Market Dynamics: The Rise of SUVs ?

There aren't many examples of marketing and sales strategies that showcase how pharma should promote the "test and treat" paradigm, but the introduction of sport utility vehicle (SUV)-type vehicles does provide an analogy of how a high-capital industry with long development cycles used converging technologies and segmentation to dominate a new niche.

In the early 1980s, Ford's and Chevrolet's SUVs were fully enclosed, two-door pickup trucks used mainly by outdoorsmen. American Motors (AM) came late to the market, and didn't want to compete head-to-head against more established brands.

But differentiation can be a powerful tool, and can be used by more than one competitor. Later, Ford capitalized on AM's design changes and created an SUV with many of the same parts and the same chassis as the light pick-up truck, but used differential pricing to charge up to $10,000 more per vehicle.

The automobile industry, too, faced a lack of direct analogues on which to predict success. At first blush, it would have seemed that, given the niche market to which such vehicles would have been marketed and the increased costs of creating such vehicles (including the ad budgets required to "educate" consumers about the need for these trucks), this would have been unduly onerous—certainly not profitable.

Indeed, the industry spent a collective $9 billion on advertising SUVs from 1990–2001, as reported in Keith Bradsher's book, High and Mighty: the Dangerous Rise of the SUV. But ultimately, the investment paid off. By May 2007, the midsize SUV represented a full 11.3 percent share of the US automobile market share, according to J.D. Power and Associates.

Market Dynamics: Personalized Med

Let's break down the components of the SUV example to understand how this strategy applies to personalized medicines.

Show how it's different The pharmaceutical industry redefines markets as drugs mature, face competition, or go off-patent by using the standard "Four Horsemen" of differentiation—efficacy, safety, convenience, and cost effectiveness. This product differentiation can result in the ability to capture greater market share, charge higher prices, deflect competitive initiatives, command greater buyer loyalty, and stimulate earlier trials and referrals of products.

It is already well understood that the simple step of differentiating your product in the crowded clinical marketplace—whether through better dosing, reduced adverse effects, or greater efficacy—can greatly increase returns for comparably small input. Personalization represents the possible Fifth Horseman, and is an effective and powerful tool to segment and define clinically meaningful patient populations for whom the drug works.

Lock in patients Physicians can be fickle. Research shows that their prescribing choice is highly sensitive to drug rep visits, direct-to-consumer advertising, price, and the availability of therapies with more convenient dosing schedules. Look at Fosamax, the gold standard osteoporosis drug built to last as the market leader through a series of improvements to its dosing profile to a once-weekly dosing. Even so, it lost 15 percent of its market share within three years to Actonel, when it launched in 2000 with a more convenient once-monthly dosing.

Personalized medicines can create market security to guard against these common, competitive threats. If a therapy is targeted at a specific patient group based on a particular genetic difference, it will be very difficult to substitute products, and physician commitment and loyalty are likely to be high. First entrants are likely to capture and hold onto market share to a much greater degree than one-size-fits-all drugs. And the benefits of a "targeted" lock on patients is highly likely to confer the same market security as that bestowed in mature markets on leading brands.

Accelerate adoption Research by DiMasi shows that, historically, the average time to peak sales for drugs is 4.5 years. This adoption curve is lengthened when looking at diagnostics, which historically have slower market diffusion and adoption than drugs.