PE: Can you clarify why these two "markers of excellence" may be subverting what market research wants to accomplish?
SHARMA: Under the mantra of best practices, senior management has tasked the market research function to improve decision making
with procedures that are tied to specific performance benchmarks. This fosters a sense that marketers can bend the market
to their will. There is an appealing logic to this: If we don't follow the same protocols to vet opportunities and assess
options, then how can we argue that decisions and follow-up actions are grounded with evidence? The question is that if the
FDA holds our drug development process to rigorous standards of scrutiny, then does it not make sense to apply the same discipline
to market research? You could say that the stakes are even higher here. It's the task of market research to create what FDA
approval alone does not confer—a market for a new drug.
The challenge is finding the right balance between systems and serendipity. There are principles and standards that can be
incorporated into company culture. But there are limits to its practical application. It is virtually impossible to rely on
the same research techniques to define strategies for every product and therapeutic segment because context will have a powerful
impact on the options available, as well as the accuracy by which models and metrics can be used in evaluating them. Today's
complex business environment argues even more against the notion that machine-tooled, ready-to-use solutions can be drawn
from the analytical hopper and applied to shape the market for your products. Market research is instead a process for uncovering
insights and making inferences from multiple sources, evidence, and survey techniques. Simply handing a "how to do it" manual
to a manager is not going to work, particularly if the manager is young and inexperienced.
PE: What about all the attention given to identifying, tracking, and defining metrics around "customer insight"?
MCDONALD: It is ironic that customer insight is being sold as something entirely new, a practice that will somehow reinvigorate market
research or take it to a new level as a business guidance tool. That's a misconception. The function would never have survived,
much less grown, had researchers not been delivering good customer insights to position our brands. A good example of flawed—and
wasteful—thinking is when senior management commissions "insight research" as a separate exercise, with no alignment against
the strategic, course-of-business studies that drive market research. This is like adding another course to the banquet, when
we ought to be adding more flavor to what we are already serving.
PE: You mentioned earlier the importance of casting the market research net widely to cover a product's entire life cycle.
Does this suggest that the real value of market research is as a forecasting tool?
SHARMA: With three out of every 10 medicines failing to obtain a positive return on up-front investment in R&D, both aspects of the
market research function—opportunity assessment and opportunity optimization—are critical to P&L success. Companies must be
thinking about product positioning in the earliest stages of product gestation, even before proof-of-concept has been established.
This is where the market research function has to stretch to prove its mettle. At the pre-launch stage, the time horizon
is longer and market conditions are harder to predict, much less set real numbers against the analysis. As a rule, once the
marketing mandate shifts from foresight to oversight, the process is less suspenseful and strategic.
PE: What about the task of anticipating how customers will respond to innovation, especially in determining access and price
for a new medicine?
MCDONALD: Innovative products and technology platforms require additional marketing foresight and investments in analytics because
the risks of miscalculation are greater. Customers are unimaginative about their unmet needs, and can react negatively when
confronted with radically new options that alter their priorities. Twenty years ago, when Merck began to explore physician
attitudes toward osteoporosis in preparation for the launch of Fosamax, it was clear that the prevalence and implications
of the condition were under-estimated, essentially because it couldn't be seen until significant bone damage had been done.
Merck's effective deployment of market research to highlight the societal cost of osteoporosis, coupled with technical advances
in bone densitometry measurement, helped support the introduction of a drug that the medical community has come to recognize
as an innovative standard of care for many women entering menopause.
A lesson here is that in order to minimize risk and uncertainty, marketers must be unsentimental in understanding how a product
might influence attitudes in the payer and provider communities. When you bring forward a subtly differentiated medicine that
follows a path laid down by others, the market research burden shifts from strategic questions on how to develop a new market,
to the tactical questions of securing a beachhead against the existing competition. The more uncertain and uncharted the environment,
the tougher it is to predict outcomes by simply relying on customer insight; while the less innovative the product, the more
difficult it can be to count on market research heroics to compensate for its limitations.