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  1. How Creating a Sense of Urgency Helped Me Increase Sales By 332%
  2. 1. Identify the decision maker.
  3. Creating the Sales Culture that Makes Sense for Your Team
  4. Network with like-minded attendees
  5. The Sense-Making Approach

This approach has already proved its suitability for several companies with whom we have worked. One can gain a rough estimate of the future sales potential by taking a top-down approach, estimating the total size of the market, and multiplying that by the expected market share of the product. This top-down approach can thus be used to provide a rough estimate, which you can then fine-tune through a bottom-up approach. First, estimate the number of potential patients.

Combine analysts' estimates on market growth and assumptions on market penetration and price to generate an initial forecast representing the sales potential of the drug.

How Creating a Sense of Urgency Helped Me Increase Sales By 332%

Use the discounted cash flow DCF method to discount the yearly cash flow with an appropriate discount interest rate to arrive at the present value of the product's future sales at the time of the product's launch 1 , 2. These calculations yield an estimate of the product's sales potential. Each deal partner receives a percentage of the product's sales because of its contribution to the deal value. First, overall market potential is determined.

Second, percentages are allocated, based on industry averages, to the contributions in marketing and sales, development, and manufacturing. Third, the investment contribution of the pharma company for clinical development is calculated, using the formula for determining risk-adjusted cost of capital.

1. Identify the decision maker.

The remaining value equals the IP contribution, which is usually made solely by the biotechnology company. Once the sales potential has been established, it is necessary to allocate a percentage of that potential to the contributions of each partner. There are generally four areas of contribution to be valued: 1 research and discovery 2 clinical development 3 manufacturing, and 4 marketing and sales.

The first step for most biotechnology companies is to attempt to value their IP before entering into negotiations. However, as we will explain more fully later, it's nearly impossible to value IP in a vacuum, without the context of the marketplace and the contributions of the pharma partner. Therefore, the contributions from the pharmaceutical company should be calculated first. Many biotechnology companies can find it challenging to value the sales and marketing contributions made by their pharmaceutical partners, and yet they must be able to do so in order to negotiate a fair deal.

Thus, they must be able to calculate the size and cost of the sales force that will be required to market and sell their compound. There are two elements to marketing and sales contributions: first, the costs associated with building up, training, and maintaining a sales force; and second, the know-how of that sales force in terms of skills and capabilities, reputation, and established customer access. In each case, the industry average will provide a guideline for determining the contribution.

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However, to determine the appropriate marketing know-how contribution for the pharma partner, detailed data about its sales force are required, namely about number of representatives in the area of interest and their productivity. Depending on the degree of sophistication of the manufacturing process and the pricing of the final product, the percentage of sales granted to the party that supplies the drugs to be used in clinical trials and the markets can vary a great deal. The relative manufacturing costs are higher because biotechnology companies usually manufacture more complex products, and sales are usually lower because the patient populations are smaller than those of pharmaceutical companies.

The contributions in the area of clinical development—usually provided by the pharmaceutical partner—are one of the primary reasons that biotechnology companies pursue a deal. Once again, these contributions fall into two categories, know-how and financial investments.

The former is much easier to value, again, based on industry averages. The pharmaceutical companies' financial investments are usually the larger component of their contribution in clinical development, and it is much more difficult to arrive at an appropriate value in terms of sales percentage for these contributions. To do so, it is necessary to take a venture capital approach, which rewards the pharmaceutical company for the appropriate degree of risk to the capital it invests.

How to Use Scarcity and Urgency to Increase Sales - How To Sell High-Ticket Products & Services Ep12

However, this is more challenging than it first appears, because the degree of risk actually declines as the compound progresses through the stages of clinical development. Therefore, to arrive at an appropriate compensation rate for financial investments in clinical development, we have designed a formula that takes into account both the normal rate of return that the individual pharma company could expect on an investment, and a yield that reflects the decreasing degree of risk over time.

To calculate more accurately the appropriate rate of return as risk declines, a new parameter—the risk-adjusted interest factor RI —needs to be determined, using the following formula:. Using this interest factor, which is perfectly tailored for financial investments in the biopharmaceutical industry, it is possible to calculate the present value of investments that pharmaceutical companies make in the development of the product as it progresses toward launch. By adding up the resulting, discounted investments at different stages in drug development, the present value of the pharmaceutical company's investment in development can be calculated at the time of the product's launch, and the percentage of sales it represents can then be determined.

In the Biochem Pharma case, this figure equaled Why, then, should it be valued last?

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Because, like gold in the ground, it has no intrinsic value until it is mined and made available to the market. The value of the gold is therefore what the market is willing to pay for the gold, minus the cost of removing it from the ground which we have now calculated.

Creating the Sales Culture that Makes Sense for Your Team

So, looking again at Figure 1 , in our example, the residual value of the IP, after all the parties have been appropriately compensated for their contributions to developing and marketing it, is In nearly all cases, this percentage would go to the biotechnology company, which normally has developed the compound at least up to clinical phase I.

Biotechnology companies need to negotiate whether they want to receive this percentage as a percentage of sales over time, as a one-time payment based on the present value of all sales , or as some combination of the two. They will make this determination based on their need for cash. In some instances, the pharmaceutical company contributes its own know-how to develop, for example, a target into a compound e.

In these cases, the residual value If we look at the history of biopharmaceutical deals, most biotechnology companies would have benefited from using the calculation we have just described to determine royalties. Looking ahead, what does this calculation mean for royalties in the future? As is so often the case, it depends. As we mentioned earlier, placing a financial value on the contributions of each party is often the most hard-fought part of any negotiation.

However, awarding appropriate control of IP rights can be equally important to the participants and to the success of the deal. The current frantic activities of global pharma giants preparing for the patent expiration of their blockbuster drugs underscores the tremendous importance of IP in the pharma markets. As these examples show, control of IP represents an enormously powerful lever with huge economic consequences.

Consequently, it is surprising to find that in most biopharmaceutical deals the biotechnology partner retains only the scientifically interesting rights e. Although this situation might initially leave pharmaceutical company representatives cheering about their impressive negotiation successes, their jubilation should be short-lived. The latest findings 4 suggest that biopharmaceutical deals are much more successful for both partners over the long term if the biotechnology company retains the appropriate amount of the intellectual control rights.

This makes sense in light of the fact that only when both parties retain a fair stake in the deal can they be expected to exert their resources on its behalf. Just as financial deal terms must reflect the contributions of each party, so control of IP must be correlated with each party's contributions to the development of the drug. In other words, the partner who will manufacture the product should get or retain the rights to do so. Generally speaking, the allocation of IP control rights should allow each partner to keep control of the steps carried out under its supervision.

Furthermore, the distribution pattern should provide incentives for both partners to stay interested in the long-term success of the project. How can biotechnology executives convince pharmaceutical companies to be interested in such an approach? And why would successful biotechnology companies change their current procedures?

Network with like-minded attendees

Even companies like Millennium experienced these harsh times before it could demand, and get, premium deal conditions. However, as Holtzmann suggests, it is in the best interest of both biotechnology companies and their pharmaceutical partners to make deals that make sense from the beginning, regardless of negotiating leverage.

Because biotechnology companies who shortchange themselves in their initial deal make it even more difficult to make the right deals later. Either they will face demands from subsequent potential partners for comparable terms, or they will face internal resistance from senior managers unwilling to sacrifice their vision to their internal business development department. And pharmaceutical companies that force biotechnology newcomers to accept unfavorable deal conditions will subsequently be spurned as poor partners by just the companies they will want to woo—successful biotechs.

And finally, the ultimate success of any deal depends on the continuing efforts of each party. Prior to presenting your pitch to the buyer, you should conduct thorough research on their company, their industry, and competitors. Great research will also eliminate unnecessary noise and will keep the buyer s engaged. Before the actual sales pitch, ensure that you are talking to the person who not only truly understands the business, but is also a decision-maker. This is easier said than done.

Oftentimes, getting access to the actual decision-maker in a deal is a primary hurdle that salespeople face, and requires building trust and a more value-based relationship over time. This point poses a growing challenge, as research from CEB shows that the number of people involved in B2B purchase decisions has grown from 5.

Being a storyteller is a skill not often discussed on sales teams, but it can be the secret that sets a good sales pitch apart from the best sales pitch. Tell the story of where their business is now, and the vision of what could be. Inspiring change and getting them to think differently is a way to differentiate against another seller who sells products and not value. You've done your homework and listened to what the buyer has to say — now share your solution to their problem.

A good sales pitch will acknowledge that problem via research and provide a solution. Your message should be honed on a specific product feature or features that the audience will benefit most from. The most common sales objections fall into four buckets: budget, authority, need, and time also known as BANT. You may not need to have a detailed response to all four, but be prepared to discuss each. The key here is to show you understand their concern, and offer possible ways to overcome those hurdles.

The Sense-Making Approach

Does the target audience currently have a competing product that is similar? If so, highlight the features that differentiate your product. Do they not have budget this quarter? Talk to how much money your product can save them. In the meantime, leverage customer and product research and use that knowledge in handling objections.

So, start by asking questions, and be an active listener in response. Keep checking in with the buyer during your pitch — take the time to hear their views and respond with deep, thoughtful follow-up questions. This is a critical step to really understanding their business needs and ultimately closing the deal. If your pitch goes well and you have your ears open, it should feel less like a business presentation and more like a healthy conversation about their business needs.

Every sales pitch should end with a call to action that makes sense. Never wait for the customer to make the call to action. Knowing the role of your buyer or buyer s, more likely will help focus your research and shape how you personalize your pitch. For example, research shows that marketing leaders say their biggest challenge is engaging with customers in real time.

Meanwhile, for customer service leaders , the main challenge is keeping up with changing customer expectations. Looking for a head start on your next sales pitch?