OR WAIT 15 SECS
When conducting marketing research, focus less on your product's benefits and messages and more on its value to understand where scripts come from.
According to conventional wisdom, a new brand has only 120 days after launch to create momentum and build a trajectory that will determine whether it eventually succeeds. That wisdom still holds true, but the rules for launching products have changed. Man-aged care's quest for "value" has played the biggest role in reshaping how pharma markets its products. According to David Balekdjian and Michael Russo of the Bruckner Group, "nearly 100 percent of MCOs and PBMs now analyze a drug's value when making formulary decisions."
Pharmaceutical marketers have lost control of some of the tools traditionally used to ensure brand success. Regulatory actions and scrutiny have increased constraints on promoting brand claims. In pricing, emerging managed care strategies and plan designs have created tougher negotiation environments. As the use of multitier co-pay systems grows, consumers are allowing their treatment decisions to be swayed by a $10-$15 difference in co-pays.
Kim D. Slocum, director of strategic planning and business development at AstraZeneca, says, "One of the most critical issues facing the pharmaceutical industry over the next 10 years will be who pays for innovation. Better identification, documentation, and promotion of value will be absolutely critical to that activity." Identifying and promoting value falls squarely within the responsibilities of brand managers. This article defines value, explains how it can differentiate a product, and highlights how product managers can better prepare for product launches by establishing product value early in the game.
NEW DEFINITION: The American Heritage Dictionary offers several definitions for "value," two of which are "worth in usefulness or importance to the possessor; utility or merit" and "an amount, as of goods and services, considered to be a fair and suitable equivalent for something else; a fair price of return." Traditionally, the pharmaceutical industry has used the former definition. If a medicine had sufficient usefulness to a physician or importance to a consumer, that usefulness demonstrated value—whatever the cost and whatever companies had to do to promote that perception. With today's shrinking pharmacy budgets, multitier co-pays, and prior-authorization requirements for biologics and breakthrough medicines, the definition is shifting more to the "fair and suitable equivalent" model, wherein marketers must demonstrate that brands are worth their cost to the healthcare system.
Over time, the focus on value will affect every element of what brand managers do. But for now, they should:
FIND VALUE EVERYWHERE: Many of today's strategies and research techniques are organized around brands' features and benefits, or core messages. These messages search for what is unique, or sometimes what is catchy, but not necessarily what is valuable. Value itself, though, is not difficult to find. There are three ways to ensure that marketing planning and research focuses on value:
Concentrate on the complete critical need. Marketing 101 advises, "Look for the unmet need," but, frankly, many pharma customers believe needs are fairly well met. Most physicians were perfectly satisfied with Zocor (simvastatin) before the launch of Lipi-tor (atorvastatin). But total cholesterol reduction was critical, and physicians believed that Lipitor performed better than its predecessor. Most patients were generally satisfied with Claritin (loratadine) before the launchof Allegra (fexofenadine), but patients sought lack of sedation combined with efficacy, and found Allegra to combine the two better.
The Delphi Process
It's critical to know when and how to focus on a key combination of benefits. When Pfizer launched Celebrex (celecoxib) and Merck launched Vioxx (rofecoxib) within months of each other, Celebrex's positioning addressed one benefit—gastrointestinal safety—while Merck went one step further, addressing the combination of effective pain and inflammation relief and GI safety. Until the dual-proposition Vioxx developed unforeseen cardiovascular problems, it was on its way to becoming market leader.
Part of the marketer's role is to change physicians' and patients' behavior by offering superior value. Doing this involves creating awareness of the complete need, including medical, lifestyle, and cost needs, and then focusing attention on your brand's unique ability to meet them.
Segment the market based on value. Within the market, value may vary among stakeholders. Patients may want relief, while physicians want freedom from the distractions of phone calls and paperwork. One specialist may want a new source of patients, while another may seek to protect a "cash cow" surgical procedure. In all cases, identify the stakeholder group for whom your brand offers the greatest value andfocus on winning its loyalty and support. Much of Premarin's success in the late 1990s reflected activists' belief that women's health problems had been largely ignored by the medical community and that hormonal replacement therapy possessed unique benefits. As medical researchers studied these benefits, the mass media took them as a given, and women flocked to their physicians requesting Premarin prescriptions. It was not until the NIH Women's Health Initiative proved HRT's benefits to be mostly illusory that Premarin sales began to decline.
Respect Your Champions
At the same time, it's important to avoid alienating the stakeholders who might resist your efforts. In the 1990s, Merck promoted its new agent, Proscar (finasteride) as a way to enable primary care physicians to treat benign prostatic hypertrophy (BPH), thereby sparing older men a painful, invasive surgical procedure known as a trans-urethral prostatectomy (TURP). The problem was that men with BPH were treated by urologists, a large portion of whose incomes came from performing the procedure. They refused to surrender their patients and fought against Proscar, which never fully overcame their resistance.
This concept can be applied within stakeholder groups by seeking value segments—groups of stakeholders within a category that champion a distinct value proposition for your brand that others might not. These value segments can reflect medical beliefs, underlying non-medical values, or physician practice economics. Botox (botulinium toxin) has profited from marketing to a small cadre of physicians so impressed by the brand's benefits—and unafraid to inject patients and purchase medicine directly—that they are willing to consider new uses within their practice long before these uses are approved.
Rethink marketing research. Most of the marketing research techniques used today focus either on benefits or messages. Instead, ask marketing researchers tofocus on value in order to identify exactly what it is about a physician, patient,or brand that determines whether that physician prescribes the brand for a specific patient. These techniques, both qualitative and quantitative, will focus on how physicians treat specific patients—and why.
ORGANIZE INTERNAL TEAMS: Value, like beauty, is in the eye of the beholder. Within your com-pany, various functions will take dra-matically different views of a product's unique benefit and keys to success. It's important to ensure that all critical functions are aligned on the same value prop-osition throughout development and launch. Organize internal teams around the key external stakeholders whose behavior will determine success, such as physicians (represented by sales force), managed care (account managers and marketers), patients (DTC experts, patient advocacy associations), and clinical/regulatory (FDA specialists).
Some of the most important insights come from individuals outside product managers' typical circle. Industrial operations (representing manufacturing and product distribution) can provide creative packaging solutions to enhance compliance, improve administration, or otherwise deliver on the brand's value proposition. But those operations need accurate forecasts to plan how much manufacturing capacity to build. Think undercapacity doesn't matter? Immunex underestimated launch demand for Enbrel (etanercept)so severely that Centocor's Remicade(infliximab) was able to gain significant market share.
To ensure speed in your preparations, build subteams composed of ad hoc members of the launch team who can support the primary functional expert. Some particularly critical subteams are: managed care/contracting,sales force planning, analytics/marketing research, segmentation, forecasting, regulatory/labeling, and medical/clinical. Each team should be led by someone from the core team who represents that function. Other members should beinternal stakeholders in dif-ferent functions. For example, medical liaisons should be part of themedical subteam and managed care/contracting.
FOUR P'S NOT ENOUGH: The famous four Ps of marketing—product, price, promotion, and place—are no longer enough. Payers' focus on value makes it necessary to add a fifth—preparation—to ensure that the product has adequate resources before, during, and after launch. And even within each of the established elements, product managers' jobs are changing.
"Product" refers to the package of claims and cautions that are represented in the product's label. When preparing for launch, product managers should live by two documents: a target product profile (TPP), which defines the performance goals your company hopes the brand will attain over its lifecycle, and a draft target label, which summarizes the claims and cautions your regulatory group believes FDA will grant the brand based on available and/or planned clinical studies.
In practice, both these documents tend to describe the product's features. Your job is to manage the label process to maintain focus on the value that these features will bring to physicians, patients, and/or payers. If you have done the right research, you will know what each group values. Now, you must work to connect the product's features to these values and, in the process, build strategies about which groups will find the most value in your brand. Staying focused on your own value proposition is the only way not to be distracted by the bureaucratic, regulatory, and competitive challenges that throw so many brands off course.
The first step is to attach a sense of value to the draft label itself. Prepare a value-annotated label with footnotes or sidebar comments identifying the value propositions attached to the various brand features. Distribute the label to the team and, whenever you update the target label, be sure to update the annotated label at the same time.
It's important to test these links relentlessly to see whether the features can truly carry the argument. One reason that brands fail is that they claim efficacy based on features—duration of action, for example, or ability to sustain drug-free periods—that physicians do not consider markers of efficacy.
Marketing research provides several excellent methods for testing. Value driver studies can confirm your sense of what the market values, and, at the same time, identify specific features that express this value. Perceptual maps and other attribute-focused studies can confirm links between value goals and brand attributes more tightly. Qualitative research can help you understand when things do not link up the way you expect them to.
PRICE STRATEGY: As customers become better organized and more financially sensitive, price becomes increasingly critical to brand success. Too often, marketers think of the price as a single list item, expressed in cost per pill, vial, or day of therapy. In fact, price is merely a single element of pricing strategy, which reflects your value proposition. Your price should reflect what various stakeholders are willing to "pay" for your product. Keep in mind, though, that various stakeholders pay in different currencies. To a primary care physician deciding between statins, the "cost" involves the hassles associated with patient phone calls asking him to switch drugs to avoid a higher co-pay, or the paperwork necessary to document the need for a prior authorized brand. To the patient, the "cost" is whatever she pays out of pocket at the pharmacy. For the payer, the "cost" is the negotiated price.
A pricing strategy must reflect all stakeholder costs. One excellent, widely available probability-based design is the Monte Carlo model, which is similar to a basic Excel-style model, except that for uncertain measures it replaces a single value with a distribution. For example, you might know that 1-1.5 million Americans suffer from a particular disease. In a typical model, you would estimate a single number (1.25 million) and use that in your model. In a Monte Carlo, you use a distribution (median, 1.25 million; low estimate, one million; high estimate, 1.5 million) instead. The software selects a random value within this set and, using random values for all the distributions, creates an estimate. It then takes a new set of random values, and repeats the process. Other distribution variables might include multitier co-pays and changes in competitive pricing or spending.
A typical Monte Carlo forecast is based on 1,000 or 10,000 such estimates and focuses on the distribution of results. It can provide not only guidance on the price point that maximizes revenue, but also the key assumptions to monitor to ensure the validity of your price recommendation.
Pricing strategy should focus primarily on costs and values for the individual who has greatest say in the final prescribing decision. In oncology, group practices purchase medicine directly, and prescribing decisions have financial consequences for physicians. Therefore "cost" is a bottom-line financial measure. For most oral medicines, however, prescribers have no financial incentive to act, and measure cost solely against hassle. Prescribers who endure the hassle of paperwork and patient phone calls, restrict payer power.
CAREFUL PROMOTION: At the same time, pricing strategy must respect the needs of key stakeholders, particularly those who would like to be your champions. Promoting brand value to physicians is different from promoting price. In most consumer markets, most buyers believe that a lower price suggests an inferior product. Similarly, pharma brands entering the market at a discount price must first demonstrate efficacy, safety, and tolerability, and only then promote price as a differentiator. The alternatives are to sell on price alone—which the market views as proof of inferiority—or to simultaneously promote two seemingly contradictory propositions: premium value at a discount price. The second strategy costs more money, takes more time, and requires exceptionally skillful communications.
The promotional link between low price and brand value is subtle and depends on the audience. For hospital or MCO pharmacists who manage line-item budgets, a lower price may be a benefit in itself. Physicians, though, associate cost with the hassles of paperwork and patient phone calls. As a result, they will consider a lower price a benefit only if it translates into fewer hassles by combining the standard pharmaceutical benefits (efficacy, safety, tolerability) with increased payer acceptance and, as a result, less administrative work.
One of the better tools for promoting brand value is to consider real quality-of-life improvements. Such ben- efits will help a brand set perceptions at launch but cannot rescue a brand from a failed launch or indistinct launch positioning. In the past, FDA had no mechanism for including quality-of-life claims in the label. Brands that promoted quality-of-life benefits focused promotion on patient empowerment, either to consumers (Celebrex and Vioxx) or physi-cians (Imitrex). Recent changes at FDA may now enable brands to include patient-reported outcomes in the label. If clinical and new product development teams do a good job, product managers will have patient-reported outcomes in their phase III program. If not, start a subteam (headed by Health Economics) and look to do more studies quickly.
Over the past several years, a handful of low-cost brands, such as Lescol (fluvastatin), gained more share than anundifferentiated late entrant could expect by entering at and promoting a lower price. " Still, it is unclear whether the brand could have achieved comparable or higher revenue (with lower share) at a higher price. Looking ahead, the test case will likely be Vytorin (ezetimibe/simvastatin), which has flat-priced itself well below the dosing strengths of Lipitor and Crestor (rosuvastatin), to which it shows comparable (or even superior) efficacy.
PLACE AND TIME: Finally, brand value for pharmaceu-ticals today is closelyintertwined with the distri-bution system, or place, through which the brand reaches the market. Markets today include three basic distribution systems: pharmacy-purchased outpatient medicines, hospital-administered medicines, and physician-purchased medicines such as oncology or biologic medicines. These systems differ in who pays, how medicines are reimbursed (directly or indirectly), and how much independence the prescriber has. It is important to understand the unique features of each system—and how they shape perceptions of value—before designing value-focused brand strategies.
It's also important to remember that value is dynamic and can change over time. Brand value can change based on new competitors, new indications, legislated changes in reimbursement, new surgical procedures, or major new epidemiological studies. Brand managers should consider changes in the value of their brands and changes in the value of the company's therapeutic franchise. You can test these assumptions using a variety of techniques, ranging from advisory boards to (more impartial) Delphi exercises.
When you review the results of your exercises, identify the testable measures that will be key to brand success and develop a system to track these particular measures. Most brands track awareness and acceptance of key brand attributes among physicians and sometimes consumers. But it may be even more important to track value drivers—the benefits that shape request, prescribing, and reimbursement behavior. If these value drivers swing in your favor—for example,if a larger percentage of physicians rates the brand high on effi-cacy—you can expand promotion earlier in the product's lifecycle.If they swing against you, marketers can explore strategies to bolster positive perceptions in these driver areas, search for new value platforms, or even reduce promotion for a brand that cannot win. Start value driver tracking two or three months after launch; track quarterly for the first year, and once or twice a year after that.
One effect of globalization will require product managers might to consider these issues in the context of global marketing, instead of simply the US market. National Institute for Clinical Excellence (NICE) guidelines (www.nice.org.uk), based on the British government's idea of value, are gaining worldwide acceptance and have become a guide for many US MCOs. In Germany, the government allocates each physician a budget for outpatient medicines for a particular indication that they must manage directly. In the future, promoting value on a global basis—which is already a critical success factor for new brands in 2004—will be the primary factor for success of almost all brands.