Math for the Marketing Mix

Nov 01, 2002

The newest study released by the Association of Medical Publishers (AMP) suggests that pharma companies could improve their return on investment by taking a more mathematical approach to determining the marketing mix.

AMP's Analysis of ROI for Pharmaceutical Promotion (ARPP) study, a follow-up to its 2001 ROI Analysis of Pharmaceutical Promotion study (RAPP), determined companies' returns for detailing, DTC, medical journal advertising, and meetings and events spending. Study author Dick Wittink, PhD, a professor of management and marketing at the Yale School of Management, modified RAPP by analyzing more current spending data and more realistic brand size categories and by exploring ROI for the therapeutic categories of hypertension, asthma, and arthritis. (See PE, "Journals Take ROI on the Road," May 2001.)

Estimated ROI for Promotional Tactics by Revenue
Wittink concluded that, for the largest and most recently launched brands (those with sales of $500 million or more, launched between 1998-2000), the greatest opportunities for investment are detailing, journal advertising, and physician meetings and events. Second, Wittink concluded that those same investments could increase ROI for large brands launched between 1994 and 1997. For small brands (those with sales of $25–$100 million), regardless of the launch date, increased spending on journal advertising was found to improve returns. (See "Estimated ROI for Promotional Tactics by Revenue.")

Predictably, Wittink found that almost all brands, regardless of sales and launch date, underspent on journal advertising. On the other hand, all brands except the largest and most recently launched overspent on DTC. For detailing, medium-size brands, with annual sales of $100–500 million, did not spend enough, and the smallest brands achieved perfect ROI in that category. However, small brands overspent on physician meetings and events, while medium and large brands underspent.

The greatest ROI for the 48 hypertension brands analyzed is for detailing. Journal advertising delivered the highest ROI for the 9 arthritis and 20 asthma brands.

Several pharma executives joined the study's steering committee this year, lending it more credibility than in the past, according to C. Marshall Paul, chairman of ACNielsenHCI. Those executives' comments helped balance the promise of journal advertising during the presentation of the study to healthcare publishers and advertisers.

In addition to Paul, committee members included Bill Friedrich, associate director of global market research for Wyeth-Ayerst Global Pharmaceuticals; Dean Slack, director of strategic analysis for Bayer; Paul Rabideau, director of marketing science for Novartis; Kevin Kirby, manager of promotion response and targeting for GlaxoSmithKline; and Kelly Sborlini, director of audit services for Verispan.

Those members, excluding Kirby, who was unable to attend the results presentation, noted that the calculations did not apply to every brand and instead urged marketers to look at the relationship between the numbers.

ARPP's release is timely as pharma marketers are now wading through the media planning season and may be cutting budgets because of the economic downturn. However, the study raises more questions than it answers about determining the marketing mix. Top of mind are how marketers can find better ways to target patients and improve the ROI of pharma's DTC spend. Other issues, such as competitive reactions and the synergistic effect of promoting through several mediums, provide fodder for continued follow-up.

Rabideau, who is president of the Pharmaceutical Management Science Association, says that in spite of ARPP's results, he is still uncertain about journal advertising's ROI. Instead, he hopes PMSA's study examining "underpromoted" brands at different points in their lifecycles, conducted in partnership with AMP, will offer a more valid and reliable measure of journals' advertising effectiveness.

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