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In the Winter 2009 edition, we kicked off a series of interviews with industry experts at Copernicus to get their thoughts on issues marketers in different industries are dealing with and approaches they might take to driving growth. This go-round we’re turning our attention to pharmaceuticals.
“Throughout previous economic downturns in the advertising world the one bellwether of hope was always the pharmaceutical industry….But not this time,” wrote Rich Thomaselli, a correspondent for Ad Age, recently. According to IMS, the big-time collectors of pharmaceutical data, the economy had a significant impact on decreasing pharmaceutical spending in 2008. As of August 2008, the number of all prescriptions dispensed in the U.S. was lower than in the first eight months of 2007, the first sustained downturn in prescriptions in at least a decade. “The numbers could be chalked up to a sudden improvement in Americans’ health,” wrote Daniel Gross in Slate magazine, “It could also mean that as they seek relief from recession-induced headaches, more Americans are eschewing prescription meds for Tylenol.”
Pharmaceutical marketers, particularly the direct-to-consumer (DTC) folks, had it pretty rough even before the economy started to slow. Regulatory changes, political pressures, encroaching generics, fewer breakout new products in the pipeline, and lots of questions about the effectiveness and value of DTC advertising had already made corporate life pretty tough. As Mark Drossman, the former executive creative director at Glow Worm/Publicis Healthcare Group, put it, it’s downright “Pharmageddon.”
We sat down with Eric Paquette, a senior vice president at Copernicus, to get his thoughts and perspectives on what pharmaceutical marketers are dealing with and how they might improve ROI.
Eric is the firm’s resident pharmaceutical industry expert. He’s led the development of both physician and consumer marketing strategies for brands at all phases of product life —from new launches to those nearing patent expiration. He’s also helped clients develop consistent marketing strategy processes to be employed across the company's portfolio of brands for the entire product lifecycle. He’s worked with many of the pharma industry’s heavy-hitters including, Boehringer Ingelheim, Pfizer, Tap, and Wyeth on prescription and OTC brands
Here’s what he had to say:
Mzine: According to the latest figures from Nielsen, ad spending by pharmaceutical companies dropped by 18.4% last year. The going assumption seems to be the economy is the big reason for the cuts. But isn’t the pharmaceutical industry one of those lucky “recession-proof” industries? Is the poor economy the main culprit here—every marketer has to do more with less and the pharmaceutical industry is no different? Or is there more to the story?
Eric: DTC spending was down last year, but I think that number needs some context. Spending was down from the historically high figures of 2006 and 2007 when a number of factors drove increased spending. There were, for instance, a couple of new blockbuster products—or at least products that their companies thought would be blockbusters making it easier to get the big marketing bucks behind it—coming to market. There were also new indications for a couple established blockbuster brands.
It’s funny, actually. With the economy hurting advertising sales generally, a couple of our clients have actually been able to buy more GRPs for fewer dollars than they would have a year or two ago—there’s just more wiggle room on the pricing. When the numbers come in, it will appear that they spent less, when in fact they got MORE for less.
That said, DTC marketers are clearly facing pressures that weren’t there in 2006 or 2007. The economy has raised the hair on everyone’s neck. A number of the biggest advertisers are struggling with pipeline and patent expiration issues. And shifts in the regulatory environment all have pharma companies beginning to really scrutinize some of their DTC marketing decisions.
Mzine: An Ad Age article a few weeks ago about the uptick in sleeping pill and anti-depressant sales in spite of cuts in the marketing budgets of the leading brands caused a bit of a stir. Many took it as further evidence that DTC advertising has almost no relationship with consumer demand for Rx brands. What was your take?
Eric: I’m guessing that sleeping pill and anti-depressant sales are indeed up because of the economy. Goodness knows the economy in general and the stock market have caused their fair share of sleepless nights and touched off depression….
Yet I would say while the “facts” described in that article might be correct, I don’t think it’s wise to say that it’s evidence that DTC advertising has NO relationship on consumer demand for prescription brands. I think there are a number of dynamics at work, particularly for those categories that would let general sales trends go counter to DTC spending. When you begin to strip away some of the individual brand and category issues, you can better assess whether DTC works or doesn’t.
Mzine: What about some of the other recent studies that demonstrate the supposed ineffectiveness of DTC advertising?
Eric: It’s true, there’ve been a number of recent studies touting the supposed ineffectiveness of DTC advertising. In all of the cases that I can think of, though, they were evaluations of a very narrow set of products. It’s easy to find one, or two, or five brands where DTC advertising—at least the way that it was executed—was a bad idea. But I could do the same thing very easily in just about any product category or industry. There’s lots of advertising out there that doesn’t perform to expectations for a whole host of reasons.
Everything that I’ve seen that evaluates DTC advertising with bigger pools of brands included in the analysis indicates that it’s still very effective. There’s a reason that these brands spent $4.4 billion—and that's in a “down” year!
DTC advertising is not a one-size-fits-all tactic. It’s appropriate and very effective for SOME brands, but not for others. It might be effective for one brand in a category and not for another. It might be effective at one spending level for one product, but at a completely different spending level for another. The individual brand dynamics are crucial in determining potential success.
Mzine: Do you find companies are thinking twice more these days before jumping into a DTC campaign? How have you worked with pharmaceutical marketers to determine what marketing activities—DTC or otherwise—to emphasize?
Eric: Yes, as I said earlier, most companies are scrutinizing their DTC investments more carefully. I actually think this is good news. Some past DTC advertising decisions were based on way too little information. We’ve seen companies make hard and fast DTC budget decisions without careful evaluation of potential payback of those investments.
When we work with companies, we often go through the following sequence of research, analysis, and decision-making:
1. First, we get some sense of whether DTC is likely a good idea or bad idea and some sense of the budget using information, assumptions, and norms in the framework of a forecasting model.
2. Next, we do a market segmentation to figure out who, how many, and how responsive the best potential DTC targets are, along with what will motivate them to talk to their doctors. We turn insights about the target and their motivations over to the creative agency to help develop the campaign.
3. We move into the media decision and determine how efficiently or inefficiently the targets identified in the segmentation can be reached through different channels.
4. Finally, we return to the framework established at the start, update the inputs and assumptions at each stage of creative development and testing, and forecast potential campaign ROI.
When brands follow these steps they develop better campaigns, and are able to maximize their DTC investments.
Mzine: Do you think the recession has inspired DTC marketers to make changes in their tactical advertising programs the way it has in other industries?
Eric: I think a combination of the economy and the emergence of digital and non-traditional media vehicles has gotten marketers of pharmaceutical brands to start changing their media tactics a bit. On the consumer advertising side of the fence, pharma advertising is still very heavily driven by TV and print, but more brands are exploring and testing other approaches.
It’ll be interesting to see how the FDA’s Division of Drug Marketing, Advertising, and Communications' (DDMAC) recent warning letters about search ads will impact the use of digital and other non-traditional vehicles. DDMAC has general guidelines that apply to all forms of media, nothing specific to digital. So these warning letters were one big curveball to pharma marketers who up until that moment had thought they were following the rules. With all the questions about the clarity of DDMAC’s policies flying around, pharma companies are worried about “stepping over the line”—it’s just not clear where exactly the line is drawn from media vehicle to media vehicle.
Mzine: You’re in the midst of launching a new service for Copernicus, the DTC SMART Solution. What does it offer DTC marketers and how does it get at some of their big concerns?
Eric: DTC SMART is a way to provide DTC brands with a fast and cost-efficient way to define the brand’s DTC target, to understand their media usage, and to forecast likely returns whether it is for a new campaign, a long-running campaign, or a new campaign where course-correction is needed.
Developing DTC campaigns can be a very “time-compressed” exercise—there’s a lot to do between the decision to launch a campaign and the time that it arrives on air, but, for a variety of reasons, there’s often not much time to do it. Real and perceived time constraints limit the due diligence put behind DTC decisions. Given the economy and the other macro issues facing pharmaceuticals, there’s more budget pressures on top to time issues.
DTC SMART is sensitive to both of these issues and offers a way for pharmaceutical companies to get quick and cost-effective targeting, media, and budgeting guidance that will keep a brand on track with ROI goals.
Mzine: If you had to pick one key piece of strategic research that—regardless of the category or brand—would have a tremendous impact on marketing performance, what would it be?
Eric: Well-executed segmentation. When done right, segmentation tells you who your target is, what they want, and how to find them. The target is the foundation on which marketing strategy is built. If you haven’t identified a good and valuable target, understood what they want, what you can provide, and where to find them, you’re basically developing marketing strategies with a blind-fold on—and probably in front of a firing squad that you can’t even see….
Mzine: And on that note, if you had the ear of every brand manager at pharmaceutical companies around the world for five minutes, what would you say about the best steps to take to make marketing programs more effective and efficient?
Eric: I’d say a couple of things.
First, be sure to use the same diligence in making marketing strategy decisions throughout the product lifecycle as you do in preparing for your launch.
Markets change. Perceptions of your product and your competitors’ products change. You change your sales aids once, twice, and sometimes more each year. Be sure that you’re also keeping up on your understanding of your targets, what they need, and what they believe your brand provides. Periodically gather the information that you need to recognize when shifts in your marketing strategy and tactics are needed.
And for any brands considering a new DTC campaign, I would say to be sure that you base your strategy decisions on the same types of insight that you gather for other parts of your business. Understand your target and where to find them. Understand their motivations and what they believe your brand might provide. And measure the likely outcome of your DTC investments beforehand. Think about the economics. Is it worth it to spend a little bit of money and a little bit of time to support an investment that runs in the tens of millions of dollars? Of course it is.
Send an email to Eric with questions and comments: eric.paquette@copernicusmarketing.com
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