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.
Instead, they saw a way to differentiate from the competition. AM designed an SUV with four doors, cargo room behind a second
row of seats, and a chassis that rode high like a truck but handled like a car. Immediately, AM's Jeep Cherokee appealed to
urban families. And by differentiating the product for these consumers, AM carved out a powerful new market while retaining
their loyal customers, who still just wanted their standard truck or car. In 1980, SUVs held just 0.1 percent of the US automobile
market. But the introduction of the Jeep Cherokee forever recreated the typical urban family vehicle, and SUVs increased their
share to 3.6 percent of the market by 1989.
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.