More Than a Measure

March 1, 2007

Successful Product Manager's Handbook

Volume 0, Issue 0

To be or not to be marketing on the web is not the question for many pharmaceutical marketers. With a rapidly expanding Internet audience seeking health-related information, pharma companies are moving more of their marketing attention and advertising dollars online. That's because everyone knows the value of online pharma marketing, right? Well, maybe not.

To be or not to be marketing on the web is not the question for many pharmaceutical marketers. With a rapidly expanding Internet audience seeking health-related information, pharma companies are moving more of their marketing attention and advertising dollars online. That's because everyone knows the value of online pharma marketing, right? Well, maybe not.

In fact, many in the pharmaceutical industry wonder if they are getting the bang for the bucks they're spending on e-marketing efforts. This statistic may seem easy to quantify, but in many cases, companies lack a clear understanding of what "good" means when analyzing their own Internet numbers. For example, what does it mean to have a 4 percent signup rate for a consumer e-newsletter? And are 100,000 visitors a month to a brand's Web site a lot? The answer is, it depends—what might be deemed good for one brand might be considered average for another. Success is dependent on many variables like strategy, therapy area, and brand size.

Traditionally, brand managers rely on agency partners or other brands in their company to determine what "good" is. But it's not enough to get a real reflection on how pharma companies use online marketing. To get an industry barometer, TGaS Advisors collected Internet marketing data from 23 brands at seven major pharma and bio companies; the resulting dataset establishes a comparative benchmark that focuses on the effectiveness of Internet marketing and relationship marketing tactics. To put it simply, the results are a performance yardstick that tells brand managers what and how their peers are doing.

The results differ based on size and budget of each brand, but there were some similar findings across the board. Of course all brands are different, but the TGaS benchmark study found that companies typically spend 56 percent of their online consumer marketing budget on media. Twenty-four percent of the budget went towards relationship marketing programs, while the rest went towards Web site development and market research (see "Budget Allocation").

The following charts and tables illustrate various aspects of how the 23 brands in the study handled their online outreach to consumers, as well as offer some intriguing insights. Grouped by size in terms of annual US sales revenue, the figures show what kind of results the brands achieved and how much they spent to get there.

If You Spend It, They Will Come

One interesting yardstick compares the amount spent for online marketing versus the number of visitors to a brand's site. The brands are grouped by annual revenue, and plotted against two different variables: the average dollar amount the brands spend on online budgets, and the number of annual visitors to a brand's Web site. The results show that brands that put more money into an online budget will have more traffic on its Web site, thus spending less per visitor. Conversely, smaller brands that spend less on their budgets end up spending more per visitor.

Of course, online spending doesn't occur in a vacuum. What a brand does offline clearly matters to the outcome of online marketing results. An observation that emerged from the benchmarking was that smaller brands—with annual revenue under $500 million—tend to devote consumer budgets to direct-to-patient programs and little else. With little Web traffic, cost per visitor is $5.44.

Conversely, for the blockbuster brands ($1 billion to $2 billion) that did highly targeted direct-to-consumer campaigns—and included the name of the Web site in commercials—cost per visitor was $3.81, indicating a high level of traffic to a brand's Web site.

The remaining revenue groups were more likely to have mass media campaigns to drive awareness, which may have broader reach, but doesn't guarantee consumers will go to a brand's Web site.

Build Relationships

Pharma companies that had online marketing plans in place had an advantage to cultivate relationships with patients. But how are marketing analysts to know the relationship is working?

A good measure for performance in this area can be determined by three stats: the percentage of people who enlist in a patient program through the Web site; the percentage of people who actually open emails once they're enrolled; and the percentage of people who opt out of programs after initial enrollment.

While it might be interesting to compare relative performance across the spectrum, it's more useful for a brand to gauge its metric against other brands in the same revenue category.

So, for the purpose of the benchmark, TGaS analyzed the overall numbers of consumers who visited a brand's Web site and how they used the information they read on the site.

The benchmark showed that a third to nearly half of the patients who enrolled in a relationship-marketing (RM) program online come directly from the brand's site. The rest of the patients enrolled the brand's Web page through non-branded sites or banner ads. The email open rate hovered from 37 percent to 50 percent for enrollees across the spectrum, while the percentage of people who dropped out of RM programs was consistent for all brands in the benchmark. How does your company compare?

The Cost to Be First

Most people start their hunt for healthcare information at search engines like Google or Yahoo, so it makes sense for pharma marketers to invest in search engine marketing (SEM). TGaS' study found that pharma companies spent as much as possible, but there's only so much any brand can devote to SEM because the supply of search terms is limited. The SEM budget for the smallest brand category in the dataset was $740,000.

After this is purchased, the incremental marketing dollars for brands are spent on a variety of activities. The online budget includes costs for media, site development, and market research. The online media budget is a subset of this, and includes cost for banner ads and email lists rentals.

Leaders of the "Click"

The click-through rate (CTR) is a common tool to gauge the success of an online advertising campaign. A CTR is obtained by dividing the number of users who clicked on an ad on a Web page by the number of times the ad was delivered, called impressions. What does "click-through success" look like? Once again, it depends.

According to the TGaS benchmark the first industry-specific data available on CTR—bigger brands with large marketing and creative budgets have higher click-through rates. To determine the success of a single brand's Web site, the click-through rate should be measured against other brands that share the same annual revenue.

A Place to Start

A key finding shows the significance of the $2 billion milestone in a brand's life. A $1 billion brand is generally considered blockbuster, but results show high click-through rates and large number of site visitors occur in brands that earn more than $2 billion. Does this mean blockbuster status actually occurs at this level? Ongoing benchmarking may be a way to find the answer.

For many pharma brands, reaching out to consumers with disease information is only a click away. By building a solid and informative Web site, companies can not only encourage compliance, but can build relationships with their customers as well.

Stephen Gerard is managing partner at TGaS. He can be reached at sgerard@tgasadvisors.com