Half Day Meeting: ROI or RIP?
From left to right:
Back row: Steven Gray, Barrie James, John Ivory, Peter Dommett
Front row: John Robson, Andree Bates, Paul Hartigan
Maximising return on marketing spend is something which has perplexed those involved in pharma marketing for a very long time - but are we any nearer achieving that magic bullet of knowing where our marketing spend is having the biggest effect?
A fascinating half-day meeting held in London on 26th November sought to find some answers. Whilst the pharma industry is under pressure to make cutbacks on spending in order to improve profits, marketing spend is at an all time high. Management is therefore keen to assess what value it is getting from its marketing investment, making the marketers’ ability to measure and improve ROI of the utmost importance.
Around 80 representatives of the industry and the service sector came together at 20 Cavendish Square to hear six speakers on the subject, and to take part in workshops looking more closely at different aspects of the ROI question.
ROI - what is it and why bother?
The Chairman of the meeting, and the first speaker, was Barrie James, president of Pharma Strategy Consulting. An internationally recognised leading-edge pharmaceutical thinker and consultant in pharma futures, strategy and evidence-based marketing, Barrie manages the Huntingdon-based consultancy, which specialises in ‘pragmatic solutions to fundamental strategy, marketing and operations in the global pharma marketplace’. Earlier in his career he held positions at several pharma companies, and is the author of various pharma reports and books.
He started by saying that ROI is notoriously difficult to define: “we all know about it, but never ask for it”. But it’s more vital than ever to consider ROI, he said. “Things have not been going well in the pharma world and a lot of this is due to the fact that we have not come to terms with our new environment.”
Barrie identified various areas from which intensifying pressures are being put on the industry, from the product based factors such as fewer NCEs, poor differentiation, ageing products and external R&D, through external threats such as generics, parallel imports and what he called an ‘image crisis’ to changes in the marketplace including disintermediation, increased transparency and greater customer intimacy and knowledge. In addition to all of this, the industry faces declining market growth, increasing competition, financial pressure and M&A failures.
Coupled with all of this is the lack of a new model to replace the one which has been made obsolete. “The business model - the blockbuster - which we all know and love doesn’t work any more, and we haven’t found a new one,” he said.
Barrie set out two possible options for the industry: transformation, or what he called ‘stick to knitting’. He ruled out the first as having been tried and failed, and so suggested that the industry should “try and do what we do, only do it much better.”
That inability to achieve transformation has stemmed from the failure of strategic manoeuvres to change opportunities for pharma companies, whether it’s the obvious tactics of follow-on brands, formulations and geographical expansion (all of which he called ‘band-aids’), the logical tactics of mergers and acquisitions and generics, or the ‘stretch’ tactics of disease management and pharmacy benefit management. According to Barrie none of this has worked well, and in many cases not at all.
Which brought us on to ‘Sticking to the Knitting’: marketing your way out of trouble. “In the 90s, pharma discovered marketing: brands, categories, face time,” he told delegates. “We knew the talk, but did we know the walk?”
The industry has tried to spend its way out of trouble, putting more muscle behind the brand in terms of human wave selling, outsourcing, co-marketing and promotion, and DTC communications. The result has been an explosion in marketing spend, with the top 20 US companies spent a staggering $50.9 billion on marketing (of which over a third is on the salesforce), accounting for 33% of the industry cost structure; this against a figure which used to be half .
So what has the outcome been? Inevitably, the law of diminishing returns has kicked in, but much like the ‘Cola Wars’ of the 1980s, no-one has been willing to pull back from the traditional model, instead adopting a strategy of ‘waited for the other guy to blink’.
Marketing is now the single largest pharma cost, rising from 21% in 1980 to 35% in 2006 - while R&D has remained steady at 18%. The result has been squeezed margins: “In OTC, the rule of thumb is never spend more than 25% on marketing, because it hurts the bottom line,” said Barrie.
So if spending your way out of trouble hasn’t worked, what will? The answer, according to Barrie, is to think your way out of trouble, by auditing your marketing and focussing on ROI. Marketing is the only function at the operating level where significant short-term productivity improvements can be made (as well as long-term ones). Because the spend is so big, even a 5% efficiency saving has a big effect.
That marketing audit is about understanding and quantifying marketing effectiveness and efficiency, and analysing the relationship between the firm, its customers and its brands. ROI should be a major activity of marketing, according to Barrie.
He finished by suggesting seven ‘deadly resource allocation decisions’ to be avoided:
- We always do it this way
- That’s how Pfizer/Novartis/… do it
- It’s standard industry practice
- We follow instructions from Basle/New Jersey/Stockley Park
- It worked for our last major launch
- It seemed a good idea at the time
- There are no other ways that make sense
What can be measured?
Next to the lectern was Dr Andree Bates, managing director of Eularis, a pharmaceutical analytics firm which provides data-driven insight into the financial impact or corporate and marketing decisions. A leading expert in pharmaceutical analytics, her career has encompassed academic, clinical and pharmaceutical positions around the globe, and she has gained worldwide recognition within the healthcare industry for ROI and marketing effectiveness measures.
She started by setting out the main problem for pharma marketers: “In today’s competitive marketplace, pharmaceutical marketers (and agencies) must prove what marketing activities provide what return.”
And yet, she said, it’s ‘pretty damning’ that many marketers cannot accurately measure - nor manage - return. According to a McKinsey study, only one in three marketers build marketing budgets based on knowledge of the spending required to meet goals, and only 13% of senior marketers feel confident in their ability to forecast the sales impact of their marketing programmes. What’s more, faced with a 10% budget cut, only 40% of marketers feel they could predict the impact on sales.
All this at a time when there are numerous issues emerging which affect the bottom line. “We’ve got a lot of crises on our hands in the industry,” said Andree, “And we have an obsession with the quick band-aid fix.”
These crises include pipeline, customer and management issues, as well as problems with growth, an investor crisis and a competitor crisis. All of this is adding up to less bottom line in the future - and therefore increased scrutiny of costs. But, asked Andree, is ROI the right thing to measure?
Defining ROI as ‘the relationship between revenue, gross margin and return’ for each discrete marketing investment, she showed how the return could be accurately measured. “Marketing ROI has different needs from traditional accounting ROI,” she said. “Marketing investments are selected quite differently from capital investments, requiring a different approach to ROI analysis.”
The main difference is that marketing is scalable compared with capital investments, and marketing investment decisions are far more complex, going beyond a decision to select the best investment choice from a pool of alternatives. Instead, marketers need constantly to make decisions on how much advertising is required, how frequently targets should be marketed to, which are the optimal channels, and how much to invest in each.
Andree maintained that the key to optimising marketing investments is to view each incremental investment independently.
One problem is that sometimes a high ROI can be achieved at the expense of growth and profit, with ROI comparisons sometimes being made as a proportion of the original investment, without the absolute effect being measured.
“Despite advancements in marketing measurement, many companies still misspend huge amounts on marketing. Why?” asked Andree. “Because ROI approaches are often flawed and insufficient to guide decisions about where and how to drive growth moving forward. Past return is a poor predictor, in a changing environment, of future returns.”
This is because ROI relies on historical data; relying on history to ‘prove’ the return on a marketing programme doesn’t guarantee it will pay off in a similar way in the future. This is because as we move forward, there will be other factors in the changed environment that weren’t there before - what competitors are saying and doing, formulary issues, environmental factors, what their patients say, and so on.
What are we currently measuring anyway? Historically, this has focussed on activity tracking in the 80’s and 90’s, then traditional historical ROI in the mid-to-late 90’s, then historical and analogue marketing response and econometric models in the early 2000’s, and now finally now we are more focused on market share growth and bottom line profit based on current market performance.
Pretty much everything is measurable, whether it’s messaging impact on prescribing, sales force impact in prescribing, advertising impact, effect of meetings, as well as impact of PCT focused activities (and much else besides). The question is: what, how and why should we be measuring, and is it aligned to the strategic decision being made.
Andree’s conclusion was that everything must be measured - and everything can be - but that care must be taken to ensure that the real impact of decisions is gauged, and that the measurements are taken with this strategic aim in mind.
ROI and the ABPI Code - what is best practice?
As in so many aspects of pharma marketing, the ABPI Code has an impact on ROI - and Steve Gray, our third speaker took to the platform to talk about what that impact is. Founder of Steven Gray Consulting, Steve is a specialist in healthcare sales and marketing compliance, believing that the secret to compliance is through understanding and good communication.
He said that on the face of it, the principles of ROI are simple: if activity A shows a 50% ROI after six months, repeat it; if activity B shows a negative ROI after six months, don’t. However, introduce compliance factors into this equation and it’s not quite so straightforward.
For example, if the promotional campaign that is inherent in activity A involves a breach of the Code, then the reputation damage could eradicate the ROI benefits. Conversely, even if activity B shows no short-term ROI (for example, a three year patient support programme), it might do in the long-term. So it’s important to look at the type of investment being made.
So what is the ROI of compliance? Steve quoted The ‘Father of Quality’ Joseph Juran, who said, “The cost of quality is the sum of all costs that would disappear if there were no quality problems.” Likewise, according to Steve, the cost of compliance can be measured in a similar way. What is the cost of not following the rules?
In the end, avoiding a breach costs time and money and this needs to be factored into the cost of any marketing investment. The direct costs of such things as the time taken in review and approval, of training marketers about compliance, and of precautionary audits all need to be taken into account. And will the Code lead to less effective - or at least less aggressive/creative - campaigns?
However, if being compliant costs money, then so does breaching the Code. Administration fees, negative publicity, recalling material and even suspension from the ABPI, have direct costs; on top of this is the opportunity cost of delaying or scrapping the campaign, as well as the damage both to the corporate reputation and potentially the marketer’s career.
Steve cited several examples from the headlines of where companies have suffered negative PR for breaches, and explained that it was a question of balancing the costs of compliance against the costs of rebuilding reputations following a breach.
As most pharma marketers know, it is clause 18 of the Code which is the ‘danger area’. Promotional aids - gifts - can be very effective, but can also be viewed as bribes/inducements to prescribe. Activities to enhance corporate reputation must benefit patient care or the NHS, thus encouraging a change in attitude towards the company (not so easy to measure) rather than a change in behaviour towards a product.
So does the Code allow pharma marketers to measure ROI? The answer is complicated, and depends on the activity, and whether its scope is national, regional, local or practice-based; generally, the more focussed the activity, the more problematic measurement becomes.
If it’s about attitude shifts, as we have seen, then there is no problem. But once the aim becomes more specific - for example increasing sales across the whole portfolio, measurement is only really appropriate at the national or regional level. And if it’s about increasing sales of a particular product, then this is even more problematic.
“If you measure the ROI of gifts or services against product sales,” said Steve, “it looks like the reason for giving the money is mainly for product growth; the more local you take the ROI measurement, the bigger the risk that the gift or service itself is regarded as inappropriate.”
Can you target placement of activities based on ROI? Only, according to Steve, if it’s based on areas with medical need, rather than, for example, practices which are either positive or negative towards a product, or those which are difficult to access or taking a formulary decision at a particular time.
ROI calculations should be based on the reason for the activities. If it’s about reputation - the attitude to the company over the long-term, there should be no problem. But once measurement becomes exclusively about sales, on a local basis in the short-term, there is more likely to be concern. “ROI goes beyond the sales line!” said Steve.
Case Study One: Medical Education
Mark Osborne, medical marketing manager at TEVA Pharmaceuticals, tackled the subject of medical education. Mark has been in the industry since 1991, and currently has responsibility for clinical message development, data generation, managed entry strategy and KOL development. His role has broadened in the last few years to cover all aspects of marketing management for the UK Brands division.
Presenting a specific case study, Mark said that measuring the ROI on much of what a product manager does is very difficult, although where there is a specific intent and specific outcome sought, it can be achieved.
The big challenge in the case study he presented was that the product involved had been a blacklisted drug, so few GPs had used it; this combined with the fact that the campaign had to talk about the therapy area rather than the specific product.
Scale was also an issue: with a small salesforce of just 55 people, and starting from such a low base, finding meaningful metrics was difficult. With sales being the key driver of ROI measurement of a series of workshops, how much could be meaningfully taken, even from a strong set of ‘verbatims’ on feedback sheets?
In actual fact, the figures gained look very strong but again, given the low baseline, how much does it prove in ROI terms? To what extent was the success due to luck, hitting the market at the right time? Would a similar campaign work in another context? These are all questions which demonstrate the difficulties of accurately measuring ROI.
Case Study Two: Congress and Meetings Communications
Measuring the ROI from congresses and meetings was the topic presented by Peter Dommett, managing director of mXm Medical Communications, an organisation which amongst other things supports international congress and medical meeting organisation for Pharmaceutical companies, including symposia and exhibition work. The company has been proactive in developing pragmatic tools, such as ROI Monitor™, for assessing best practice and ROI on global and UK projects.
Peter started by explaining how the ease of measuring results varied depending on the type of event, with more local events giving a better level of control. Once you get to the international congress level, the complexity means that you have little control over attendees, with a diverse audience, multiple contact points, and limited opportunity to follow-up.
The case study presented was in this mould: a Global Marketing Department is approached to be a major sponsor at an international congress, with delegates from around the world, 300 of whom are sponsored by company affiliates, and 2700 of whom are not sponsored by the company (thus the company won’t know who they are). The event will include a range of promotional and scientific activities.
The questions to ask are these: is it worth the significant investment; should they sponsor again next year, and if so, how can performance/return be improved?
Clearly there are a number of possible contact points. As well as the pre-event publicity (a video e-mail) and on-site promotion, a satellite symposium with 1000 attendees and a 200m2 exhibition booth both offer opportunities for contact, as do parallel workshops in the evening, a (non-product related) patient-focussed session in the relevant therapy area, and scientific posters and plenary presentations. And, of course, the ROI follow-up itself offers an opportunity for further contact.
But there are several issues in measuring ROI. Each delegate will be exposed to many influences to change prescribing, both positive (from the company and advocates of the drug) and negative (from competitors and those with a negative perception or experience of the drug). Trying to measure the positive effects of the sponsorship is further complicated by not knowing which delegates have taken part in which activities, and what their reactions to each were, as well as uncertainty about what proportion of attendees are non-prescribers.
Even for those who are prescribers, how many patients do they actually manage, and therefore how much opportunity will each have to put what you tell them into action? How, then can you measure the relative impact - positive or negative - of each activity?
Peter took delegates through a process for Congress ROI evaluation, a logical flowchart to help try to get to grips with some of these issues.
By building a model (which will inevitably include some assumptions), then a calculation can be achieved which will give some measure of the actual ROI. But beyond this, the opportunity to capture data and follow up with further research will hone that figure towards something more useful and credible.
Capturing e-mail addresses (and permission) from delegates allows a web-based questionnaire to be sent to all delegates (filtered to remove industry participants); in this case containing 16 questions requiring either quantitative or open responses. Thus the attendance and impact of each activity can be assessed.
Peter asserted that doctors are actually keen to let the industry know what they thought, and this was backed up by a 24% response rate in this case. This enabled the company to measure the increased likelihood to prescribe.
An alternative approach is to assess how much it would cost to achieve a similar level of contacts away from the Congress (the opportunity cost). By adding this to the estimated prescribing benefit achieved through the event, a measure of ROI can be achieved.
Peter finished by outlining some key tips to ensure that the ROI measurement is effective and useful. The first question to ask is how the ROI analysis will actually be used after the event. It’s important to get buy-in across the company for the ROI process to be used, as well as consensus on the assumptions which are going to be fed into the process. In complex situations, try a pragmatic approach, advised Peter.
You need to plan ahead to capture delegate information, feedback and sales data, and you need to recognise that no two delegates are equal, so a decision needs to be made about how to determine the differences.
Finally, it’s important to discuss the results objectively, removing personal issues. Agree the learning points and ensure continuity for future projects, and you can achieve useful ROI measurement to determine the effectiveness of this - and future - investments.
Case Study Three: Electronic Communications
Paul Hartigan, founder and managing director of PharmiWeb Solutions, presented the final case study. Paul has spent the past eight years developing innovative web-based solutions and strategies for the pharmaceutical sector.
Paul introduced two types of e-marketing ROI: what he called ‘soft’ ROI results, and ‘hard’ ROI results. But he warned, “More often than not clients currently don’t ask for ROI as part of the programme.”
In the case study he presented, the campaign objectives were clear and well-identified: to raise brand awareness, create access opportunities, create an ongoing dialogue through repeat visits and multiple waves, build a knowledge base and platform for future e-marketing activities - and to measure success (i.e. this was one example where ROI was built into the process).
The campaign itself involved a mix of tactics, including a two-wave e-mail blast via multiple channels, a core product-centric e-detail, and additional content such as patient case studies, KOL commentary and interactive content. Two promotional items were also used, and the measurement was via a non-incentivised feedback questionnaire.
Like other speakers before him, Paul pointed out that pretty much everything can be measured; he then proceeded to demonstrate how in this case they had gone about the task. Top-line metrics were easy and automated - the proportion of e-mails opened, the click-through, bounce and conversion rates are all absolute figures which are easily obtained.
Likewise the length of time spent online can be measured, and interestingly showed longer interactions than face-to-face with a rep; an important metric for deciding where best to invest marketing spend.
One ‘softer’ measure was to look at the open rates at different times of the week, with interactions outside core working hours suggesting extended sales windows, perhaps at times when customers would be more open to ideas, away from the pressures of the surgery. Paul said that there is an increasing trend towards working at home, accessing e-mails outside surgery hours, and this is backed up by the good proportion of personal, non-surgery and non-NHS e-mail addresses targeted by the campaign.
More importantly, data-mining techniques gave quality information about what current prescribing patterns are, so that marketing messages could be better targeted to achieve a higher ROI. Ultimately, building enough data to create individualised marketing programmes could lead to very high levels of return.
Reactions demonstrated by the online questionnaire also gave useful results, showing how many respondents found the resource useful, or learned something new, as well as the harder data of how many expected to start or increase prescribing as a result of the activity.
And it’s not just positive results that can prove useful. Knowing where the negatives are will help subsequent waves and indeed future campaigns be better designed to be even more effective.
E-marketing offers a very precise way of targeting customers, which should in theory give a low cost and high-return, as well as a more measurable (through online metrics) campaign - all compelling reasons to consider it. Quantitative data such as click-through rates and time spent interacting can be quickly and accurately harvested; what’s more, the good response rates to softer feedback research gives valuable information to increase and/or maintain ROI on the marketing activity.
The combination of qualitative and quantitative data is important, but Paul finished by commenting that “when it comes to online ROI methodology, there’s fast, cheap or accurate – just pick any two”.
Summing Up
At this stage delegates split into three groups to undertake brief workshops, based on the topics covered by the three case study presentations. After coming together to hear very brief outlines of the discussions, Barrie James once again took to the stage to sum up the afternoon.
He outlined four key messages to take away from the day:
- You can measure pretty much everything, but what you actually measure needs to be aligned to your strategic aims
- ROI measures should be based on the desired outcomes
- You need senior - and early - buy-in to the process
- You need both qualitative and quantitative information
“Pharma faces the greatest uncertainty in its history,” concluded Barrie. “The issues of an inability to escape from the past and a difficulty in inventing the future combine to cause a huge ‘region of uncertainty’. Complacency is fatal. We must make sure we are as effective as possible, so that our glorious past and our comfortable present don’t get in the way of our future.”
Held on: 26/11/2007