Global Precision Marketing

Introduction

In applying the “4 P’s of Marketing,” pharmaceutical marketers have always made generous use of a variety of promotional channels.  As the fiscal environment changes considerably, and the drive towards “global” brands and global decision-making structures increases, pharmaceutical marketers are faced with an increasingly complex environment with increasingly rigorous requirements for demonstrating ROI.  Traditional approaches to promotional budget planning no longer meet the current needs of the pharmaceutical marketer, and this problem escalates at the corporate level.   

This article provides pharmaceutical business and marketing management with a “hands-on” approach and practical steps that executives can apply in their businesses today.  After a brief discussion of trends impacting these decisions and the pitfalls of some approaches used historically, we will illustrate the “state of the art” in decision-making processes and tools for strategic and tactical allocation of promotional budgets via real-life case studies. 

Drivers of Change

Any sales, marketing or general manager at a biotech or pharmaceutical company is painfully familiar with a litany of environmental changes buffeting their business:

• Financial pressure driving dramatic changes in promotional budgets:  After a brief period of turmoil in the early 90s, promotional budgets grew dramatically, particularly for sales forces and DTC advertising.  In recent years industry growth has fallen to single digits, market valuations have slid dramatically and the number of NMEs approved has fallen.  The end result is a focus on cost containment and cost cutting that most sales and marketing managers have not seen in their careers.
• Declining impact of the traditional sales representative:  While marketing managers might bristle at this, the bio-pharmaceutical industry has historically been a sales-driven culture.  However, whilst sales forces have dramatically increased, access to physicians has declined, both through formal barriers enacted by physicians and through informal barriers created by the sheer volume of calls.  According to a study published in the fall 2002 issue of The McKinsey Quarterly, a sales representative gets an opportunity to speak with a physician in only one out of five office visits, and then for less than two minutes.    
• Rise of the ‘global’ brand and global budgeting decisions:  Though still relatively unconcentrated, the bio-pharmaceutical industry’s consolidation over the last decade has given rise to larger multi-nationals promoting global brands.  While country marketing managers have mourned the loss of local flexibility, a bigger change is looming: budget trade-off decisions not just within the country, but across countries.

These factors have given rise to a focus by senior management on:

• Measuring and understanding the historic impact of each sales & marketing channel for each brand
• Forecasting product sales under varying investment levels for each promotional channel
• Determining the optimal budget allocation across promotional channels, brands and countries

The Marketing ROI Challenge

Ask any sales operations senior manager in a mid-size to major bio-pharma about the ‘promotion response’ of their brands to their sales forces’ efforts and they'll produce reams of presentations dissecting this to the n-th degree.  They'll also produce analyses demonstrating not only historical return by segment, but profit-maximizing reach & frequency recommendations by physician and sales representative for each of the next three years. 

Ask a marketing manager to demonstrate if a recent promotional program had a positive ROI and, more often than not, you’ll get qualitative or observational feedback.  Ask them to demonstrate the historic ROI of each program they implemented last year and the projected impact of each program in their budget for the coming year and you're more likely to be met with a blank stare.

The culprits here are not the marketing managers, though.  Rather, it is a combination of multiple factors:

• Historically, marketing managers were not asked to provide this level of insight.
• The industry’s sales-driven model has caused bio-pharmaceutical companies to invest heavily in the sales force, resulting in sales force automation (SFA) systems that track every physician call.  Comparatively little investment has been made in tracking of other channels. 
• Data availability and senior management desire gave rise to a wide range of analytical tools to measure the impact of sales force calls on physician prescribing (“promotion response models”). 
• Measuring marketing ROI is also more challenging, from an analytical standpoint, due to:

• Less data available on promotional spends (due, in no small part, to a lack of focus on capturing these data in a structured manner)
• Increased complexity due to the variety of promotional programs implemented, ranging from physician-level programs such as direct mail to practice-level programs such as sampling to specialty-level programs such as journal advertising
• Many approaches relying upon complex ‘black box’ methodologies that neither integrated local management expertise nor inspired confidence in the results

Despite all of these ‘barriers,’ marketing science has evolved significantly as the demand for true multi-channel, multi-brand, multi-country marketing ROI models has increased.  The next section will provide a brief overview of an approach to address this need. 

A Multi-Channel Marketing ROI Approach

The key to overcoming the challenges is to implement a structured, but flexible approach (see Figure 1) that can be applied to each promotional channel, for each brand, in each country being studied.  While there will exist data deficiencies at first, by having a consistent process, companies will be able to identify where to focus additional data acquisition efforts.  More valuable though will be companies’ ability to leverage ‘best practices’ and analytical insights across brands, channels and countries to ‘fill in’ data gaps.

As one example: marketRx has been working with a multi-national pharmaceutical company for the past 5 years over which time our promotion response and portfolio optimization products have driven their promotional strategy in their Top 10 global markets.  As product launches have been staggered across these countries, when planning a launch in a new country, the customer has been able to leverage the actual measured ‘promotion response dynamics’ from other countries where that product has already launched in order to build a much more informed and realistic ‘base case’ forecast model for the new country launch.   

The analytical ‘heart’ of this process is promotion response modeling: developing statistical models that describe the relationship between increased investment in a particular promotional activity and sales.  When measuring the impact of marketing channels, this ‘heart’ requires as much ‘art’ as science: the ‘art’ comes in matching the right modeling methodology to each promotional channel (see Figure 2 below).  The drivers of methodology choice are the promotional channel itself, the reach of the channel (broad-based vs. physician-level), the frequency of delivery, as well as the data availability and quality.

With the models in place, the real fun begins.  This is where marketing managers get to play ‘what if’ games and answer questions such as:

• What is the impact of changing promotional budgets at a variety of levels, such as country, region or global levels?
• What is the impact on profits of imposing different business constraints?  For example:
• at least 50% of the budget must be spent on the sales forces, or
• no channel’s promotional budget can increase by more than 10%

By leveraging a robust process with well-developed analytical models, marketing managers will gain greater insight into their business – and make better decisions – than ever before!

Case Studies

By their very nature multi-channel optimization problems are more complex and require a much more disparate set of skills and data than sales force optimization problems.  In this first case study we show how a very wide variety of data sources and analytical and consulting skills can be used to help produce an optimized strategic plan across all promotion channels.

Case Study 1: Integration, Sophistication

A client (a mid-sized Pharma with "Product A" competing in a very large and competitive market) approached us with the following problem:  They were considering a significant reduction in sales force support for "Product A" and were interested in determining if the eliminated sales force support could be replaced by other channels of promotion.  They had used some channels historically (and had some data), but were also considering a number of channels that had not been used previously.  The company is very data-driven and so all solutions needed strong analytical justification.

The project started with a very basic question:  which promotional channels should even be considered?  After much debate the decision was made to take a step back and increase the scope of the project to include qualitative market research to assess the available promotional channels and determine the "short-list" of channels that should be analyzed.

The promotional channels in the short-list fell into 4 different categories in terms of their data availability”

1. Sales force detailing
2. Historical data (spending levels) available only at the national level (by month)
3. Historical data (spending levels) available at the physician level (by month)
4. No historical data available.

Each of these categories required a different analytical approach, but all of the results could be easily integrated for the multi-channel optimization ("trade-off") analysis.

The items in groups i and ii were analyzed using (somewhat) standard promotion response dynamics techniques.  The items in group iii were analyzed using "control / experiment" techniques.

Group iv poses the greatest problem: how to analyze promotion channels without historical data?  For this group, the results of customized market research was combined with the results of groups i, ii, iii to produce justifiable promotion response models for all channels.  The market research asked physicians about their awareness and participation in various promotional channels and also asked questions to get at their responsiveness to the various channels.  These results were benchmarked against the channels from groups i, ii and iiii.  In particular, the relative effectiveness of the promotional channels as observed from the data matched that calculated from the market research (see Figure 3) and hence gave us confidence to extend the results to group iv.

The end result of this phase of the analysis was a defendable strategic plan determining the spending levels for each channel.

The next phase of the project was the tactical implementation.  Here the same data sources were used, not just to determine an overall promotion response dynamic, but to determine the different response characteristics of different market segments to different channels.  The end result of this phase of the analysis was a customized, detailed plan for each promotional channel and each physician: not just any plan, but an optimized, defendable plan based on many and varied data sources.

Case Study 2: Consistency

In parallel to going deeper a number of our clients are also going wider.  Rather than just optimizing a single brand, or even a single therapeutic area they are thinking of optimizing across all of their major markets.

As an example: one of our clients is looking to complete an analysis like Case Study 1, not just for a single product but for all of their products in their top markets (countries) worldwide.  These analyses will be completed using the same techniques, approaches and applications in each of the markets – this is a key advantage of an approach that can utilize a wide variety of data sources – a consistent, transparent approach can be followed no matter what data is available.  Whilst our process lends itself to repeatable, transparent analysis it is important to pilot this so that the data collection and outputs can be customized to the particular client.

However, the advantage here is significantly greater than just seeing the same charts and reports across multiple countries – because the analysis has been completed with a consistent process the results from the various countries can be safely and reliably compared and hence optimization decisions made at a global level.

Conclusion

As financial pressures mount and demand for proof of market impact increases, marketers will not be able to follow a ‘business as usual’ path to promotion planning.  As this article describes, there exist planning tools today that can assist marketers in these efforts.  While, the success of implementing these tools will ultimately be determined by product performance, there are a number of areas where bio-pharmaceutical companies can focus when putting these processes in place:

• Transparency: inputs, process and outputs should be as transparent as possible to ensure understanding and buy-in across all levels of management
• Data-driven: the process should emphasize evidence-based, data-driven recommendations over instinct-derived ‘bets’
• Flexibility: the implementation should be flexible to handle a wide variety of programs and countries
• Robustness: the methodologies employed should be able to address a wide array of senior and marketing management questions