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  • Writer's pictureKarsten Schmidt

How to unleash the real power of segmentation and targeting

Updated: Jun 5, 2020



In Life Sciences Healthcare professionals are often categorized based on their potential in relevant therapeutic areas as well as their propensity of prescribing certain brands within these therapeutic areas. From these two dimensions of potential and propensity the customer segments are built which are needed to establish the level of resource allocation against them. Resources can be a wide range of activities from the classical individual or group interactions to all other sorts of multi-channel interactions.


Illustration of two-dimensional segmentation of potential and propensity




By running an analytical process which combines sales force intelligence with market data down to brick-level it is determined which segment the individual customers belongs to so that segmentation and targeting values are as accurate as possible. In our example there is a three by three matrix (numbers can vary from case to case) and from this normally between three to four segments are deduced. The available sales force interaction capacity (number of sales reps multiplied by number of interactions per time period) is the basis to distribute the number of planned interactions per customer segment. Apart from the value-based segmentation Life Sciences companies often also try to introduce behavioural customer segments in order to adjust promotional messages taking into account the beliefs and attitudes of different customer segments. It is worth mentioning in this context that the combination of value plus behavioural based segmentation increases complexity significantly and that at the end of the day sales representatives need to be able to fulfill a plan of customer interactions with a limited number of customer segments and messages within their territories. Otherwise there is a risk of excessive complexity which cannot be handled properly by the sales team.


So far so good! Now comes the even more challenging part: How should Life Sciences companies actually establish their call capacity, i.e. the size of their sales representative team. Here is where the concept of promotion response is relevant. It is known that with increased promotional effort the sales impact diminishes hence the promotion response curve is one of diminishing returns. As a consequence the point on the profit curve (sales minus expense curve) needs to be found where the profits will be maximized. This is also called the point of the last profitable call or the point at which the cost of the customer interaction is at the same level as the incremental sales that will be generated into the future for that interaction. Another term used is the one of incremental return on investment (iRoI) which is zero with the last profitable call. This means that increasing coverage of customers beyond this point will not be profitable for the company anymore.


Illustration of promotion response and profit response curves

In order to establish long-term incremental sales it is important to take carryover values into account. Carryover values are the incremental sales into the future due to promotional efforts in the past. They vary depending on the life cycle phase that a product is in, its competitive pressure and its type of therapy (acute versus chronic). There are powerful tools available in the market which are able to calculate promotion response, carryover values and the corresponding ideal level of promotional investment to optimize long-term incremental sales. It is highly recommendable for Life Science companies to periodically review their resource allocation through promotion response analyses in order to maximise their long-term profits.

The segmentation and targeting process described in the beginning becomes much more meaningful when conducted in combination with a state-of-the-art promotion response analysis.

So when was the last time that you conducted a promotion response analysis for your market to ensure optimal resource allocation for your portfolio of promoted brands? The good news is that this does not have to be an overly complex or expensive process. #SegmentationTargeting of Healthcare professionals is a challenging task in Life Sciences. Its real power is unleashed when combining it with state-of-the-art #promotionresponse / #iRoI analysis. This brings #SFE to the next level.

 

Xeleratio Consulting Ltd.

We help Life Sciences executives improve sales performance with innovative best-in-class Business Excellence tools and methodologies . Expertise in Business Excellence has been gained with over 12 years of working in different global and regional roles in the Life Sciences industry.


 

Please feel free to reach out and request a free strategy session whenever convenient.



 

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