Think First, Spend Better

September 1, 2004
Terrell Herring

Successful Product Manager's Handbook

Don't forget to consult in-house departments such as medical affairs, R&D, and distribution to get their insight.

You can tell it's budget-review time at a pharma company just by observing the glassy eyes of product managers. Under pressure to deliver the magic number that will get the biggest bang for the buck, they can only hope they didn't ask for too little to get the job done or overestimate their needs and incur the wrath of their finance officer. To avoid either of those scenarios, many would do well to take time to answer some important questions about their company before submitting a budget.

To start, product managers must consider the corporate culture and marketing strategy when creating a budget. Does the company strive for market leadership in every category or just one or two therapeutic areas? Does it just want to be a player in a major market in which just a few share points translate to significant revenue and profit? Is the product or brand a designated "blockbuster" or does it fall into the "equitable return" category? What is the short- and long-term corporate strategy for the brand? Where is the brand in its lifecycle? The answers help determine the forecast and subsequent budget allocation that support the marketing programs designed to meet the performance goals for a particular product, brand, or franchise.

Two-Step Analysis

A good place to start the budgeting pro-cess is to analyze the previous year's budget allocation for the brand and determine which tactics provided a positive share impact. Key to that assessment is market research, particularly promotion response modeling analysis. Such analysis shows the response to marketing and sales programs and medical education initiatives by physician segment, both individually and cumulatively, providing quantitative data. (See " Did It Work?") This allows product managers to determine the value of previous tactics and identify the most effective combination of programs to include in the new marketing and budget plan. In addition, the information is useful in determining sales force call requirements, which is integral to successful execution of the brand strategy.

Although this type of market research provides some important performance metrics about previous tactics and call requirements, it is also essential to combine it with other information when prioritizing budget allocations. A situational analysis provides additional insight into the defined marketplace in which a brand competes. It provides answers to these important questions:

  • How does your brand compare with the competition in terms of pricing? Positioning? Advertising and promotional spend? Sales force size?
  • For-mulary placement, distribution, and clinical support?
  • What new products on the horizon offer new competition?
  • What does your competitive intelligence say about changes in any of these areas that could identify better opportunities or new hurdles for the brand in the coming year and beyond?
  • How should funds be allocated this year to meet these challenges while at the same time position the brand for growth?

The situational analysis provides managers with a contemporary view of changes in the marketplace and is instrumental in determining not only the money allocated to each tactic or program but also in crafting the message delivered by the sales force intended to overcome the identified challenges for the brand. For example, your analysis might reveal that a competitor is changing its product's dosing so that your brand no longer can claim exclusivity in dose convenience. How will you change your message to differentiate yourself from the competitors? Will you focus on another product attribute or re-craft your message from "exclusive" to "first" in dose convenience? Product managers can and should supplement their research with insights from other departments such as manufacturing and distribution, as unrelated as they might seem. (See "Internal Resources.")

In this promotional analysis of a medical education program, the brand’s market share grows in the months following the event.

Prioritize Tactics

After completing this type of market research, product managers are better prepared to choose the programs proven to have a considerable return and an ability to grow the brand. They can also eliminate less effective programs and introduce new programs into the mix.

When prioritizing marketing programs for budget dollar allocation, product managers should also consider the important elements of program flexibility—a program's ability to start, stop, or be modified quickly to meet the rapidly changing needs of the market, company, or season. Reserving the high costs of primary sales call positioning, marketing programs, and samples allocations for the brand's peak season can produce cost efficiencies. Other cost saving considerations include secondary or tertiary promotional positioning, the use of an outsourced sales team, and the inclusion of impersonal (anything other than face to face contact) promotion to low prescribing physicians and those in remote geographies. Impersonal vehicles such as direct mail, telesales, telesampling, and business reply card (BRC) program redemption—while not as effective or costly as personal promotion—can help maximize the return on promotional dollars spent while delivering the brand message.

Internal Resources

New Challenges

Product managers also have to consider some of the current promotional challenges stemming from the newer, more stringent pharma and healthcare regulations and how they affect brand promotion and budgeting. Wise product managers build strong internal relationships with corporate compliance officers who can advise them how to stay within promotional regulations.

One area in which compliance personnel can be most helpful is developing effective patient assistance programs that can improve sample cost management. Samples are one of the most costly line items in the budget. When physicians use samples for indigent patients, rather than for patient starts, as per regulatory guidelines, it is very expensive and can potentially appear as over sampling to acquire business, conflicting with existing regulations. Execution of a well thought out patient assistance program, minimizes regulatory conflicts and keeps the sample budget in line by providing complimentary products for indigent patients and reserving samples for their intended use.In addition, manufacturers receive a tax advantage and the "good will" image associated with these compassionate programs.

The product managers' relationships with corporate compliance officers also extend to the medical affairs department, which uses its allocation to ensure the delivery of medical education associated with a disease or molecule to physicians. The PhRMA Code has forced companies to shift dollars from their marketing budgets to medical affairs. This has left product managers at many companies with fewer resources for promotional activities and without control over medical education programs.

Today's brand budgeting is more challenging than ever because the marketplace is rapidly changing. Program cost efficiency and flexibility are critical when building a marketing plan and brand budget. It's important for product managers to take time to gather and analyze information both internally and externally. That data will enable them to efficiently and economically budget their resources for the tactics proven to provide the best return on investment and help achieve your brand goals.

Related Content: