Advice You - Business

Alok Kumar is Chief of Operations for a major telecommunications company. In Kumar’s business, it takes eight to nine months of revenue to recapture the ‘acquisition

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

costs’ of each new customer.

Think about that: just to recoup the money spent on advertising, promotion, introductory discounts, new-client administration and data

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

entry requires a customer to remain loyal for eight or nine months! Only after the tenth month does Kumar’s company start to reap real profits.

What is the equival

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ent figure for your company? If you think you make money the very first time your customer buys, think again.

How much money does your company spend attracting new

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

customers?

How much do you spend on retaining existing customers past the crucial tenth month?

In Kumar’s case, the answer was shocking! The marketing budget for a

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ttracting new customers was huge. But the retention budget for keeping existing customers was tiny. In fact, it wasn’t even listed in the budget.

At Kumar’s insiste

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

nce, and only after much effort and experimentation, his company introduced a budget line item called CORC: Cost of Retaining Customers. Starting at 0.8% of revenue,

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

his company carefully tracked results and now dedicates a full 2% of revenue to this new but essential item in the budget.

At first, many people balk at the idea.

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

Why spend money out of profits on customers who are already giving you the profits? Isn’t that crazy? Spending exactly the money you’ve worked so hard to earn?

Not

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

at all! In fact, CORC turns out to be one of the most reliable ways to secure future revenue – into the 12th, 15th and 24th month of customer retention – and profits

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

.

What kind of expenditures go into this CORC line item?

Goodwill gestures when things go wrong are included, but such service-recovery expenses are reactive – and

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

are spent only after things have gone wrong and customers are upset.

Kumar is more enthusiastic about the proactive elements of CORC: sending unexpected gifts to l

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ong-term customers, such as surprise bouquets of flowers and dinner vouchers to customers on the tenth month of business. The company even rented an entire movie the

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

atre and filled it with customers and their spouses for a special viewing of a blockbuster movie. Many customers commented that it was the nicest thing any company h

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ad done for them in a long time. (And a lot more memorable than just another discount.)

CORC: Cost of Retaining Customers. One of the strongest, smartest and most p

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

rofitable expense items you’ll ever find – or put – in your budget. How big is yours?

Key Learning Point

Spending money on pleasing, surprising and appreciating yo

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ur existing customers is good business. It keeps them committed to your company and lets them know you value them NOW, not just when they first signed up. Long-term

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

profitability comes from long-term customer retention, not just new customer acquisition.

Action Steps

Figure out how long each customer must be with you before yo

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

u can recoup your acquisition costs and earn a profit. Then look carefully at how much you spend each subsequent month to retain that customer with special activitie

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

s and efforts.

If your budget is skewed heavily in favor of attracting new customers, but not working hard enough to keep them, put a CORC in your budget right away

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Most companies can't get it through their thick skulls that a low-cost pricing strategy doesn't work and does not build customer loyalty. Customers will not become advocates if you have lured them in with a low-cost pricing strategy.

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Advice You - Put a CORC in Your Budget

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