom we are “bending over backwards” to please, and meeting their demands, are becoming even more demanding and more difficult instead of showing their appreciation for what we have done
  2. Our Account Managers don’t get enough back for what we give away to our customers. In some instances, our customers have come to expect that we give things away to them without getting any real value in return
  3. As a manager or executive, I am asked more frequently to become involved in a negotiation, or I feel like I need to be involved in the negotiations. This takes up more time than I would like to devote because I have competing priorities
  4. Our negotiations always seem to eventually boil down to price
  5. When we run into trouble and the Account Manager wants to give in to the customer, the excuses are either:
    • our “value proposition” isn’t strong enough,
    • a Director of Pharmacy that is only focusing on price, or
    • a “difficult” personality on the other side that we need to “keep happy” and have maintain a “good relationship”
  6. Generally, our Account Managers believe that the customer has more power and so their actions and recommendations reflect their belief
  7. We don’t get access to the Medical Directors or others whose focus is on issues outside of price; we’re blocked by our point of contact
  8. Our negotiations still take a too long to conclude which lengthens the sales cycle
  9. Generally, the strategy that our Account Managers take is focused on skillfully convincing the other side, perhaps with science-based arguments, and being prepared to address objections and defend the company’s position
  10. It’s possible that our Account Managers could do deals that were at least 5% more favorable to us and that would make a significant difference to our performance
  11. Our Account Managers tell us that it would help if the negotiating training that they receive was more realistic to their real world.

If any of the above statements are true in your organization, you have a need to improve negotiating performance.

Account Managers must now be skilled negotiators. That’s a change from the past. That means that the experience that top field representatives and sales managers bring with them into the Account Manager role isn’t enough by a long shot. The truth is that Account Managers are being asked to deliver results in markets where the products often have very little ability to differentiate themselves and the customers know it and use it. Customers are demanding more and more and Account Managers struggle with what to do. They think to themselves, do I give in and keep the customer happy or do I take a hard line and risk the relationship. The answer is neither; they should skillfully negotiate to the full extent of their organization’s power; which is considerable, they just don’t understand how to recognize it and use it.

What about systemic signs and symptoms that indicate that the organization needs to better understand how to support its negotiators. Here’s some questions to ask:

1. Do the Account Managers have approved list of “tradables” that they can use to negotiate with the customer?
2. Are they acquiring objectives in exchange for any movement they make?
3. Have all the internal parties involved in negotiating a customer contract and/or approving any proposals or contracts been trained in the same negotiating methodology? Does everyone speak the same negotiating language?
4. Has the senior executive in Account Management and staff received the training and adjusted internal processes to support the negotiating methodology?
5. Are there measures that have been put in place to create sustainability of the skill?
6. Do field managers understand how to coach the skill and support the front line negotiator?
7. Has negotiating excellence been identified as a core competency for Account Managers?

Skilled negotiating performance can mean the difference between exceeding goals and not meeting them; strong negotiating performances help Account Managers feel like they make a real difference for the company; that builds morale and excitement in the group. And having a common approach builds a sense of team. When the approach is driving results, it builds commitment to the leader. So providing the support necessary for an Account Manager to be an effective negotiator may be a good place to focus your attention.