Are You Clear About the Role of Marketing in Pharma?
Pharmaceutical marketers seem to be rapidly losing the ability to understand and influence their customers. For many years, Pharmaceutical marketers were blindsided by their own success and relied too strongly on innovative new products.
Several studies reveal that the majority of CEOs believe that the number one driver of revenue growth is new products. This could be the case in the pharmaceutical industry also with the constant M&A activity to acquire pipeline.
If they had done their jobs, most of these products would not have launched at all.
In addition, line extensions are also quite a common phenomenon in the pharmaceutical industry as a quick fix to gaining a ‘new product’. ACNielsen BASES report that 93% of all new consumer products fail within the first 3 years, and product databases show that line extensions are actually more likely to fail than legitimate new products. It has been seen many times that no matter how loved the parent product, this does not automatically transfer into the line extension. The marketers tend not to attract new users which, in turn, mean that the users they attract cannibalize the original product. I can think of many pharmaceutical brand cases where this has happened. Can you think of many line extensions that have done better than the original product? There are exceptions but not too many.
In these failed cases, the marketers should have researched everything thoroughly before deciding to launch the product. If they had done their jobs, most of these products would not have launched at all.
Some Pharmaceutical marketing teams have realized that as costs rise and differentiation becomes less and less existent between products, pharmaceutical sales and marketing efficiency must grow. The key to that is a comprehensive understanding of customers’ needs and drivers, even more than the customers themselves understand them.
To win in this environment, pharmaceutical marketers need a stronger understanding of their customers than ever before; they’re also required to understand what needs their customers’ have that will drive their behavior, and how to market to these needs more efficiently and effectively than ever before.
Pharmaceutical marketing is certainly not dead, but it is undergoing unprecedented changes that are not within the typical realms of many Pharmaceutical companies’ expectations. It is not ‘business as usual’ anymore. However, marketing success has become a key driver of shareholder value, and is more crucial than ever…. but how do you achieve marketing success and what exactly is ‘marketing’?
Let’s look at the academic definition of the word according to The Chartered Institute of Marketing (CIM):
"Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably."
Peter Drucker once said, “Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
In a Forbes article by Jack Trout[i], a survey of top executives was cited in which they were asked their priorities in order and the results in order of priority were:finance, sales, production, management, legal and people. Mr. Trout noted that missing from that list were the two basics that Peter Drucker mentioned (i.e. marketing and innovation).
Marketing is important but it is slipping down the priority list of CEOs. The fault of this is not with the CEOs but the marketers, as many have let their brands become commodities rather than highly differentiated brands due to poor marketing. I would like to point out a study[ii]that interestingly examined the extent of brand commoditization (meaning of ‘brand commoditization’ is where the brand - or company services or products - is very similar to its competitors and is almost interchangeable). In this study, something alarming I noted was that pharmaceutical brands included (e.g. Cialis/Viagra, Allegra/Claritin, Nexium/Prevacid, Vytorin/Crestor) were seen as highly commoditized compared with brands like Dunkin’ Donuts/Starbucks. The pharmaceutical industry marketers are doing a far worse job at differentiating their brands than coffee shops! This is entirely preventable with strong marketing.
When brands are highly commoditized and the perceived product differences no longer exist (or are small), then price becomes an important factor. When you understand this, you can see how generics can come straight in and claim a large share of the market. In fact, in Pharmaceutical markets that have become highly commoditized, where the product itself has little intrinsic value (e.g. G-CSF and the epoietins), biosimilars were able to have highly successful uptake. On the other hand, in other categories where the product value proposition was seen as higher (e.g. somatropin) and the products were more highly differentiated, the biosimilars were not able to achieve the same level of success.
One often sees lazy pharmaceutical marketing where the marketers find an easy differentiator, or ‘mode of action’, and base all their marketing on that simple, obvious variant. This may be successful, but only if the marketers have securely tied that differentiator to a strong driver, such as efficacy. If not, the results hoped for will not be forthcoming.
By changing their messaging to analytics-identified driver messages, they were able to double their market share in 6 months with the same budget.
Let’s consider a non-pharmaceutical example, i.e. washing powder. You want it to be effective in washing your laundry and make your whites whiter than white. Your mode of action may be different. Smelling nice may be an added benefit. However, if you market it only on your mode of action or on smelling nice, your customers may think it is not particularly good at cleaning clothes. You would be better off starting with the ‘whiter than white wash’ message and adding mode of action and nice smell as secondary messages.
Let’s look at a pharmaceutical example. A certain brand had great clinical data on efficacy, a minimal side effect profile and strong safety but was just failing to thrive. Two years post launch and it still had a single digit market share and was not growing. When looking at the data, it didn’t look like a particularly effective drug, so the thinking was that it would have to be positioned for mild cases of the condition. However, when analyzing the data further, it was found to be a highly effective drug and the marketing team had neglected to even discuss efficacy as a message as they felt the fact it was launched and approved meant it was highly effective. They had decided to focus on what I would consider secondary messages - such as ‘lack of weight gain’ - and completely neglected efficacy, which was the number one driver message. By changing their messaging to analytics-identified driver messages, they were able to double their market share in 6 months with the same budget, something they had not been able to achieve in the preceding years. It is so important to really get to grips with the data and base your marketing on that.
It is clear that marketers must be able to understand how to deal with the challenges faced, respond appropriately, measure and justify their activities to deal with the challenges, and also be able to prove that these activities are leading to increased bottom line growth for the company. Pharmaceutical marketers need to demonstrate that they are spending wisely but often lack the information to make well informed decisions.
Much of the time, instead of linking an activity to a financial result, they are too busy showing brand awareness and tracking survey results. They do not tie these to actual revenue figures very successfully which, of course, leads to distrust with the C-Suite. Sales / marketing are one of the biggest, if not THE biggest, investment in a Pharma company, and yet it’s a sad fact that many marketers could not argue strongly which components of their marketing are leading to what financial results.
The industry is seriously lacking in these measures and still relies on poor metrics, anecdotes, gut feeling, basic ROI and competitor size, spend and actions to guide decisions in this area. It is time to regain control and with it, credibility. This is where using sophisticated analytics will stop spend on knee-jerk systems and campaigns that are a reaction to competitors and help concentrate on the real role of the marketing department: to know and understand the customer, and then to translate this profitably to the product and business strategy.
The key to tying marketing to revenue and profit successfully is not an art or science, but is mathematics - more precisely, strong current-data driven analytics. Currently, there is a lot of hype about analytics, so it is understandable that, especially given the experiences of CRM, Pharmaceutical executives may be skeptical. However, when correctly used, companies can transform their results through a thorough understanding of their customers, their products and competitors’ drivers, and know exactly what they need to do, and spend, to create a specific financial result.
Still, there are cautions. Firstly, the analytic models must be designed to address the specific marketing issues you are facing and focus on solving your needs and challenges. Then they require data, and not just any data…garbage in, garbage out, remember? The data must be collected in a way that works reliably with the algorithms and must reflect the market in which the data will be used.
Analytics is all about making better decisions, quicker, that are not driven by the same data that everyone else is buying into, but completely tailored to your own situation. When a company uses analytics to gain a comprehensive, deep understanding of its customers and the different customer segments and how they perceive value in the drugs on offer, and when they use that knowledge to examine all aspects of their marketing hindering their growth, the resulting cuts and increases are in alignment with revenue growth and profit, and the company is in a far better position to grow profitably in a downturn economy.
Analytics using past performance data may be interesting, but can’t answer questions such as: What is happening now? What will happen in the near future and how can I impact that by making resource allocation or focus changes? The prominence moves from measurement to understanding. Statistical techniques, based on real and current market data, along with modeling and forecasting tools, allow us to develop insight into what is happening in our world and then translate that insight into action with reliable accuracy of results.
Of course, the quality of the data used is critical. Simply looking at market research data, ROI of activities or response curves is not enough, and historical data or analogues also are now shown to be highly unreliable in a dynamic market like most Pharmaceutical ones. The use of the current market in predictive modeling is the type of analytics needed to get an accurate picture of what is going on and what channels are going to give the best return.
Focusing on robust analytics is critical if companies are to identify and properly support the top performing channels of the future by product, target segment, indication and line of treatment, in order to reap the maximum profits possible.
Analytics is something that should be at the top of any C-Suite’s agenda as, when used correctly, it has the power to transform results. Pharmaceutical marketers will have the power to predict what actions will yield what results. This, in turn, will improve credibility and earn them a commanding position as marketing is the life blood that drives the final results for any company.
The time to take advantage of this is now, before it is too late to recover from a huge loss. Such efforts should not be seen as an expense but as a critical investment in future results because, by doing this well, company results will improve and the profitability from that will assist in building superior capabilities and financial results.
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[i]J Trout. Peter Drucker on Marketing, Forbes, 2006 http://www.forbes.com/2006/06/30/jack-trout-on-marketing-cx_jt_0703druck...
[ii]Copernicus and Greenfield, 2006