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Ensure Your Marketing Creates Visible Financial Results for Your Company
We all know that the old model, in which Pharmaceutical companies flooded the market with sales reps and targeted individual prescribers, no longer works, so what now?
Year after year we see the same things happening in the industry: layoffs, downsizing and budget reductions, buying earnings via acquisition, focus on increasing R&D innovation and efficiency, focus on emerging markets, increasing emphasis on biologics, biobetters and biosimilars, diversification into new and revived product categories, and so on. What’s going on?
A 2013 report from healthcare consultants PwC sums it up quite nicely by highlighting three fundamental challenges facing the industry:
- Rising consumer expectations, with all customers, particularly institutional buyers, demanding increased value for their money
- Poor productivity resulting from R&D
- Cultural sclerosis: basically a stagnant management culture which hasn’t realized that the old ways of doing business is dead, and that a new paradigm is required.
I have seen a common thread linking these three areas: marketing. Pharma has lost the knack for marketing its drugs to increase revenues. The C-suite feel that marketing is not able to create measurable results and, therefore, see marketing as an expense to be cut, rather than the engine and company life support that keeps money flowing in.
Instead, the C-suite has tried to demonstrate value (mainly to shareholders) by manipulating its stock through massive layoffs, slashing budgets, moving offshore, and merging with - or acquiring - other firms. At some point this has to stop and we have to return to the fundamental tenet of good marketing: providing value to customers.
Stronger marketing is desperately needed, marketing that works, that’s based on quantitative data, not gut feel, that is designed for a specific product, a specific market.
Today, regulatory requirements keep marketing departments penned in tighter than airline passengers sitting in the back row of coach. The blockbuster model is dead, sales forces have shrunk like a woolen sweater thrown in the dryer, budgets have shriveled, customers are screaming for price concessions, patent expiries as well as competition from generics and biosimilars have eaten into sales and profits; the list of problems goes on and on.
Given the dearth of R&D in most companies, relying solely on new products to drive growth is no longer an option.Yet, a 2011 report from KPMG on the state of the US Pharmaceutical industry found that about half of Pharma executives (52 percent) expected the biggest drivers of revenue growth would come from their own research, followed by therapies from a partner or acquisition (36 percent).
How is that going to work given that the annual growth rate in Pharmaceutical research and development (R&D) expenditures has shrunk from 7.5 percent to just 2.3 percent in Europe, and dropped from 10.7 percent (1998-2002) in the US to 0.5 percent?
This emphasis on new product development to drive growth has another flaw: Pharma continues to operate in silos, with a wall between marketing and research. This means that marketing typically doesn’t get involved with a new drug until it is about to launch, so the information marketing could bring to the development – including unmet customer need, key facts about the competition, potential marketing opportunities aligned with R&D – is only available at a later stage.
What do marketers need to do now?
- Marketing should be involved in the drug development process much earlier than when the drug is nearing the end of clinical trials. This is something marketers should be discussing with senior management. Involve marketing earlier and they could use analytics to identify potential barriers to sales, such as an already saturated market, the difficulty of pricing issues, etc. Develop plans early to overcome these barriers through market preparation, and partner with research to ensure a more market-friendly product.
- Marketing needs to ensure that the messages used for their products are the underlying key drivers for their product category. So many marketing strategies are taking the easy way out and focusing on easy differentiators. If these are not strong drivers (as many are not), then so much of your time and money is being wasted and you will not see the results you want/need. Time and time again we see this as being the case and notice that by making simple changes in messaging and positioning, major improvements are observed.
- Marketing must demonstrate a measurable financial impact. The most evident impact for marketing should be revenue growth and profit but with strong analytics, any marketing team should be able to easily tie marketing to revenue and profit fairly precisely. Marketers need to be able to say, “We put x$ in these programs and got y$ revenue and profit as a result”. Warren Buffet is a CEO, widely regarded as one of the savviest CEOs around, and he spends a lot of money on marketing. He states that he ties marketing to sales growth and is happy to write as many cheques as needed for his marketing teams, and his teams are able to demonstrate their achievements. All Pharma marketers need to be able to do the same. I speak with many marketing directors every month and so many are still using gut feel and inadequate approaches to measurement of activities. There is definitely room for vast improvement here.
- Marketing impact must be visible to the CEO. Marketing results should not onlybe obvious from doing the mathematical calculations, they should be so obvious that the CEO wants to know what you are doing to get such great results.
Are you able to show your C-suite that for every dollar they spend on marketing, they will get three or more dollars in return? Do you have the underlying support, processes and tools in place to really know the financial impact of your marketing? Clearly, the results show many companies do not. Most CEOs appear to be disappointed with the inability of their marketing teams to gauge what they are doing effectively, and create measureable financial results. This must change - and now is the time for change - for betterment of business and, essentially, superior company results.
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