Managing Your Revenue at RiskVerde Group Capabilities

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Who We Are

CUSTOMERLOYALTY RESEARCH

EMPLOYEEENGAGEMENT RESEARCH

• We are a research based consultancy specializing in customer retention research. We have developed a trademarked research process that prioritizes – by economic impact – the specific customer problem experiences that result in decreased loyalty and churn, called Revenue@Risk.

• Verde also provides Human Capital Management consulting. We focus on employee engagement research using a state-of-the art employee engagement survey and benchmark database developed by The Conference Board.

POINTS OF DIFFERENCE • 16 years experience in identifying, analyzing and improving

organizational performance and resolving customer problem experiences across business categories.

EXPERTISE • Senior Consultants with Customer Loyalty, Human Capital Management expertise with a variety of industries.

CLIENTS • We work with leading Fortune 500 companies worldwide.

Strategic Research Partners:

VERDE TEAMVERDE TEAM

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Stakeholder experience is the strongest predictorof behavior

• Trends:

– Introduction of customer-centric service models

– Moving sales team from product selling focus to coordinating value-add experiences

– Addressing the business needs of customers for mutual benefit

• Issues:

– Continued use of traditional sales force effectiveness, general physician satisfaction metrics

– Typical studies do not identify specific experiences, frequency of experiences , how to create value added services from the customer’s perspective.

• The Verde Group has developed 3 key premises around Pharma Stakeholder research that identify the attributes that make customers satisfied and loyal, but more importantly the experiences that create dissatisfaction and possible defection from the brand.

Pharma Stakeholder Research APPROACH TO LOYALTYAPPROACH TO LOYALTY

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Dissatisfaction is not the Opposite of Satisfaction

As a driver of loyalty, dissatisfaction represents a dimension of customer affect distinct from satisfaction.

Dissatisfaction is a very powerful predictor of a customer’s future behavior.

Drivers of satisfactionand loyalty

• Consultative Selling• Business Acumen• Creating Mutual

Benefit

Drivers of dissatisfactionand defection

• No coordination of resources

• Reimbursement Issues• Educational Materials

APPROACH TO LOYALTYAPPROACH TO LOYALTY

Satisfaction Is Not Sufficient For Loyalty

Satisfaction Is Not Sufficient For Loyalty

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Experiences Drive Loyalty

The customer relationship is built with the experiences that customers have with a provider. These experiences lead to the formulation of attitudes and the attitudes drive customer behaviors (loyalty or defection.) The assessment must mirror the customer relationship process.

Satisfaction is an attitude associated with loyalty

Most customer loyalty research focuses on attitudinal measures. However attitudes are not actionable.

What drives loyalty, brand equity and customer value is the Customer Experience

APPROACH TO LOYALTYAPPROACH TO LOYALTY

Satisfaction Does Not Drive LoyaltySatisfaction Does Not Drive Loyalty

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Customer Loyalty Evolves Over Time

• Customer defection is a process of disengagement and not an event

• A customer’s dissatisfaction thresholds are established in part by the attractiveness of competitive alternatives

TRUSTTRUSTTRUSTTRUST

Customer Loyalty Is Not BinaryCustomer Loyalty Is Not Binary

APPROACH TO LOYALTYAPPROACH TO LOYALTY

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The Verde Research Process

Our methodology is designed to move research findings “out of the binder” and into operations in an actionable, efficient and impactful manner.

OUR PROCESSOUR PROCESS

Verde has developed a proprietary research process to measure customer and employee experiences and resulting attitudes and behaviors. The process:

• Identifies the customer and employee experiences that are predictive of market action (recommend, prescribing behavior, value)

• Links market actions to financial impact

• Delivers insights that are highly actionable due to the granular nature of the feedback.

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Revenue@Risk and Engagement@Risk Analysis

OUR PROCESSOUR PROCESS

Obtain buy-in, commitment of leadership

team

Involve employees in identifying customer pain points and opportunity

Identify interactions and experiences customer has

with the company

Pinpoint actions with greatest impact to

produce ROI

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Project Planning• Facilitated Decision Making Meeting• Sets Up The Project

Diagnosis• Qualitative Research with employees and customers• Customer experience measures developed from input

Baseline Measurement• Quantitative Research• Measures Performance Against Expectations

Action Planning• Facilitated Meeting• Uncovers Actions Needed To Drive Customer Behavior

Continuous Tracking• Periodic Measurement• Tracks Improvement On Key Loyalty Drivers

Our measurement program will provide actionable and robust results for every key stakeholder group

Project Steps OUR PROCESSOUR PROCESS

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Outputs From “Revenue At Risk” Study

“Revenue At Risk” Problem Analysis

• Ranking of Stakeholder experiences: the most prevalent, the most important to the Stakeholder

• Identification of the key problems placing the greatest revenue at risk • Key Drivers analysis to measure impact of problems on behavioral outcomes

Drivers of Loyalty Analysis

• Identification of those superior service and relationship attributes most important to sustaining and growing the loyalty of the Stakeholders and differentiating the company from competitors.

Brand AttributePerformance

• Performance of company and competitors on the key brand attributes that create competitive advantage.

ServiceRecovery

• Analysis of Stakeholders who contact the company about problems vs. those who do not.

• Impact of company’s Stakeholder contact handling on satisfaction, and loyalty.

Economic Impact Analysis

• ROI impact of problem experiences on Stakeholder’s revenue impact. Analyzed by overall impact and by individual problem impact.

OUR PROCESSOUR PROCESS

Revenue@Risk prioritizes the economic impact of the problem experiences that degrade customer loyalty, and then creates detailed insight on the actions necessary to grow the value of the customer base through improved retention, product penetration, and word-of-mouth market.

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Problems & Service Recovery

When problems are solved completely, customers with problems are as loyal as those without problems

Loyalty is lower for customers who do not have their problems resolved than for those who never call at all

Loyalty is four times greater when problems are resolved to a customer’s complete satisfaction

I II III IV

No ProblemExperience (52%) %

Completely Satisfied (28%) %

Resolved(68%) Acceptable (28%) %

Less than Acceptable(41%) %

Contacted(50%) %

Not Resolved(32%) %

ProblemExperience (48%) %

Did NotContact (50%) %

Market Impact

Question/Problem

Experience

Service RecoveryContactBehavior

Customers(Base=2311)

Definitely Recommend

Pharma

%

44

18

10

17

8

25

26

46

Impact of Service Recovery on Loyalty and Word of MouthFor each Customer group the survey data will yield:

(I) % with problems

(II) % who will/will not contact the company

(III) % with problem resolution and satisfaction with resolution:

(IV) Recommendations

EXAMPLE CHARTSEXAMPLE CHARTS

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Impact of Most Serious Problems

MOST SERIOUS PROBLEMS

0

1

2

3

4

5

6

7

8

0% 5% 10% 15% 20% 25% 30% 35% 40%

Incidence

Cust

omer

s At

Ris

k

Lack of business acumenCompany’s products

are not cost competitive

Patient education materials not up-to-date

No coordination of resources to service us

Unresponsive to requests

Inability to track marketplace trends

50% 60%

Example Chart showing the impact of experiences on customer behavior by identifying the problems that are the most serious in terms of both incidence and defection risk:

This analysis provides an analysis of the most serious problem as well as the combination of problems on customer risk: negative word of mouth, decreased spend.

Lack of problem solving skills

EXAMPLE CHARTSEXAMPLE CHARTS

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TOTAL PHYSICIANS KEY DRIVERS OF CUSTOMER LOYALTY

Willingness to Recommend

Biologic Company to other Physicians

Willingness to Recommend

Biologic Company to other Physicians

Ability of the Biologic Company to Get Patients Approved for Biologic Therapies

Sales Reps Customer Centric Focus

Problem Solving Skills Provided to Office Staff

(.31)

(.26)

(.21)

(.30)

Collaborative Business Intelligence and Business Acumen

Key Drivers of Customer LoyaltyEXAMPLE CHARTSEXAMPLE CHARTS

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Revenue@Risk Economic ProjectionCredit Card Issuer Customers at Risk and Customers Saved

NOTE: Cardholder Quantities Modified for Client Confidentiality

Note: NLTR = "Not Likely To Recommend"

[CLIENT] REVENUE@RISK PROJECTION

15,000,000

CORE CARDHOLDERS

4,950,000

Problem

10,050,000

No Problem

1,980,000

Contact

2,970,000

No Contact

1,465,200

Problem Resolved 659,340

Complete

336,996

Partial

468,864

Not

19%

NLTR

33%

NLTR

70%

NLTR

125,275

CARDHOLDERS@RISK

111,209

328,205

50%

Percent That Defect

62,637

55,604

164,102

68%

NLTR

350,064 175,032

460,350 31%

NLTR

920,700

3%

5%

7%

10%

2%

% Projected Saved

1,879

2,780

11,487

17,503

9,207

CARDHOLDERSSAVED

$57.94

Cardholder Value

$108,876

$161,086

$665,567

$1,014,135

$533,454

$2,483,117

TOTAL ANNUAL INCREMENTAL NET INCOME

33%

514,800

67%

40%

60%

74%

26%

45%

23%

32%

PROBLEM INCIDENCE CONTACT RATE

PROBLEM RESOLUTION

SATISFACTION WITH PROBLEM RESOLUTION

1,835,452

1 2 8 9 10 113 4 5 6 7

Problem Not Resolved

TOTAL CARDHOLDERS AT RISK

EXAMPLE CHARTSEXAMPLE CHARTS

Economic Impact Analysis

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R@R Applications to common Business ObjectivesPhysician/Customer Perception and Satisfaction

The business objectives we solve for in these types of projects include how experiences drive attitudes and, more importantly, market behavior. The specific research objectives include:

• Which Physician/customer experiences (products, services and interactions) generate the highest levels of Physician/customer satisfaction and loyalty?

• What are the drivers of dissatisfaction and key experiences that may be putting Physicians/customers at risk?

• What actions can the company take to improve the overall experience and therefore, continue to achieve positive economic impact?

Competitive Market Analysis

The specific objectives to be accomplished with this research include developing an in-depth understanding and insight into the following:

• Which companies are considered Best-in-Class in terms of their ability to generate the highest customer satisfaction and loyalty, e.g., willingness to defend, share by word of mouth, brand preference, and willing to pay a price premium?

• How does the company’s performance compare to key competitors on these key customer experiences?

• What are the key sales rep competencies that are creating value-added experiences that meet Physician’s growing needs for information and support?

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R@R Applications to common Business ObjectivesNew Product Launch

We conduct these projects ahead of launch, to help our clients gain an understanding of their target physicians' viewpoint on services and initiatives from competitors to enable them to differentiate beyond the product and create loyalty as quickly out of the gate as possible.

ATU Research

Verde’s R@R approach provides much more in-depth insight into the experiences that shape attitudes and usage, and our approach isolates the effect of the brand loyalty from actual customer satisfaction to enable a company to fully understand the separate experiences and perceptions that drive attitude, usage and brand loyalty.

Monitoring Patient Compliance

Verde also conducts research with patients, mainly to track compliance. The goals of this research are to identify and understand the types of patients likely to be non-compliant. Our research includes the identification of issues with patient education materials, lack of understanding of medication regimens, possible literacy challenges, adverse side effects, impact of physician office visits. We use our R@R methodology to identify the specific issues associated with usage, frequency of problems and the most significant ones impacting compliance.

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R@R Pharma Case StudiesEXPERIENCEEXPERIENCE

Leading Biologic Company – Quest for Non-traditional Physician-Sales Rep Insights

Background: Company had a unique blockbuster drug – crossing multiple therapeutic uses. With a strong late stage pipeline, it had an opportunity to create a strong franchise in the disease states it managed. Yet with increasing competitive pressures, company recognized the need to fully explore and understand the relationship it had with its key customers. Traditional research studies focused on the Physician-sales representative relationship. Given new market dynamics, this wasn’t enough. Company felt it was important to move beyond the physician and explore other constituents that influence brand and company perceptions.

Objectives: Identify key drivers of dissatisfaction versus those of satisfaction and loyalty for each customer touch-point including:

• What is the relative importance of each touch-point in maintaining current relationships and growing new ones?

• Which specific touch-point issues are impacting customer loyalty behaviors and associated outcomes – word of mouth, script writing, and retention – for company and for competitors?

• How prevalent and important are these issues within each customer group? How do the issues differ by customer group?

• How do experiences with company compare to other major biotech firms in this space?

Insights gained and actions taken: • Develop and empower a single point of contact to own the customer issue from “cradle to grave” • Proactively explain roles and responsibilities of customer-facing/resourcing• Simplify and streamline the patient access process • Train and reward for “customer centricity” • Training around customer interactions

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R@R Pharma Case StudiesMedical Device/Automation Company: Requirement to “change the game” in the hospital lab automation space Background: Company is a global leader in the area of pre-transfusion diagnostics. The company has set itself as the industry benchmark for delivering innovative, value-added products. Their success has been attributed to its unwavering focus and execution around several key principles including: excellent reputation among stakeholders and investment in quality improvement and customer satisfaction. But competition is fierce. In order to maintain and build customer intimacy, company needed a comprehensive customer and employee measurement system that assess and projects how experiences drive attitudes and physician behaviors.

Objectives: • What are the critical “moments of truth” for customers; the interactions that are most important for

driving satisfaction and creating loyalty?• What specific problem experiences occur across the sales and service cycle that damage Company

customer satisfaction and loyalty? How often do they occur? • What is the financial impact of these problems in terms of reorders, product penetration, share of

wallet and customer retention? Which are most damaging for Company, and which represent the biggest opportunity for improvement?

• How do problem experience, frequency and impact vary by customer position: Technician, Lab Manager or Director? What are the differences in satisfaction and loyalty to Company between each of these customer types and across Hospitals versus other types of customer sites?

• Insights gained and actions takenEncourage Customers to Contact about Problems. Improve Problem Resolution. Provide Additional Training to Employees. Correct Product Quality Problems. Communicate Departmental Roles and Responsibilities to Employees.

EXPERIENCEEXPERIENCE

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R@R Pharma Case StudiesLeading Pharmaceutical Company – Losing Market Access in Key Regions

Background: Ongoing cost pressures in managed care have resulted in the growing influence of the IDN. Company had a need to better understand who these constituents are and, more importantly, their role and

influence in the network (particularly non-prescribing constituents). Additionally, the needed to understand how other parties, outside the IDN, influence and affect other parts of the network. With this information, the company can then develop a more focused strategy aimed at accessing these stakeholders with relevance and value.

Objectives: • Who the key influencers/decision makers are across/outside the system and how decisions made

within/outside the system affect other parts of the system. • What IDNs need/what are their challenges/what is most important to them in order to understand how a

pharmaceutical or non-pharmaceutical partner may bring additional value? • The IDN’s perspective around what they believe is an effective relationship and why they think it was

successful, with specific examples.• Future trends and how this differs by IDN, specifically knowledge of current business model and how their

business model is evolving over time. What is making them evolve/change?

Insights gained and actions takenEstablishment of focused IDN strategy and go-to-market organizational structure that supported third party

solutions for value-driven outcomes and improved access in difficult markets.

EXPERIENCEEXPERIENCE

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Verde Experience: Overview

In the past decade, Verde has worked with many of leading Fortune 500 companies in a variety of industries.

CLIENTSCLIENTS SPECIFIC CLIENT WORKSPECIFIC CLIENT WORK

• Revenue@Risk Customer Loyalty Tracking• Competitive Benchmarking• Customer Defection Research• Balanced Scorecard Development• Brand Loyalty • Loyalty rewards program development• Product Evaluation and Usage Studies• Segment Specific Positioning • Marketing Communications Strategy

• Our efforts are focused primarily on loyalty, customer value and employee engagement research.

• We have also conducted associated research/ consulting on various marketing and strategy issues directly pertinent to the loyalty challenges our clients faced at the time of engagement.

EXPERIENCEEXPERIENCE