Aligning with company or brand strategy
Every organization and brand carries a strategy for commercialization success to which an incentive plan should be aligned. These strategies can vary significantly based on brand characteristics and requirements, the brand’s position in its life cycle, market or policy situations, and the list goes on. Strategic alignment becomes even more complex when one factors in the need to carry multiple brands within the sales team, each with its own goal. In addition, some brands have goals adjusted during different time periods, further complicating planning.
As brands evolve from their launch stage to maturity, the plan strategy may be shifted from achieving great initial adoption numbers and market penetration during launch, to achieving higher revenue and profitability in later brand cycles. An IC Plan taking these position shifts into account might consider shifting the IC measurement from sales units to sales profit, which will automatically help shift the focus of the field force towards targets representing higher margins. Making sure that the IC plan is in sync with strategic goals may be complicated due to these shifting factors, but is critical to brand and organizational success, as well as the rep’s overall sense of satisfaction.
Defining “right” performance
From an operational perspective, the plan needs to define what the “right” performance is for that brand at that time in order to ensure that the “right” performers – those who are really driving the business toward the established goals – are the ones getting a strong payout. One wants to avoid situations where a consistently high payout territory is not meeting brand or company objectives while a high performing territory (based on brand / company objectives) receives low payouts.
Example of Mis-alignment Between IC Plan and Company / Brand Strategy:
Product X is 3 years into launch and is considered a “successful” brand. However, while still growing in volume, profit has started to decline. On closer examination of the source of business, the highly profitable cash and commercial channels have started to decline in volume, but the lower profit Medicare and Medicaid channels are continuing to grow rapidly.
A management objective is to grow Product X profits. The current IC plan is based on a quota structure and pays based on total Rx quotas. The Bronx, NY territory is actually declining in Product X profit but is being paid well based on Rx growth (high Medicare growth). However, the Fort Worth, TX territory is growing in Product X profit but is paid only moderately well due to small Rx growth, but a strong movement toward more profitable channels. In this case, representatives are motivated to push toward the business that is the easiest to grow irrespective of value to the company. In addition, they will shy away from offices that have a concentration of patients who are in more difficult-to-move channels, even if these channels are more profitable.