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UNDERSTANDING & PROJECTING THE IMPACT OF PROMOTION
The Economics of Promotion
WHAT IS MY BACKGROUND
Education Associated Arts Degree in Pre-Engineering Bachelors Degree in Business & Applied Mathematics Masters Degree in Business & Applied Statistics PhD (ABD) in Business and Applied Economics, with a
Statistics Major Professorial
Professor/Instructor … Statistics, Marketing, Computer Simulation, Marketing Research at California State University (San Luis Obispo, California), University of Montana, New Jersey Institute of Technology, Farleigh Dickinson University,
WHAT IS MY BACKGROUND (CONTINUED) Professional
Researched the value of R&D support given by The National Institutes of Health and The National Science Foundation, and evaluated research findings/reports
Started and sold several research businesses Strong background in all areas of pharmaceutical
promotionStrong background in a host of Therapeutic areas Created & implemented the analytic methodology that permits
the analysis and projection of impact of a fully integrated promotional campaign … studied the fully integrated promotional campaigns of over a thousand different pharmaceutical products
Professional career, for the last 35+ years, has focused on understanding the role of promotion, each of the promotional modalities and how they come together to create a campaign work
WHAT IS MY BACKGROUND (CONTINUED)
Promotional Research Studied several hundred Pharmaceutical Mail campaigns Studied all aspects of Detailing for many Pharmaceutical
companies Reach Frequency Multiple Sales Forces
Studied all aspects of Journal Advertising Single page through multi-page units Single and Multiple Insertions
Studied many levels of PME /CME Dinner meetings Small and Large Groups Convention/Conference meetings Etc., etc., etc.
WHAT IS MY BACKGROUND (CONTINUED)
Promotional Research (continued) I have built proprietary promotional models for many
different pharmaceutical companies in the US The basis of the research finds its roots in solid Economic
Theory, Various aspects of Physics, Marketing and Promotional Theory, and Finance and Investment Theory(s).
The approach has proven to be highly accurate across 100’s of products and many therapeutic classes
Have completed several hundred integrated promotional studies, covering over a 1,000 products
One has to keep in mind that Marketing Theory and Promotional Theory DO NOT change from one therapeutic class to another.
What does change is the competitive Environment.
PRESENTATION RECIPIENTS IN CANADA
Merck … Directors and entire marketing team
Novartis … VP of Marketing, Analytics, and Senior Members of Brand teams
BMS … VP of Marketing and all members of Brand Teams
Abbott … Directors and Product Managers
Pfizer … VP of Marketing, Product Managers from Primary Care
Sanofi … VP of Marketing, VP of Finance and all Product Managers
Boehringer Ingelheim … VP Marketing and all Product Managers
Novo Nordisk … Director Marketing and all Product Managers
Amgen … Business Unit Managers and Product ManagersHave done projects with most of the above Pharmaceutical Companies in the US and a few in Canada
CAN YOU PROJECT PROMOTIONAL IMPACT?
I HAVE … and, normally, will be within ¼ to ½ of 1 percent
Patently Absurd you say, no one can predict the impact of promotion … and you are right if you continued to think in traditional patterns!
Let’s start with one very widely held belief … Promotion directly drives sales / market share!
I hope before you leave today, that I have planted some doubt in your mind concerning this idea … because, I DO NOT believe it does!
QUESTIONS TO CONSIDER What drives product growth? What is the role of promotion? What is the role of promotional mix? How do promotional work together …
interactions? Does journal advertising work? What is the role of journal advertising? Does detailing work? What is the role of detailing? Etc., etc., etc. How does promotion manifest its impact?
TRADITIONAL THOUGHT PROCESS
Promotional
Campaign
If this is what your client believes, no wonder you can not create an “Optimal” campaign and project its impact!
Sorry, but the real world is a lot more complex than the above graph!
REAL ROLE/PATH OF PROMOTIONAL IMPACT
Promotional
Campaign
Market Instabilit
y
Product Accountab
ility
Product Accelera
tion
Product Velocity
Product Momentu
m
Product NRx’s And
Share
This thought process lays a strong economic & necessary foundation for understanding the role of the various promotional modalities and the ultimate impact of the campaign
HOW DO THE MODALITIES FIT IN THIS MODEL?
What is the role of Detailing? What is the role of Sampling? What is the role of CME? What is the role Mail? What is the role of Journal Advertising? What is the role of “E-What ever”? What is the role of Diffusion Theory? What does it take to both CREATE and
CONVERT Instability?
WHO/WHAT DRIVES WHAT?
Which modality(s) drive Instability? Which modality(s) drive
Accountability? Which modality(s) drive Acceleration? Which modality(s) drive Velocity? Which modality(s) drive Momentum? How do modalities interact? Why is
this understanding Important?
THE PATH TO SUCCESS
The first job of promotion is to CREATE Instability
Once this is achieved, the same strategy / message / tactics must CONVERT that Instability to growth for your product
This growth dynamic manifests itself in the concepts of Acceleration and Velocity
Finally, positive Momentum must be achieved and maintained … which, of course, is a function of both the campaign and the product’s quality
INTERACTIONS – TRADITIONAL VIEW
Detailing
Sampling
CME
Advertising
INTERACTIONS – THE REAL WORLD OF IMPACT
Detailing
Sampling
CME
Advertising
It is the Integration and Interactions of all campaign elements/modalities that drive impact!
KEY TO SUCCESS
Understand the sequence of events that take you from Promotional Program Construction to the Ultimate Impact of that campaign
Understand the role of each Promotional Modality, how and where it manifests its impact, and how product Momentum is created and maintained
If a Modality appears not to be working, find out why! BECAUSE ALL PROMOTIONAL FORMS DO WORK THOUGHOUT THE PRODUCT’S LIFE!
FALSE / MISLEADING QUESTIONS & STATEMENTS
Is my campaign increasing sales? Wrong question. Should be … is my campaign increasing sales
profitably and/or optimally? Does Journal Advertising work?
This question/statement never ceases to amaze me. Of course Journal Advertising works! That is, if you do it properly … good ad, budgeted properly and balanced with the rest of the campaign. Balance referring to many different concepts revolving around the creation and conversion of Instability
What about other modalities? Same profitability concepts apply and same interactive
relationships apply
ROLE OF EACH PROMOTIONAL MODALITY
Detailing … Sampling … CME / PME … Mail … Journal Advertising … DTC / DTP …
Do you remember?
ROLE OF EACH PROMOTIONAL MODALITY
Cre
ate
In
stabili
ty
Convert InstabilityNone
None
Str
on
g
Strong
DetailingNew Product
Journal AdvertisingNew Product
SamplingNew Product
CME/PMENew Product
RESEARCH FINDINGS CONCERNING PROMOTIONAL IMPACT
After 1,000+ Promotional Studies
21
IMPACT OF PROMOTIONAL CHANGETIMING TO 90% MANIFESTATION
I M
P
A
C
T
Number of Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18-3 -2 -1 0
PMEDETAILING
PAGES
90%
THE REAL WORLD OF PROMOTION IMPACT OF DETAILING VS. SAMPLING
Impact of most promotional modalities diminish as product ages Sampling is the only modality impacted minimally by age or time Question: At what point in the product life cycle does the sample
become the driver of Detailing and Sampling Impact?
time
Imp
act
Samples
Details
t
THE REAL WORLD OF PROMOTIONACTUAL VERSUS AUDITED DATA
Audited details are projected from a physician sample Actual details (calls) are recorded and reported by the sales
representatives Physician recall of a sales call declines as the product ages Question: If two products each show 20,000 details/month, are
they spending the same on Detailing?
time
Level
Call Report Data
Audits
Typical History
100*(Audit/Actual) = % Pick-up
65-70%20-35%
Launch
18
-24
Month
s
THE REAL WORLD OF PROMOTIONACTUAL VERSUS AUDITED DATA
Audited journal Ads are usually a function of a census Actual units are recorded and reported by visually checking all
journals Physician recall is not needed Question: If two products each show 30 pages of advertising per
month, are they spending the same on Journal Advertising?
time
Level
Audited/Census Pages-per-monthActual Pages
Typical History
100*(Audit/Actual) = % Pick-up
Launch
18
-24
Month
s
But, this does not mean that the value is the same over time.
25
THE REAL WORLD OF PROMOTION MATHEMATICAL RELATIONSHIPS
What is the functional relationship between audited promotion data and market share? Market Share increasing over time Detailing and other audited promotion declining over
time
Market Share
Audited Detailing+ -
26
THE IMPACT OF PRODUCT AGEINGMATHEMATICAL RELATIONSHIPS What is the functional relationship between
Promotional Impact and Product age?
TimeProduct Age
Rela
tive Im
pact
DetailingAdvertisingCME/PMEDTC
Sampling
What are the implications of this on one’s ability to model promotional impact• Census vs. recall vs. age on impact• Recall vs. impact
EXAMPLECASE STUDYEXAMPLECASE STUDY
CASE STUDYESTABLISHED PRODUCT
Crowded set (40+ products) Mature product (7+ years old) New claim – 18 months earlier Promoted new claim through DTC print – 18
months Professional target: FPs, GPs, IMs, & one
Specialty Consumer target: Specified Sub-Group Considering a Multi-Million dollar television
campaign History: Sales force reduction 3-years earlier History: NO faith in professional print
CASE STUDYCLIENT’S QUESTIONS
Should we implement this DTC television campaign?
Planned start is July 1998 – is this justifiable? What is our promotional ROI likely to be? How do we insure success? How should our professional campaign be
structured? Do we need to alter our current professional
promotional mix? Justify all projections and predictions!
Delay start of DTC Television for six months. Get professional up to speed first!
Add 2xx++ Salespeople before DTC start. Increase professional advertising by
$1,400,000. Keep sampling in step with detailing. Increase Primary Care activity.
CASE STUDY ESTABLISHED PRODUCT
RecommendationsRecommendations
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
t-12
t-10 t-8
t-6
t-4
t-2 t
t+2
t+4
t+6
t+8
t+10
t+12
t+14
t+16
t+18
t+20
t+22
t+24
t+26
t+28
t+30
t+32
New
Pre
scri
pti
ons
Forecast - Base
Forecast - Campaign
Actual
Case Study: New Prescriptions/ROI Forecast
ProjectionsProjectionsNew Campaign StartsNew Campaign Starts
UNDERSTANDING & EMPLOYING THE CONCEPTS DISCUSSED TODAY
Concepts discussed today require learning and working with a set of new measures
While the real power of this approach rests in developing the full system of simultaneous equations, a good starting point is in the development and use of all appropriate measures
This can be accomplished with an Excel Worksheet that sequentially develops each of the measures
EXCEL WORKSHEET
Prod1 Prod2Prod3
Base
NRxs
Share
NRx Instab
Share Instab NRx Acct
Share Acct
Concentration
Velocity
Acceleration
Momentum Summary
NRxs&
Share
NRxs&
Share
NRxs&
Share
PROMOTIONAL
ENVIRONMENT
THE SIMPLE WORLD OF PROMOTION
NewPrescriptions
Market
Share
Detailing
Sampling
Advertising
DTC
Dinner Meetings
Etc., etc., etc.
THE REAL WORLD OF PROMOTION
Marketing Environment
Promotional Environment
ProductEnvironment
DiseaseEnvironment
Instability
Velocity
Acceleration
ACCOUNTABILITY
DTC
DetailingSampling
Mai
lA
dver
tisi
ng
NRx’s&
Share
THANK YOU!
“The best way to predict the future, is to create it”
“Models are meant to be used, NOT BELIEVED”