Why Big Pharma's marketing strategy needs a rethink

While it is true that the CMO's leadership requires broader organizational scope, as I said in my earlier article, it also demands a greater external focus as the custodian of the brand franchise. With increasing pressure on marketing to deliver (and be seen to deliver!), it is crucial that ROMI does not become the tail that wags the dog. Measurement in and of itself does not deliver improvement. To borrow from Peter Drucker, "leadership is about doing the right things". Marketers have the responsibility to take a broad strategic view that can provide a catalyst for innovation.


Arthur Stern is CEO of Global-Prime.

To illustrate, let us take the health industry as a case in point -- a category that globally is full and centre of today's political and social agenda. There is growing evidence that the current health systems of nations around the world will be unsustainable if unchanged over the next decade. Healthcare is threatened by a confluence of powerful trends -- increasing demand (ageing), rising costs, uneven quality, misaligned incentives. If ignored, they will overwhelm health systems, creating massive financial burdens for developed and developing countries and devastating health problems for people.

'Big Pharma', in particular, are struggling with the concurrent demise of the blockbuster-drug business model. For a long time, at most three out of 10 drugs paid back their investment and created all of the profits. Now, the continued low ROI from R&D investments, limited prospects for new blockbuster drugs, and looming patent expirations are the impelling factors in the industry.

However, global consolidation and rampant cost-cutting appear to be limited-goal 'survivor' tactics. We suggest the 'right things': building on proven strategic marketing principles, including a focus on changing customer behaviour and digital empowerment to provide the foundation for a transformed business model. In particular, the perspective offered here relates to the implications of the changing product mix on marketing strategies.

The largest part of their marketing budget is dedicated to the field-sales armies of MR's (marketing reps). Without new blockbuster drugs, the future portfolio mix will increasingly skew toward lower volume, more specialized medicines. This proliferation of lower volume products will not sustain the traditional, labour-intensive, sales-driven marketing. The need for a dramatically more cost-efficient, effective marketing approach is the key internal driver for a strategic change.

At the same time, rapidly changing customer (i.e. doctor) preferences underscore the need from an external point of view. Much has been reported about MR's reduced face-time with doctors and the increasing number of hard-to-reach or unavailable doctors. A major factor for the diminishing sales force effectiveness is their reduced relevance in the internet age.

Doctors, as with the general population, are following the general trends toward using the internet as the number one source of information. For example, in Japan twice as many doctors already prefer the web over an MR meeting for obtaining information. Indeed, their changing behaviour includes increasing web usage while they are consulting patients. Thus, the traditional MR channel will be increasingly challenged. From the doctors' perspective it is both less convenient and is less effective or timely as an information source compared to the internet which can provide more compelling presentations and access to key opinion leaders.

This increasingly inefficient (internal facing) and inappropriate (external facing) go-to-market model needs to be completely overhauled. At the same time, the changes need to drive greater patient-centricity to match the over-arching marketing shift in health-care. Indeed one manifestation of a greater need for 'consumerism' is the fact that pharmaceutical and life sciences companies are using new pharmacogenomic discoveries to develop 'personalized' medicine.

We would posit, based on more matured experiences in other industries, that the focus for materially improving marketing ROI would be to more aggressively adopt multi-channel marketing. Multi-channel marketing is integrated marketing communications across all channels. The threshold goal is the potential efficiency offered by the effective blend of the MR sales force and digital media.

Do the 'math': The cost curve for the MR sales force will increase whenever the target customer contact base is extended. The variable manpower cost will tend to increase exponentially for any plan to achieve either extra time with doctors or incremental reach. On the other hand, digital media with mostly fixed costs will show a declining cost curve (i.e., improving cost efficiency) as reach increases. Consequently, balanced multi-channel marketing can offer material efficiencies and a substantial ROI.

Achieving this vision of marketing efficiency requires transformational innovation in the downstream marketing business model. And a prerequisite for dramatic success will be a clear acknowledgment of the scope of the undertaking. First, there is an industry-wide organizational bias that has to be recognized. Pharma companies, in general, can be described as sales-force centric with marketing largely in a support role. Since multi-channel is a customer-centric value proposition, it will require different metrics. More importantly, it requires the CMO and marketing to take the organizational leadership role.

Moreover, multi-channel is not the same as multiple channel. The large pharma companies reportedly spend about 10 percent of their marketing budget on digital channels and have an alphabet of related programs to improve efficiency. However, these efforts appear to be more multiple channel efforts, too often falling into the trap of "all things to all people", without taking a strategic and agnostic assessment. The principle for multi-channel is a focus on high-value customer segments and the underlying belief that multi-channel interactions are a key driver for customer engagement.

In a marketing-led setting, the first question is what conversations do we want to have with which customers, and the second question is what channel is most appropriate. Therefore the biggest hurdle for the CMO adopting a multi-channel strategy is aligning on the different business models and value propositions. Strategic execution of a transformational agenda will require a different set of business goals and performance metrics across all of the marketing-related areas.

If we step back for a moment and look at Big Pharma more broadly in relation to other industries, the current situation can be viewed as a typical innovation cycle. For example, a common development pattern for technology products is from hardware to software to integrated solution to services. From this perspective, the pharma marketing innovation agenda we moot is to move from pushing physical products toward pulling customers through a new 'service' model.

Broadly rethinking the value proposition will inform the development of a new multi-channel sales/conversion model and marketing program planning. Execution can be approached from two viewpoints:

  • Strategic: performance management based on a new focus and metrics
  • Tactical: multi-channel integrated marketing based on a new marketing playbook

Both would necessarily be customer-centric with an overall strategic view that challenges today's conventional thinking, and the barriers to change cannot be exaggerated. Withstanding any regulatory constraints, pharma has been very slow to embrace new communications technologies.

Drug brand web-sites almost never carry the interactive community features, even with validated registrations, that today's leading marketers are employing to promote customer engagement and advocacy: bulletin boards, blogs, chat rooms, etc.

Pharma marketers have largely stuck with a decidedly Web1.0 'tell and sell' model in which customer interaction is 'managed' by the MR. Whether this head-in-the-sand approach is about to change is a whole other question, but it parallels the nature and extent of the new thinking discussed above that today's climate and empowered customers demand!

Chris D Beaumont is professor at Tokyo University's Global COE Program, and Arthur Stern is CEO of Global-Prime.

 

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