 An evolution is underway. As the industry faces new technologies and economic changes, many companies have begun to experiment with the concept of customer centricity, otherwise known as customer relationship management. CRM's value to pharma companies is not just a near-term increase in sales or market share. It is also the integration of insights and the long-term development of relationships with customers who may one day buy products that don't exist yet. That requires a fundamental transformation from a product-centric business to a customer-centric one.   

 CRM in pharma is not new. Rather, it is an extension of practices that have evolved to meet the challenges of the increasingly complex pharma customer, from professional prescriber to patient end user.   

 This article explores the concept's drivers and components, differences in pharma companies' approaches, and some lessons learned from early examples of implementation.  

 There are several ways to tackle CRM. Many companies focus on enhancing traditional physician or professional relationships for greater and more immediate market impact. Others concentrate on consumer-directed initiatives to leverage the growing amount of demographic and behavioral information they have collected. Still others use technology as a tool to improve and streamline information and services internally and externally.       

 In early 2001, many pharma companies took on the challenge of defining a broader CRM vision that would coordinate their internal initiatives and better integrate external efforts to reach both professionals and consumers-including individuals at risk for a particular disease, patients, and caregivers. A global corporate culture and more aware leadership have encouraged companies to widen their vision of CRM. Taking a long-term view of the converging international marketplace, top management is now beginning to drive a holistic CRM approach to achieve operational excellence and sustain a competitive advantage.  

 The need to improve customer interaction methods has been triggered by the need to update sales force automation (SFA) systems, to improve returns from direct-to-consumer (DTC) expenditures, to keep pace with advances in technology, to deflect competitive threats, and to respond to increased external scrutiny and regulation.       

 Recent industry mergers-Glaxo Wellcome and Smith-Kline Beecham, Pharmacia and Searle, and Pfizer and Warner-Lambert-increased the size of sales forces to the point that existing SFA systems could not absorb the combined needs of two sales departments or readily integrate disparate systems. Because sales forces are the single most important and costly component of a CRM strategy, many companies are updating their current SFA systems or changing to newer platforms that enable better CRM. Some companies are improving their use of sales technology to enhance market knowledge, improve targeting skills, and increase call productivity, as reported by Dr. Michael Ahearne of the University of Connecticut (Business Technology, May 2001). Merged product portfolios also underscore the importance of planning throughout a product's life cycle. CRM allows companies to focus on high-value customers, such as influential physicians or at-risk consumers, and can help optimize launch allocations when resources are available. With an infrastructure in place, it can also help product managers better target late-stage marketing, which receives less funding.   

 Many pharma companies have concluded that corporate systems-particularly information and data-storage components-no longer serve their needs efficiently. And, as DTC ads and programs increase in number and scope, consumer data has become much more complex than traditional spreadsheets and simple databases. Consolidation of disparate consumer information into a single repository is fundamental to CRM as a vehicle to enhance relationships with consumers and to decide which patients deserve more costly programs. Improved systems also facilitate compliance with federal regulations, such as managing electronic signature capture and deploying corporate privacy policies.  

 The feasibility of enterprise-wide solutions is moving companies to define a vision and technical platform that coordinates marketing and sales. Connectivity between internal and external operating systems provides a pathway for an overall CRM system that encompasses not only technology but also processes, skills, information integration, and analytics. Such an enterprise-wide solution coordinates marketing and sales activities, pools information from multiple interactions and improves the effect of such interactions through better segmentation, targeting, and timely follow-up action.       

 Today's customers-professionals, general consumers, patients, and caregivers-want relevant information when they want it, in a format that suits their tastes, through their preferred communications channels. To influence those customers, today's pharma companies must allocate resources over a complex mix of messages and media that is no longer driven by yesterday's formulas for success.   

 In the pharma industry, two customer segments dominate: professionals and consumers. Professional CRM, in general, describes the management of the relationship between a pharma company and a medical professional. Consumer CRM describes the management of relationships with those who use pharma products or services. That includes individuals at risk for a targeted disease, patients who take a particular medication, and even caretakers of those patients.      

 Today, physicians remain center stage, and traditional forms of promotion prevail. In 2000, companies aimed approximately 85 percent of the $15.5 billion spent on pharmaceutical promotion at professionals. That included physician detailing, events, and journal advertising. But they directed only 14 percent to consumers and less than one percent to online investment, according to 2001 estimates by IMS Health, Jupiter Communications, Scott-Levin, and WR Hambrecht & Co.   

 Looking forward, however, research by the Gartner Group indicates enterprise-wide CRM competencies will become more evident in the marketplace in 2005. (See  "Today's CRM.") As a result, teams responsible for professional, consumer, and patient segments can be expected to collaborate more closely, leverage customer information, and deliver more unified and coordinated initiatives. Executive leadership and first class implementation, could accelerate cross-functional collaboration and information integration.   

 For CRM competencies to develop, it is important to integrate the information gathered as individual customers interact with the company. Because a customer's multiple interactions are interrelated, a consolidated view provides a better understanding of the customer's likelihood to change behavior and, thus, a better basis for a response with the most impact. Companies must coordinate and communicate internally so that individual departmental efforts appear seamless to all customers. Regardless of the communication channels used, customers should believe that the company recognizes and values them and their individual needs, and likewise, companies should capitalize on those insights.       

 Valuable experiences outside the pharma industry can illuminate the factors necessary for success. Driven by the need to improve customer service and increase sales, Murphy's Brewery, an Irish subsidiary of Heineken International, developed a holistic CRM approach (IDC Report #PR17G, "Measuring Customer Loyalty in the eBusiness Era: Five Real-Life Case Studies," December, 2000).  Murphy's aimed to create a system that could recognize a customer across all channels, regardless of how the customer contacted the company. In less than a year, the company redesigned and streamlined its sales, customer service, and order management processes; selected and installed a CRM system; provided training and support; and embedded performance metrics into day-to-day operations. The resulting benefits included a 14 percent rise in packaged beer sales, increased customer satisfaction, improved call handling, and improved order entry. Murphy's sales agents also had 10 percent of their time left for other duties.  

 Holistic CRM allowed the company to collaboratively manage multiple customer segments, satisfy specific customer needs, and mesh communications, regardless of the point of contact. Similarly, pharma companies will find that, when they link information from different corporate departments, their interactions with customers will be based on full prior information and any follow-up actions will be based on collective insights. Collaboration and insight sharing among all stakeholders allow companies to retain and use customer feedback as an intellectual asset rather than losing this knowledge as people change positions.  

 Today's analytics can enhance professional marketing by enabling companies to gain more information about behavioral and attitudinal factors influencing their customers. Generally, companies research behavioral characteristics of physicians, patients, and consumers as they develop their product positioning, strategy, and tactics. But now companies can incorporate behavioral segmentation into their day-to-day, customer-facing operational activities and continually add to their customer knowledge base.       

 In a recent pilot program for a major US pharma company, sales reps were asked to characterize physicians' beliefs about managing of a particular disease, their understanding of a newer way to treat it, and their knowledge of how a newer class of drugs works. The company then mined that data to see which behavioral characteristics aligned with prescribing behaviors. After further analysis that confirmed the most effective sequence of messages, the company electronically delivered the preferred action steps-customized for particular physicians-to their sales reps. The company was able to use technology and turn data into knowledge into insight into action on a near real-time basis, thereby better integrating marketing and selling processes and improving effectiveness.   

 Leading companies also use robust analytical tools and reporting mechanisms to meet the needs of strategic planning, regulatory compliance, resource allocation, performance measurement, and incentive alignment. Attention to such managerial needs can reduce unnecessary or redundant internal operations or confusion. One company discovered it had nearly 75 systems for medical market data; another had more than 15 medical opinion-leader databases operating on different systems. Improved internal efficiencies provide a unified view of the customer, thereby avoiding duplication of effort and improving return on investments.   

 Overall, pharma is at the early stages of developing and adopting holistic CRM. The following examples of very different CRM projects indicate the wide range of today's initiatives:      

 CRM vision. Several major companies have undertaken "vision" initiatives. To define the scope of the task, identifying the customer is the primary concern. With progress, it is also important to conduct the initiative with active executive support and the leadership of a recognized peer. Unless a top executive is in charge, too many groups often claim CRM ownership, triggering defensive postures and fragmented decision making. During the planning stage, it is critical to gain buy-in throughout the organization. That task requires a cross-functional effort to ensure that business and technical issues are considered in tandem.  

 Handheld technology. With the rapid acceptance of relatively inexpensive handheld devices, pharma has begun to explore the potential for improving sales force productivity and for obtaining higher quality information about physician interaction. One company's specialty sales force was equipped with CRM software installed on new handheld devices and on existing laptops. That team's success is a result of carefully refined requirements, training for rollout, and implementing systems that evaluate performance, goal achievement, and knowledge transfer.    

 Thought leadership. There is a clear correlation between clinical rapport with thought leaders and early and lasting market success. Many top companies have set up databases that profile thought leaders and log interactions with them, whether initiated by marketing, medical, or sales. Cross-functional teams regularly review those databases to see whom they are contacting, the frequency and nature of that contact, and whether sustained interaction aligns with product priorities and long-term business goals.   

 Call center capabilities. The call center is a necessary part of CRM that provides faster, more integrated, and more personalized service by using prior experience to anticipate callers' needs. One company found that sales reps drive 80-85 percent of medical requests taken through its call center. That company's solution was a more efficient process for managing document requests.   

 Other companies are installing new and efficient systems that address the need for faster, more responsive customer service processes. To prepare for the launch of a new cancer treatment in the United States, for example, a major UK-based company designed and implemented a call center with an order processing application. Key business objectives were to  

provide an integrated order processing application for use within a product specific call center

integrate the application with internal finance and enterprise-wide systems and external entities

comply with federal and local regulations and guidelines for account registration, delivery logistics, and treatment scheduling. 

Each product order required detailed processes for customer registration and verification, order processing, order fulfillment, and treatment scheduling and delivery. 

 Multiple communication channels. Many overlapping processes are involved in managing call centers, websites, and request fulfillment, including information capture and storage. Typically, companies outsource all or most of those processes including database management, often by product. However many processes and databases can be consolidated for greater efficiency and effectiveness in operations and impact. A major US-based pharma company recently implemented a web-enabled CRM solution that involved software that allows marketing managers to better track customer responses, select an appropriate mix of messages and media, determine the optimum frequency of communications, and improve response models on an ongoing basis.  

 Key business objectives included conducting both time- and event-triggered marketing, increasing the number of sophisticated web-based campaigns, accelerating "campaign-to-market" time, improving campaign cost management, and integrating consumer communications channels. The selected solution achieved the following:   

integrated appropriate campaign and website tools.

Consumer and professional integration. Web-based and electronic programs have afforded pharma companies new opportunities to interface concurrently with both consumers and professionals. One pharma company recently tested an acne treatment and used InfoMedics to capture self-reported data. It passed on the data to the patients' prescribing physicians and then surveyed them regarding the medicine's effectiveness, patient results, and results of the data-reporting experience. Of those doctors, 74 percent believed the program offered a useful means of evaluating a medication. More than 85 percent agreed that patient feedback helped support their prescribing decisions. And 64 percent said the program provided an opportunity for more useful interaction with the company's sales reps. Thus, companies can create new value around products by providing a forum for greater collaboration between patients and healthcare professionals. Using the web, a leading pharma company engaged Softwatch to develop a disease community portal for multiple sclerosis to assist professionals, patients, and caregivers. The website helped enhance physician-patient interaction and improve overall patient compliance. 

 To achieve customer centricity, pharma companies must view CRM in a holistic manner. A clear CRM vision, including a plausible implementation plan, is critical to success. Companies that understand their customers' needs and preferences can deliver more effective messages and services more quickly, and more successfully, in the marketplace. CRM necessitates the integration of customer information from multiple sources and the coordinated deployment of multiple activities among many customer segments. As the industry changes and shifts its focus to customers, CRM will be one of the most important tools helping companies to maintain a competitive edge.  

Articles

Features

An evolution is underway. As the industry faces new technologies and economic changes, many companies have begun to experiment with the concept of customer centricity, otherwise known as customer relationship management.

When the Customer is King

 As savvy product managers know, the pharma industry is in the process of reinventing itself to compete in the new bioeconomy-a global economic framework that will introduce and apply technologies such as genomics and proteomics across multiple industries. Pharma companies that emerge as the winners will have succeeded in changing the way healthcare is delivered.  

 This article presents an overview of  the changes, challenges, and opportunities for product managers as you enter the new global bioeconomy.  

 In the quest to meet shareholders needs, successful pharma companies have developed several common characteristics, many of which are based on the work of their PMs. Those companies:      

secure the majority of their sales from a small number of aggressively marketed blockbuster products

increase the sales of those products faster than their competitors 

have strong leadership in a few specific therapeutic areas and well defined market segments

use external innovation sources through product licensing and early-stage alliances

have large, effective sales and marketing forces that develop good relationships with key opinion leaders 

use effective direct-to-consumer promotion-particularly in the United States.

 To reduce costs and time to market, many have worked to produce economies of scale and reduce their operational costs and critical mass through mergers and acquisitions, thereby integrating their operations and cultures as best they can. However, the law of diminishing returns mandates a limit to the rewards that productivity increases and cost reductions can deliver. At worst, the pharma supply chain will break under that kind of pressure.   

 The bioeconomy will change the way the world thinks and lives. Not only will chemicals and materials be produced more cheaply, but people will      

be in greater control of our own well-being

 The convergence of advances in biology-genomics, proteomics, bioinformatics, and informatics-as well as information technologies such as "sense and respond," rapid data transmission, and mobile commerce-is driving the bioeconomy's emergence. As most product managers already know, biological advances, especially in genomic and proteomic research, are making it possible for scientists to decode and understand the basis of life and of many diseases. With the ability to read the human genetic code, medical experts will eventually be able to predict a person's predisposition to a broad range of diseases and intervene appropriately, insert new genes to replace faulty ones, and tailor therapies to an individual's needs and profile.  

 Sophisticated technology will allow patients to search and manage their medical records, comparing them to current public health information based on individual genomic profiles. Intelligent marketing agents will aggregate patient information from a variety of sources to provide timely and relevant responses. Networks of distributed processing systems will offer new insights into data by mining all enterprise and public data sources. And supercomputing platforms and information management will enable the rigorous manipulation of genomic data.  

 Forward-looking product managers recognize that tomorrow's innovations will outstrip today's progress. Advances in remote sensing and artificial intelligence technologies have already created intelligent operating rooms with sensory control mechanisms and devices that transmit health information via telephones and personal digital assistants. Eventually, an assortment of biotechnologies, implants, artificial environments, and synthetic sensations will make the impossible possible:  

The industry can now develop programmable microchips for the subcutaneous delivery of precisely timed doses of drugs. Interactive chips with built-in sensors may mimic the body's own regulatory ability.

Scientists are growing blood vessels on silicon chips. Eventually, lab-grown vessels will help doctors produce lab-grown organs for transplantation.

Applications are being developed to replace damaged or low-functioning neurons, perhaps someday enabling paraplegics to walk again and improving the sight of patients with nerve damage.

One day, physicians will heal severed spinal cords, returning sensory information and motor control to those patients.

 As the bioeconomy evolves, the industry faces an unprecedented era of opportunity and challenge. Pharma companies must deal with three new, disruptive factors converging on the business model. The ability to adapt will define the globally successful pharma company.      

 The first is the breakthrough in new science and technologies-human genome, bioinformatics, proteomics, and high-throughput screening. Those advances hold untapped potential for finding and developing new drug treatments.   

 The second factor-web technology and the e-economy will improve the flow of global information, eliminate barriers to information exchange, and lower entry costs for new competitors. It will also provide an environment for creating and hosting electronic networks and communities that can transform the pharma business model.  

 And third, patients are becoming highly educated, empowered consumers who take an increasingly active role in their health and demand safer, more tailored, and effective medicines. Buying decisions will become increasingly more complex, opening market opportunities for niche players.   

  In the not-too-distant future, pharma companies will move from a fully integrated model-in which discovery, development, manufacturing, supply chain, marketing and sales, and the supporting infrastructure are all held in-house-to sharing their functions through outsourcing, collaboration, and alliances with smaller specialist companies. Pharma  will outsource specific activities to industry utilities such as contract research organizations, that handle product development or to outside manufacturers. In that new business model, portions of the supporting infrastructure, such as human resources, will be electronically driven, and others, such as finance, will be handled by separate utilities. As those industry utilities grow, they will offer operational excellence in the product life cycle, from discovery and patient recruitment for clinical trials to manufacturing, marketing, and sales. Those changes will occur in three phases over the next five to ten years.       

 A gradual shift. For the next few years, the model of the integrated pharma company will remain largely the same, but cracks in the model-which are already appearing-will grow. Although the big players will continue to operate as they have been, they will begin to replace internal functions with service providers.  

 Companies wanting to move in that direction recognize that alliances are critical to their future and are now making make them integral to their overall strategy. Through alliances, they are accessing critical capabilities, experimenting with emerging technologies before bringing them in-house, actively supporting specific disease or therapeutic area strategies, and accessing strong platform solutions through an integrated solution. (See "Partner of Choice," PE December, 2001 and "P&G's Guide to Successful Partnerships," PE January, 2002.)  

 Focus on value. Subsequently, the trend toward service providers will accelerate, leading the advent of value-centric pharma companies. Such companies will clearly identify those areas in which they excel and those in which they do not. One company might have an exemplary research capability but a manufacturing function that is less than productive. Another might decide to expand its development operations and outsource its sales and marketing capabilities. Companies will determine which supply chain segments should remain in-house and will focus their business accordingly, sourcing the necessary capabilities from external suppliers. As a result, the number and types of service providers will grow, offering operational excellence throughout the industry.  

 To enable networks of companies to work together, new web technologies will match the needs and capabilities of different players. A virtual research organization could provide discovery technologies to a pharma company scientist, or a portal could provide scientists with links to a gene database, a proteomics database, or high-throughput screening capabilities, enabling fast and efficient access to information. In clinical development, a portal will recruit patients for a clinical trial, capture data about their responses, and create a database that assimilates all the data required for a regulatory submission. Web technologies will also help new industry entrants avoid having to build their own capabilities. New players will be able to focus their discovery efforts on developing new treatments or services and turn to an electronic marketplace to develop and sell them. A good network can assist companies in finding the best contract research organization that focuses on marketing. No matter what the need, web-enabled agents can link companies together.   

 The virtual company. As specialization continues, the industry will evolve to networked pharma companies with different specialist skills. Virtual pharma companies will discover, develop, and market pharmaceuticals. Service providers will satisfy increasingly broad capability requirements until all components of the supply chain can be sourced outside of the primary pharma company. Because of the complexity of communications and alliance portfolios and the high cost of transactions, capabilities marketplaces will be integral to the creation and operation of virtual pharma companies.  

 Product managers can see early indicators of that virtual future in   

the surge of industry alliances-especially in technology and research

the development of specialist skill centers such as contract research organizations 

in contract sales forces, and contract manufacturing organizations 

the emergence of netsourced capability providers. 

 As pharma companies become more virtual, their current business models will become more fragmented. Such an environment offers both huge opportunities and risks for industry leaders. Those opportunities include      

the ability to maximize revenue potential through developing targeted, effective products to an informed patient population 

securing first-mover advantage in narrowly defined markets and disease states through superior patient insight and product portfolio management

seeking smaller, more lucrative markets that are economically attractive because of reduced capital investment requirements

reducing costs and overhead by outsourcing specific activities to industry utilities

realizing new profit generation opportunities by offering leading internal capabilities to the broader industry through utility arrangements.

 The risks in the networked environment will come from niche pharma players who are agile and formidable competitors. They are unburdened by high overhead and armed with superior product and disease knowledge in their chosen market segments. Biotechnology companies will develop and commercialize their own discovery targets and become less dependent on the security of partnerships with large companies. And, by using low cost industry utilities from nontraditional players, such as payors and drug store chains, they will capitalize on their superior knowledge of patients and consumers and enter the ethical pharma marketplace.  

As savvy product managers know, the pharma industry is in the process of reinventing itself to compete in the new bioeconomy - a global economic framework that will introduce and apply technologies such as genomics and proteomics across multiple industries.

The Global Bioeconomy

Imagine that establishing a marketing budget was simply a matter of someone saying, "Here, take as much as you need." No more give and take over the numbers.

As improbable as that scenario may seem, the philosophy behind it is quite rational. Most companies would readily allocate whatever their product managers requested if they were assured of a worthwhile return. 

Therein lies the catch. Marketers must be able to show what the expenditure will do for the company-in advance and with a specified level of certainty. But no one can predict the future. Or can they?

Experience indicates that it is possible for marketers to know what they can and should expect from every promotional endeavor before they commit any resources. A nine-year analysis of more than 300 pharmaceutical promotional campaigns and their outcomes has shown it is possible to systematically forecast promotional response with R2 values (coefficient of determination) averaging more than 90 percent. With that kind of foreknowledge, marketers can create plans that optimize results. Companies can treat promotion as an investment, not an expense. And they can allocate budgets across products, as well as promotional modalities, within a given product campaign to maximize return. 

This article presents a new theory of what makes promotion work and describes a mechanism for forecasting the outcome of a particular effort. Although many veteran marketers rely-often successfully-on instinct and experience to gauge how effective a promotional effort will be, there is now a more disciplined way to go about it. The reliability and confidence that comes with that discipline commands the attention of those holding the purse strings in a way that gut feelings do not.     

There are six methods of forming a promotional budget, ranging from making purely arbitrary decisions to making calculated investments based on the return they are forecast to deliver. (See "Budgeting Continuum," page 7.)     

On the right side of the continuum, as more thought and effort is given to determining the probable outcome of an expenditure, the degree of accuracy increases. The method on the far right, budgeting based on an ROI analysis, is, therefore, the most effective in helping companies allocate their promotional resources for both campaigns and promotional forms within a campaign to maximize ROI. 

Once guesswork is removed from the process and marketers can predict with a high degree of certainty what a given expenditure will yield, the whole notion of promotion is elevated beyond the realm of an expense to that of an investment. When that happens, no amount is too much to spend if it delivers the right return. Pharma companies are maximizing long-term returns, not minimizing short-term expenditures. 

If promotion is to be understood, valued, and managed, it must be regarded and analyzed as an investment that delivers a quantifiable return. 

In 2000, the US pharmaceutical industry spent $15.7 billion promoting its products through detailing, professional journal advertising, sampling, and DTC promotion. The numbers belie the fact that most pharma companies, like those in other industries, have had no way to ensure that they are spending their money wisely-the right amount in the right places- to achieve their marketing objectives. Unfortunately, a promotional plan that directs too much spending to the wrong place or not enough to the right place can cost tens of millions of dollars in profit in just a few years. Today, most pharma companies' budgeting practices fall in the middle of the budgeting continuum, often blending several approaches.     

Many companies use the "percent of sales" method, reasoning: "That product represents 28 percent of our sales, therefore, it should get 28 percent of the promotional dollars we have to spend, and it will return 28 percent (or more) of our profit-we hope." The problem with that line of thought is that the product that is returning 28 percent or more of sales may be promotionally inelastic. (See "Product Managers' Glossary," page 8.) If that were the case, the product would produce the same profit whether the company spent 15 or 50 percent of its promotional dollars on the product. Planners should not confuse a marginal increase in sales with an increase in profit. It is entirely possible that an increase in promotion will yield an increase in sales, but if the product is promotionally inelastic, the cost of producing that gain will be equal to or more than the gain, and profits will remain unchanged or fall.

Another popular method of budgeting is to seek competitive parity. Under that method, if the competition spends $35 million, a company reasons that it must spend the same. That assumes that the competitor knows what it is doing and that the market situation is identical for both companies. Another version of that approach is to develop product launch budgets to match the expenditure of similar products during their own launch. That method relies on history to form assumptions about what will happen. Unfortunately, history doesn't repeat itself, and environmental conditions are not stagnant. A program that worked three years ago may have little or no impact today. 

The point on the continuum where promotion ceases to be viewed as an expense and begins to be treated as an investment is the "objective and task" method of budgeting. That method involves thinking through various scenarios and estimating what can be accomplished at each step with certain resources to determine the total promotional appropriation. It requires a breakdown of all the tasks necessary to achieve the overall objectives and a calculation of the costs involved. It strives for the intersection of minimum cost and maximum revenue, but it is only as good as the reliability of the estimated outcomes. 

The ideal approach is to plan, organize, and execute promotion as an investment. That requires focusing on what can be done, what it will cost, and then adding restrictions that must be met to maximize market share, sales, or profit over the next "X" years-rather than to satisfy the budget for the quarter, half-year, or year. Treating promotion as an investment requires taking a long-term view, because returns are not contained within a certain financial period as expenses are but typically extend over several years. Promotional resource allocation must take into consideration elasticity, the environment, and momentum. (See "Product Managers' Glossary.") Which products are promotionally elastic? What are the environmental conditions, and how do they hinder or enhance the promotion's effectiveness? What does it take to create momentum rather than to simply maintain it?

Intellectually, pharma marketers may already acknowledge that an ROI approach to budget allocation is the best method, but they may be prevented from practicing it because of the complex statistical and analytic modeling involved. Until now it has been a practical impossibility. But, with the research and analytic structure discussed next, the ROI approach can work.

The path to understanding promotional impact is neither simple nor one-dimensional, because it is composed of multiple, parallel, and sequential steps. Nevertheless, the process is understandable and highly susceptible to analytic modeling. (See "Steps in ROI Promotional Analysis.")    

The first step in the analysis methodology is to examine the key environments into which a campaign will be introduced: market, promotional, product, and disease. The goal is to understand and quantify all aspects of the environments that sustain or impede a promotion's effectiveness. 

That groundwork involves collecting 60 months of data and applying several investment and economic concepts-concentration, elasticity, instability, acceleration, velocity, momentum, and consistency-to gain insights into the current market conditions. 

Market environment. For the full set of competitive products, marketers must determine:         

the size of the market as measured by the number of new prescriptions each month

how uniformly the market share is distributed across the competing products (concentration) 

whether that growth is constant, or changing (acceleration)

how variable the new prescription volume and market share are from one month to the next (instability)

the market's momentum and whether it is being maintained.

Promotional environment. Initial analysis mirrors that of the market environment:         

How much promotion is taking place and what is the full promotional level and mix of each competitive product?

How concentrated is the promotion? That is, is everyone promoting-and at what levels?

How well balanced are the various promotional campaigns across media? 

Is the level of promotion growing or declining, and at what velocity and acceleration?

To what extent did past promotional campaigns succeed in creating instability in new prescriptions and market share?

How consistent are the promotions of each product and the aggregate of all products?

Market researchers must also ask:         

Is the competitive set promotionally responsive (elasticity)? How much impact do various campaigns have, and how do the level and mix within the campaign influence the success?

How do the promotional forms interact with each other over time?

How does the concentration of market share affect promotion and its ability to work?

Product environment.  PMs must understand and quantify the following variables:          

the number of products in the competitive class

the number of therapies that the product competes against

the ages of competing products and therapies  

whether the product is a first-line therapy

the product's entry position in the market-first to market, second, and so on

the objective measures of quality that exist for the product under study and each of its competitors.

Disease environment. An analysis of the disease environment involves knowing:         

the severity of the disease being treated, and whether it is chronic or acute

how prevalent the disease is and the demo- graphics of those afflicted

Pharmaceutical Executive-02-01-2002

When the Customer is King

The Global Bioeconomy

Promo Planning Without the Guesswork: ROI Analyses Lead the Way